Should mobile operators become banks, or the other way around ?

What is it about?

This paper addresses the strategic challenges of deposit banks, and payment clearinghouses, posed by the growing role of mobile operators as collectors and payment agents for flows of cash for themselves and between third parties. Through analysis and data from selected operators, it is shown that mobile operators as money flow handlers achieve levels of efficiency, profitability, and risk control comparable to deposit banks. Furthermore, the payment infrastructures deployed by both are found to be quite similar, and are analyzed in relation to financial profitability, strategic challenges and opportunities This paves the way to either mobile operators taking a bigger role, or for banks to tie up such operators to them even more tightly, or for alliances/mergers to take place, all these options being subject to regulatory evolution which is analyzed as well. The consequences of the payment efficiency and architectures are mapped out in operational and regulatory terms.

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Why is it important?

Many of the central issues raised in this paper illustrate the often difficult recognition by some parties of the co-existence of two basic models in Mobile Business: - The centralized model in M-Business: where trade, transaction rules and some generic business processes, are embedded right inside the core of enterprise and public communication networks, managed by these two parties, with a flow of service fees; -The decentralized model in M-Business, with personalized terminals and services, offering full mobility and capability offerings, managed by user-driven exploration matching algorithms, and billing along the value chain; in this model too users are also information and know-how producers. Obviously the banks come from the centralized model for their mass operations, but aim for the second model as value creators. The mobile operators too have the same profile, while coping with difficulties from the decentralized model they helped propagate. Thus indeed, mobile operators and some banks should be allowed to “converge” as mobility based IT slowly penetrates the conventional IT backbones of banks, and as the efficiency of transactions handling by mobile operators can give advantages to the banks adopting them while influencing the value added communication services they provide. A way to look at this evolution, is to use Michael Porter’s “five forces model” which also explains the convergence analyzed above in terms of competitive forces, without linking it as in this paper to technology evolution.

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