Buoyed by continued growth, South Korea’s mobile contactless payments market will enjoy average compound annual growth rates in the realm of 50%, according to a new report, ‘Mobile Contactless Payments in South Korea: A Recipe for Future Success?’ from Celent.
The pre-paid contactless market can expect considerable growth
Celent projects that the number of pre-paid contactless payment customers is projected to reach 4.5 million by 2012, resulting in a compound annual growth rate (CAGR) of 56.3%.
The report also forecasts that pre-paid contactless payment transactions will rise by 2012 to 180 million, for a CAGR of 29.7%, and Celent expects that total transaction value will reach US$140m, for a CAGR of 39.9%.
The future is also bright for post-paid contactless payments
Nonetheless, there are a number of preconditions for achieving growth in these areas:
- Increased market penetration of mobile phones equipped with radio frequency (RF) antennas.
- Spread of payment processing terminals for mobile phones.
- New services to differentiate contactless payments from conventional card payment schemes.
- Interoperability, which was also a crucial factor in the success of mobile banking in South Korea.
For the market to continue to thrive, a number of obstacles must be overcome
- Mobile phones equipped with RF antennas must become more widespread.
- Mobile contactless payment processing terminals must become more common.
- Unique mobile services must be rolled out.
- Synergies need to be driven by interoperability.
There is one crucial precondition for the growth of this market: whether mobile contactless payments services can differentiate themselves from cards and the competition. By leveraging the merits of mobile phones and proffering services that transcend plastic card services, mobile contactless payment providers can attract the attention of consumers. The operative phrase is “business model differentiation”. A key point here is that the degree to which these players can offer innovative, game-changing incentives will likely correspond to the ease with which consumers are able to embrace their services. Such service offerings can include:
- Loyalty points.
- Mobile coupons.
- Discount services.
In addition, services that achieve synergies by virtue of interoperability will also prove to be a key point. Efficient, strategic operations can be supported with mobile carriers leading the charge and coordinating with card companies to provide the services. This model helped drive the striking success of South Korea’s mobile banking services, and Celent expects that a similarly symbiotic relationship can be forged in the mobile payments space.
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