Future Payment Solutions in Sweden – Critical Success Factors and Scenarios from a Stakeholder Perspective

Abstract: Mobile payments have become an increasingly hot topic due to the wide availability of smartphones and mobile internet on the Swedish market. Banks have historically enjoyed a monopoly position in payments, but have recently seen new entrants contending for a share of the market as payments go mobile. Mobile operators, technology companies, and merchants all want to join the mobile payments space in order to find new revenue streams. Technological development is happening fast, and with many actors in the market it becomes more important than ever to have a strong strategy from the start to be able to establish a standard. Purpose The purpose with this thesis is to get a better understanding of the mobile payments industry with regards to actors and technologies, and to establish the key factors that drive a standard in Sweden. The work will provide a foundation for understanding mobile payments, as well as a roadmap for actors in the industry on important aspects of future development. The purpose can be summarized in two research questions: Which technologies and services constitute the Swedish mobile payments landscape today, and what are the key success factors? What development can be expected in Sweden the coming 5-10 years, and which technologies and services are likely to prevail and become established standards? Theoretical Framework: The data analysis has been based on the Standard Wars framework, in order to understand which factors that are driving a standard. Furthermore, the digital payment value chain has been analyzed to see where actors have chosen to position themselves, and to understand the possible revenue models that exist. Methodology The thesis uses a combination of qualitative and quantitative data. The qualitative data consists of a literature review, interviews with stakeholders, an international case study, as well as workshops with industry experts and stakeholders to validate the progress and quality of the work. The quantitative part consists of secondary data to further validate the results. Result: The Swedish mobile payments market consists of a range of services and actors, where the most prominent are Banks, MNOs, PSPs and EMV. Development in mobile payments will happen fast in the coming years, and already in 2013 consumers and merchants will use their mobile phones to pay to on a much larger scale. The most important success factor is the value proposition for both merchants and customers. For merchants, the service needs to have lower total cost including investments than existing solutions, as well as be secure and fast. For consumers, the service must go beyond payments and include value added services such as loyalty, receipt management and offers. Other critical factors are convenience, easy to use, secure, and low cost. NFC is currently the most complete available technology, but lacks merchant adoption and handset integration, which means no network effects and high investment costs. Therefore, QR is the most prominent technology at the moment, as it can be used in all smartphones and be deployed for a very low cost. Nevertheless, NFC has some transition possibilities, and the winning technology is linked to the winning actor more than the technology in itself. By supporting multiple technologies, the service can minimize technology risks, and it is likely that technologies will co-exist in the future. Mobile payments are predicted to be used in 6% of all transactions in Sweden by 2017. The authors see four possible scenarios and the two most likely are where PSPs as SEQR continues to partner up with new merchants, and by leading the development adds new functionality and builds a customer base. The other scenario sees the banks manage to unite behind a redesigned solution, where Bart and Swish are merged with the mobile banking platform.