the Mobile payments and anticipated trends in international startup

89 Pages·2017·1.56 MB·English

Politecnico di Milano
Master of Management Engineering

THE MOBILE PAYMENTS AND ANTICIPATED TRENDS IN
INTERNATIONAL STARTUP: OVERVIEW ON THE SERVICES
AND THE EVOLUTION OF THE APPLICATION SCENARIO

Supervisor: Prof. Alessandro Perego
Assistant Supervisor: Eng.Valeria Portale

Report of:
Omar Zayed - 842569

Academic Year 2016 - 2017
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Acknowledgement

Firstly, I would like to thank the Osservatorio of Mobile Payments &
Commerce for providing me with the opportunity to expand my knowledge base by
allowing me to work on this report and learn and explore a new field that is different
from my background. Their constant help, support and guidance throughout the
study puts me in a position of appreciation.

Last but not least, I would like to express my gratitude, love and thanks to my
family that supported me every step of my way until this day today. I hope one day
I would be able to repay a fraction of everything they went through and did for my
sake and future.

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Table of Contents
Executive Summary ...................................................................................................................... 8
1 Introduction ........................................................................................................................... 9
2 Literature Review ............................................................................................................... 11
2.1 Mobile Payments Overview ..................................................................................................... 11
2.1.1 M-payments Growth .............................................................................................................. 11
2.1.2 Technologies and Classification of M-payments ................................................................... 13
2.1.3 M-payments Business Models ............................................................................................... 15
2.1.4 Revenue Streams .................................................................................................................... 17
2.1.5 M-payments Ecosystem ......................................................................................................... 18
2.1.6 M-payments Adoption ........................................................................................................... 22
2.1.7 Mobile Payments in Italy ....................................................................................................... 26
2.2 Startup Ecosystems .................................................................................................................. 27
2.2.1 Policy ..................................................................................................................................... 28
2.2.2 Finance ................................................................................................................................... 32
2.2.3 Culture.................................................................................................................................... 34
2.2.4 Supports ................................................................................................................................. 40
2.2.5 Human Capital ....................................................................................................................... 41
2.2.6 Markets .................................................................................................................................. 43
3 Methodology ........................................................................................................................ 45
4 International Startup Trends............................................................................................. 46
4.1 Startup Category Trend .......................................................................................................... 46
4.2 Target Trends ........................................................................................................................... 51
4.3 Mobile Payment Startups’ Geographic Distribution ............................................................ 55
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4.3.1 Mobile Payments by Region .................................................................................................. 55
4.3.2 Country Analysis ................................................................................................................... 61
5 Discussion............................................................................................................................. 74
5.1 Future Trends ........................................................................................................................... 74
5.1.1 Mobile Wallets ....................................................................................................................... 74
5.1.2 Bitcoin .................................................................................................................................... 74
5.2 Limitations and Further Research ......................................................................................... 78
5.2.1 Limitations ............................................................................................................................. 78
5.2.2 Further Research .................................................................................................................... 78
6 Conclusion ........................................................................................................................... 79
7 Bibliography ........................................................................................................................ 80

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List of Figures
Figure 1 - Growth in mobile payments (Sherman, 2014) ............................................................. 12
Figure 2 - Mobile payments technologies and services (Mathew, et al. 2010) ............................ 13
Figure 3 - Mobile payment categories (Vizzarri & Vatalaro, 2014)............................................. 14
Figure 4- Third-party payment process (Lao & Liu, 2011) .......................................................... 16
Figure 5- Third-party support of micro- and macro-payments (Li & Luo, 2008) ........................ 17
Figure 6 - Startup Growth (Crunchbase, 2016) ............................................................................ 27
Figure 7 – Startup entry by year ................................................................................................... 46
Figure 8 - M-payments startup categories 2015 (Osservatorio, 2016) ......................................... 47
Figure 9 - M-payments startup categories 2016 ........................................................................... 48
Figure 10 – Total & Average Funding: 2015 vs 2016 (Osservatorio, 2016) ................................ 49
Figure 11 – Target composition of mobile payment startups ....................................................... 51
Figure 12 - Targets of categories .................................................................................................. 52
Figure 13 - Funding per target ...................................................................................................... 53
Figure 14 - Target composition of founding startups between 2011-2016 ................................... 54
Figure 15 – Mobile payments startups’ allocation ........................................................................ 55
Figure 16 - U.S VC and angel investment amounts (Crunchbase, 2016) ..................................... 56
Figure 17 - Mobile payments usage in 2014 (McDermott, 2015) ................................................ 57
Figure 18 - Startup funding per continent ..................................................................................... 58
Figure 19 - Continent total funding per category.......................................................................... 59
Figure 20 - Continent average funding per startup per category .................................................. 60
Figure 21 - Mobile Payments in North America .......................................................................... 62
Figure 22 - Number of mobile payment startups in European countries ...................................... 63
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Figure 23 - Mobile Payments users (Visa, 2016) ......................................................................... 65
Figure 24 – Mobile Payments in Asia........................................................................................... 66
Figure 25 - Mobile Payments in South America .......................................................................... 70
Figure 26 - Mobile Payments in Africa ........................................................................................ 71
Figure 27 - Mobile Payments in Australia .................................................................................... 73
Figure 28 - Diffusion of Technologies (TSYS, 2016) .................................................................. 77

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Executive Summary
This paper aimed to study the international trends of mobile payments startups. Mobile
payments is the payment of any good or service with a smartphone. Literature has been focused
on technology, the ecosystem and consumer adoption and there is hardly any literature on the
startups in the mobile payments industry that according to Schumpeter may be the cause of
disruption of mobile payments industry. There are a lot of startups that incorporate mobile
payments in different forms. The crunchbase database of startups was used as a base to start from.
All startups that incorporate mobile payments were scouted and then went through a further
selection to find the startups that focus on mobile payments. The database was then kept updated
from the crunchbase database as well as other sources. Firstly, the startup ecosystem was identified
to find all the factors that affect startups and entrepreneurial activity in general based on Isenberg’s
model. Secondly, data was analyzed and represented in graphs and different conclusions were
discovered. The analysis showed that even though mobile wallets is the heart of mobile payments
startups it will reach a point of saturation and only a few will remain. Bitcoin and P2P are, however,
the categories of mobile payments that are expected to be present more in the future. The study
also determined that the investments started to cross the borders, specifically move from the U.S
to markets that show potential in Asia. Finally, taking examples from Africa and Asia,
governmental policies to encourage digital payments have the most significant effect on the mobile
payments industry growth and use of the technology.

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1 Introduction
The technology that has recently been introduced to the most used technical device, mobile
phones, has developed to provide mobile phones with functionalities that surpass its basic use of
telephony. The functionalities have been introduced as an opportunity to use mobile phones as a
medium to offer value added services to the users due to its massive diffusion. One of the most
prominent opportunities for mobile devices is mobile commerce, since it can market, sell and
deliver products and services to a wider range of customers than any other technical device
(Dahlberg, Mallat, Ondrus, & Zmijewska, 2008). Mobile commerce incorporates the phenomenon
of mobile payments or m-payments.
Mobile payments is defined as any payment of goods or services by mobile terminals such
as mobile POS, personal digital assistant, or a smartphone via a wireless network or other
communication technologies (Tong, Zhou, & Liu, 2005). Mobile payments can be used to purchase
tickets, parking fees, bills, digital content, such as music, games and e-books, and transportation.
Using mobile payments for physical goods is also made possible through ticketing and vending
machines. Instruments that allow for mobile payments to take place are defined to be mobile credit
cards and mobile wallets (Dahlberg et al., 2008).
The aim of this study is to predict the mobile payment technologies that will be available in
the market within the next few years. Part of the study will also include testing the effects of
startups on the mobile payments market and the innovation they offered in that industry. This will
be achieved by studying the mobile payment startups that have emerged in more startup-friendly
countries. The international trend in startups concerning m-payments will help clarify the position
of the markets where the investments are being made and the magnitude of those investments.
Analyzing the number of investments and their magnitude, along with startup analysis, will give a
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very clear picture on what barriers and obstacles that the market is trying to overcome. Once the
startup data is analyzed, a market condition comparisons will be conducted to assess the markets
that will host certain technologies.

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