NTT DOCOMO is the latest telco trying to crack the m-payments space with a new approach that aims to give operators a central role.
The Japanese operator officially launched DOCOMO Digital, its global payment and services platform, at this year’s Mobile World Congress.
DOCOMO Digital has been several years in the works, assimilating acquisitions such as m-commerce company Buongiorno in 2012 and carrier billing business net mobile in 2014.
The company is trying to put itself at the heart of the payments ecosystem, providing consulting services alongside an m-commerce tech and infrastructure platform.
Chief Sales Officer Christopher Rischard describes it as “a box of Lego that helps to address the complexities in each local market”.
It aims to bring together telcos, merchants, enterprise partners and regulators across the world in a bid to drive mobile commerce adoption.
Crucially, DOCOMO Digital thinks it can succeed in Europe and other developed markets where m-payments have largely failed to take off.
The obstacles have been numerous, from breaking age-old consumer habits to agreeing on a standard technology, but none more so than the competing interests of operators and merchants themselves.
Notably, Apple Pay has also stepped into the market.
The battle arguably lost, telcos such as Orange and Telenor are even turning themselves into banks in an effort to gain a slice of the financial services pie.
[Read more: Orange bullish on bank plans, gives itself five years head start on incumbents]
Is DOCOMO Digital the missing link?
Rischard says the fact that it doesn’t compete with any of the telcos or the merchants “really sets us apart”.
He adds: “At the end of the day, when you talk to financial companies everyone wants the same thing.”
It has not always been the case with telcos, but Rischard is keen to talk up what DOCOMO Digital has achieved in Spain as a blueprint for others.
Like much of Europe, Spain is a highly “banked” country where weaning consumers off using their cards is a tough ask.
When it comes to credit cards, however, there is a comparatively low penetration amongst the youth market.
Alsa, a bus company owned by the National Express Group, was struggling to offer m-payment services to its largely young customer base.
They approached DOCOMO Digital to embed carrier billing into their mobile and online channels, but didn’t want to work with just one operator.
“Operators are notoriously adverse to working together,” Rischard confirms. “We convinced Movistar, Orange and Vodafone to work together to provide carrier billing as a universal payment service to Alsa.”
It is the first time the three operators collaborated in such a way, the CSO claims, and something he hopes will be the start of a trend.
But he notes: “Operators are often at different levels of maturity, both at group level and opco level.”
It is one of only four deals that DOCOMO Digital has made public and the only one that brings together different operators.
Clearly there is a lot of work still to do.
“The biggest challenge is getting all of the stakeholders in all of the regions to really understand what it is in their local market that needs to be addressed and how they can work together to unlock the market for digital payments,” Rischard says.
To overcome this, DOCOMO Digital is undertaking what Rischard calls “stakeholder management evangelisation”.
In short, the company is trying to get operators in particular to view the m-payments market as two separate layers.
The first is “basic physical goods and services” where volumes are high and margins are razor thin.
Here, Rischard says, it pays for operators to work together to succeed.
The second layer could be termed as more lifestyle or luxury services where Rischard believes operators can look to differentiate.
The CSO says DOCOMO Digital is working with a number of operators on developing specific use cases.
But he warns: “One-to-one negotiations to differentiate gets you so far up the volume curve but the real take off is when you become a payment utility.”
To attain that level, Rischard says operators need to have commercial terms that are “uniform, predictable and fair” to attract merchants.
“That’s their baseline,” he adds. “It’s hard for some operators to digest.”
Rischard notes: “Lot of providers, particularly those that are VC-backed, sacrifice quality for growth and speed.”
Part of DOCOMO Digital’s business model is providing advisory and consultancy services.
Rischard, who maintains the market will still take time to come to fruition, says regulatory and commercial challenges at a local level are key concerns.
For Alsa in Spain, for example, he says they had to get “an exclusive exemption” from the regulator in order to provide the service.
Technology is not a challenge, but providing multiple, joined m-payment channels is essential.
“We’re here to help operators navigate through this,” Rischard says.
BMI Research Analyst Amy Cameron agrees that all stakeholders need to work together and that interoperability between different payment platforms is necessary.
But she is concerned that DOCOMO Digital’s approach is too reliant on carrier billing.
Cameron is “not convinced” that consumers in well-banked markets find it the most convenient solution.
“One of the main barriers is that a growing majority of mobile subscribers in developed markets are on postpaid plans and expect to pay a stable bill every month,” she says.
DOCOMO Digital must hope that its box of Lego is big and varied enough to ensure it can succeed.