The China Mobile Payment Business Development Report, released in January by Byna Consulting, shows that in 2005, 15.60 million Chinese consumers were using mobile phones to pay for products or services, growing 134 per cent year-on-year. The number of users accounted for 4 per cent of the total mobile subscriber population and the amount of the payment reached 340 million yuan (US$42 million).

Byna estimates that 2007 should be a turning point for the mobile payment business, once the value chain matures, consumer acceptance grows, and the infrastructural improvements begin on a large scale. In 2008, it is estimated that 139 million mobile phone users will pay through their phones, or about 24 per cent of the total mobile subscriber population. Payments are expected to total 3.28 billion yuan (US$400 million).

"The prospects for mobile payment are enormous and can emerge as a major next-generation means of payment," the Byna report says.

Over 800 million bankcards had been issued by late May 2005. There were 400 million mobile users at that time, a number forecast to grow to 500 million by 2008. The large number of mobile phone users and cardholders provides an attractive consumer base and room for development.

Research shows the global mobile payment market doubled in 2004, and was estimated at US$20 billion in 2005.

Byna also believes mobile payment is different from other mobile value-added services. It covers wide geographic areas and the value chain is made up of mobile operators, financial institutions, third-party payment service providers and mobile payment platform providers, retailers, handset makers, and end users.

The fact that many players in this value chain compete against each other makes the industrial chain more complicated. The most important matter to consider is the competition and co-operation between mobile carriers, financial institutions, and third-party service providers.

Mobile operators are currently focused on small payments done on intelligent networks, so they are the dominant force in the sector. The small payment platform is built, run and managed by operators on their own mobile networks, which are connected with the networks of banks, mobile service providers, and other third-party partners. Mobile operators have been working on improvements to mobile payment security, however, by establishing ceilings on payment amounts and frequency, the eventual arrival of WIM (wireless identification module) cards to identify buyers, and seller encryption on STK (SIM tool kit) cards, with their bigger storage capacity and ability to handle larger amounts of information.

Despite the dominant role of mobile operators, Byna says third-party payment service providers still have a lot of room to develop and build strong brands. They act as bridges between mobile carriers and financial institutions to take advantage of the resources on their payment platforms and co-ordinate relations between the two sides.

Byna Consulting is a Beijing-based professional telecoms market research company

(China Daily 02/21/2006 page6)