Wednesday, February 09, 2011

Ericsson's push into financial services

Another strong telecommunications brand recently announced their push into mobile financial services. Ericsson is one of the new players in this market. The announcement was made just in time for Mobile World Congress. (Read here). Reading the many press releases on this announcement and having some insight in the industry myself, the announcements are somewhat confusing to me.

According to my understanding, it is Ericsson's intention to compete with Western Union and get a "reasonable share of the market". The intention (it seems) is to not offer a service to consumers, but to rather work "with financial institutions, mobile operators and other service providers". This is an interesting strategy and according to my evaluation unlikely to succeed, predominantly because of the following reasons:
  • Western Union will remain competitive, primarily because they have a major distribution network. It does not seem as if Ericsson wants to compete with Western Union in this. This means that Western Union would have a huge and unassailable competitive advantage.
  • Connecting money remittance sources with targets is a very crowded market with many new entrants. Many have tried and failed to enter this as a new player. Competition is often on the basis of price and margins. It is not clear what Ericsson's competitive advantage will be in their new venture.
  • Ericsson's strength: their telecommunication infrastructure solutions cannot necessarily be leveraged to provide mobile financial services. Banking systems and telecommunication systems differ in many ways.
  • In emerging markets, mobile financial systems have only been successful with solutions targeting subscribers and with sophisticated agent management solutions. It is not clear if Ericsson intend developing these solutions themselves, or plans to work with existing suppliers.
While I have immense respect for Ericsson as a company and what they have done for the telecommunication industry, I would be surprised if they can make a major jump into financial services without an experienced partner with a proven track record in this complex industry called: mobile financial services.

1 comment:

Anonymous said...

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