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Ever since I have started using my Nokia N-8 my mobile bill has dropped significantly. It is down by more than 40%. When I analyzed this month’s bill I suddenly realized that I had much fewer calls and the number of SMS’s has dropped drastically as well.

Though my conversations though my phone have increased, the channels have become more diverse. I use G talk, Whats App and Skype to talk to my close friends, Office Communicator to connect with my current and former colleagues. Facebook chat to talk to my trusted network.  All these have eaten into the mobile operator’s share of my wallet.

So am I the only one feeling this way?

Not exactly, in a recent report the management consultant firm Ovum estimates that mobile operators lost about $13.9 Billion due to social messaging. The number was close to $ 8.7 billion in 2010. Same is the current upcoming trend in India. So clearly this is a global phenomenon which is adding on to the woes of the mobile operators resulting in a further decline in ARPU (Average revenue per user). 

Internet Protocol-based social messaging is cutting into the profitable revenue streams generated by SMS and Multimedia Messaging Service (MMS).

This loss today represents almost 9 % of the total revenue from messaging. Applications like Blackberry messenger, G talk, Skype, Facebook Chat, ChatOn and Whats App, Tweeter are eating into the SMS revenues of most operators globally. The new web-based apps also allow users to group chat, have 1:1 conversations, and supports attachments, emoticons and more.

As users lap up mobile internet services, the web giants are strengthening their relationships with consumers, while the telcos are finding their connections with customers reduced to a monthly bill and an occasional handset upgrade. The operators complain that the web giants are hitching a free ride on the networks in which they are investing billions, while free services like Facebook Messenger are eating into the SMS text revenues.

Adding to this, TRAI has made many changes in SMS delivery policies taking up daily SMS limit to just 200 SMS hence raising operator concerns.

Today in little more than a decade the social network apps have almost started what would be the end of the SMS. Mobile operators need to relook at their services in order to stay competitive in the future. But it said it is questionable whether in the short term that incremental data revenues for tweets, status updates and check-ins, and the more substantial data usage from services like YouTube, can offset the loss from the more lucrative messaging services that operators built up and still count on for revenues.

So what can mobile operators do to reverse the situation?

1. Concentrate on data services: Most operators’ today focus more on voice and messages, but with the rise of smart phones it is data services that would drive revenue. A good example is the increase in data services revenue for NTT DoCoMo in Japan after the advent of smart phones.

2. Mobile broadband: With launch of 3G services the faster mobile internet experience would be through broadband and this is yet another area of growth for mobile operators.

3. Collaboration with App developers: Currently the apps built for various platforms are the ones that will eventually eat into the operator revenues. Working with these developers, operators can co-create apps that would keep the users on the mobile operator’s network. For example if I had a choice between the Airtel Live and a App from Wall Street Journal, the user experience of the WSJ app is far superior to Airtel Live, hence despite being an Airtel customer for over a decade, I have not spend more than an hour till date on Airtel Live.

4. Value added services: Increasingly many transactions are shifting to the mobile phone. Services like mobile banking, mobile commerce and mobile ticketing would become the norm rather than the exception. It is time that the operators work collaboratively with this increased ecosystem and enhance their services. With decrease in SMS use in P2P (Person to Person) developers are more concentrating on A2P (Application to Person) and P2A (Person to Application). Many machines are now working on SMS platforms which in future will be shifted to apps based platforms.

But this is just the tip of the ice-berg. What are the other strategies that operators can run to leverage the growth of social media and smart phones?

Mobile as we know - Bank and Wallet On The Move

Yesterday I got a mail from my bank probing me to install mobile banking application on my smartphone and get a collage cup free. This gave me a blink of fair integration of banking and telecom industry.

There is a slow tectonic shift waiting to occur beneath the banking world due to the emergence of mobile internet which will eventually alter the concept of banking, payment and money. With about half of the world's population expected to be connected via mobile phones by 2015, this is bound to have far reaching implications on social, economic and cultural life the world over. Never has the world been so widely accessible, connected, networked and mobile.

Global operators have spent around one trillion dollars to create mobile networks and services. Hardly a week goes by without any major announcement in the media about new mobile applications, opportunities, alliances and upgrades. With mobile phones becoming smarter and more powerful, with color displays and cameras, we essentially get a personal computer on phone and Internet on the move with limitless possibilities, including mobile banking.

The banking industry the world over has invested heavily and benefited substantially from computer technology to transfer traditional services related to checking, saving, loans, debts, credit cards etc. Banks first focused on computer applications in back offices to improve productivity, efficiency and reduce cost. They then moved on to front offices for tellers to improve customer services. Similarly banks have also invested heavily over the last 25 years to create global ATM infrastructure to improve access and take some of the banking services to street corners. Now they have an enormous opportunity to take ATM and other banking functions to mobile phones without any substantial incremental investments.

Banks should be interested in mobile phone technologies for three reasons:

1.            To provide additional channel for delivery to mobile customers for convenience, comfort, control, visibility and security anywhere, anytime.

2.            To acquire new customers at lower acquisition costs, mainly because there are more mobile phone subscribers in the world than bank account holders

3.            To guard their eroding deposit base from big merchants offering prepaid cards and Internet players like PayPal.

The mobile commerce and banking have been in the making for several years with several faulty starts. Many early experiments based on small phone screens and server based wallets had very poor user experience and were not scalable.

To make mobile banking a reality, five things are required:

·                     Smart phones with bigger color displays and ability to connect with the Internet and download software applications directly from the net

·                     Simple and intuitive user interface with traditional leather wallet metaphor to incorporate branding and familiar images of credit card logos etc.

·                    Multiple secure payment options and services for consumers to select whatever they want from wherever they are

·                    Ability to store, manage and maintain accounts, receipts and budgets

·                    Ability to conduct physical world transactions at retail merchants

The first four are already in place. With these most of the banking functionalities related to checking balances, conducting and viewing transactions, transfer money, pay bills, receive loyalty coupons, purchase tickets etc. are possible today. The ability to conduct transactions at merchant requires interface between mobile phones and the point of sale (POS) through proximity radio frequency signals called near field communication (NFC) hardware and software. These terminals are already in place in Japan, Europe and US and are now being field tried in India and China.

Once consumers begin to conduct financial transactions using mobile phones it will be easy to integrate, customize and personalize cash, credit, loans, awards points, coupons and other promotions and incentives in real time.

The consumer will essentially focus more on spending mobile bits and bytes and less on cash as we understand today. If, for example, a one-million-mile award on international airlines, amounting to ten round trips from new York to New Delhi, is converted to instant cash, anywhere, anytime to buy other goods and services, how would this consumer account for this transaction in income tax?

For consumers to benefit from mobile banking three stakeholders will have to collaborate-banks for the financial services, Telcos for content and delivery and merchants for promotions and purchases. This could indeed create a win-win situation for all, especially the young early adapters to buy ring tones, music, games, books, movie tickets etc. If banks do not recognize the opportunity and take the initiative to drive mobile payment, there are others like Microsoft, Google, e-Bay, Yahoo! and perhaps Wal-Mart waiting in the wings to grab the new frontiers of tomorrow.

Quite inevitably the shift is caused by forces not within the industry but without. The dramatic emergence of mobile telephony worldwide is fraught with enormous implications for the future of banking and that of the form and concept of money.

The disruptive effect of mobile telephony for traditional banking has not been even recognized by the banking industry, let alone planned for. Part of the reason is that the traditionally conservative industry is naturally reluctant to adapt to this dramatic change. The institutional inertia is a serious challenge that this industry will have to address if it does not want non-banking players such as Telcos and other service providers to gradually take over the role that banks have played so far.

People around the world will no longer find it necessary to park all their cash in the banks. Instead they will have different instruments representing money sitting on their mobile phones. So instead of spending cash, they will be spending bits and bytes.