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European Mobile Payments -- Can't Pay, Won't Pay, Says Forrester

Amsterdam, Netherlands, May 10, 2001 . . . Despite retailers' enthusiasm for mobile payment, consumers don't want it, providers can't offer it, and technology can't support it, according to a new Report by Forrester Research B.V. (Nasdaq: FORR). These issues will not be resolved in the first half of this decade, limiting mobile payment to €26 billion in 2005. Of the five segments for mobile payment that Forrester analyzed, payment for mobile content will claim nearly half of the €3.2 billion in mobile payment gross profit generated over the period.

"While online and brick-and-mortar retailers believe that mobile payment will account for 10% of their transaction value in three years, Forrester believes this is actually at least a decade away," said Michelle de Lussanet, analyst at Forrester. "Three barriers will limit the penetration of mobile payment for the next five years: consumers aren't ready to change their payment behavior; providers will continue to resist collaborating on full-featured services; and easy-to-use, cheap, secure, and standardized technology will take years to roll out. Also, European consumers don't trust a mobile payment system and have historically resisted attempts to change their payment habits."

Forrester incorporated these factors into a forecast model of mobile payment in Europe, drawing on consumer spending data from organizations like the ECB and Eurostat. We project that mobile payment will amount to only €26 billion in 2005 -- €87 per mobile phone user per year -- and just 0.5% of consumer spending, excluding housing and vehicle purchase.

While payment for mobile content dominated last year's market, totaling €51 million, leadership will shift to low-value mobile payments in the real world in 2003, like vending machine payments; it will finally move to higher-value mobile payments like supermarket grocery payments in 2005. Although stable growth will lead mobile content payment to €5 billion in 2005 -- €7.40 per user per year -- its share of the mobile payment total will drop from 50% in 2000 to 20% in 2005. Forrester expects only €27 million from higher-value payments on the PC-based Internet for goods like CDs. Low-value mobile payment for PC-based Internet content, like pay-per-use news articles, will never take off.

Belgium, France, Greece, Luxembourg, and Spain will adopt mobile payment slowest, averaging €3.47 per mobile user per month in 2005. Austria, Ireland, Italy, the Netherlands, Portugal, Switzerland, and the UK will see an average of €6.77 per mobile user per month in 2005. The Nordic countries plus Germany will lead in mobile payment adoption, averaging €10.90 per month in 2005.

"Operator margins of 30% on content services today will drop to 10% in 2005 as competition increases, but volume gains will still yield a gross profit opportunity of €1.4 billion from 2000 through 2005," de Lussanet added. "Real-world micropayment will hit nearly €1 billion gross profit and ensure that premium margins drop only slightly from 10% today to 7% in 2005. Real-world macropayment will yield €666 million over the next six years, and more than half of that will appear in 2005. Internet macropayments will show low returns of €201 million over six years. Finally, Internet micropayment is a waste of time and is so small that total gross profit over the period will reach a mere €3 million."

For the Report "Mobile Payment's Slow Start," Forrester spoke with 50 European retailers in three categories:
10 service retailers, 20 online retailers with an average revenue of €4.4 million per year, and 20 brick-and-mortar retailers with an average revenue of €7.1 billion per year.

Forrester Research is a leading emerging-technology research firm, analyzing technology change and its impact on business, consumers, and society. Forrester's "Whole View" of the Internet economy enables clients to weave together Internet commerce initiatives with eBusiness technology to satisfy customers' changing needs. Clients receive continuous research and analysis through Forrester eResearch® Reports, an array of Advisory Services, Assessment Tools, and topical events. Established in 1983, Forrester is headquartered in Cambridge, Mass., with North American Research Centers in San Francisco, Calif., and Toronto, Canada. Forrester's European Research Center is located in Amsterdam, Netherlands, its UK Research Centre is located in London, and its Research Center Deutschland is located in Frankfurt, Germany. Additional information about Forrester Research can be found at www.forrester.com.

Contact:

Clive Savage
European PR Manager
Forrester Research B.V.
+31 20 305 4868
csavage@forrester.com