Market Insight

Nokia to shut down Nokia Money in India, exit mobile financial services

March 15, 2012

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Nokia is ending its involvement in mobile financial services, including its own-branded Nokia Money offering in India. Citing both the need to focus on its core devices and services, as well as external market conditions, Nokia is discussing structured exit options to continue support for existing users of the service.

Nokia established its Mobile Financial Services business in 2009, which employs about 120 people, primarily in India and Finland. The Nokia Money pilot started in early 2010 in Pune, India, in partnership with private retail bank YES Bank. Nokia deployed the service nationwide in December 2011.

The Nokia Money service runs on Obopay's mobile payments platform, and it is designed to work on most Series 30 and Series 40 / Series 60 handsets, on which it comes pre-loaded. It is operator-agnostic, and comprises two types of accounts: Easy Pay, primarily for unbanked individuals, enabling airtime top-ups, payments to closed-loop merchants, and utility bills. The second product, Easy Send, is aimed both at underbanked and banked demographics. It includes the same features as Easy Pay, in addition to person-to-person (P2P) transfers, and open-loop merchant payments. The service has minimal 'know your customer' (KYC) sign-up requirements, with only a water bill needed as proof of address.

Nokia's widespread retail network in India, with over 200,000 locations, in addition to partner merchants and banks, comprises Nokia Money's agent structure, collecting cash from users and instantly crediting it to their accounts via SMS.

Nokia invested $70m in California-based mobile payments platform vendor Obopay, accrued over several funding rounds which closed between February 2009 and January 2010. Obopay's latest funding round is expected to close in May 2012 at a significant discount to previous rounds; it is unclear at this point whether the equity value write-down elicited by this fact is in any way material to Nokia's exit from mobile financial services.

Nokia's commitment to focus on core devices and businesses is a sensible strategy. In the two years since the beginning of Nokia Money's experiment, the company's worldwide handset shipments (including smartphones and feature-phones) have been in steady decline. It has also struggled to maintain a competitive lead in the increasingly contested smartphone market, as Nokia's sales of such devices dramatically fell by over 20% in 2011.

After continuing to endure this precipitous decline in smartphone and feature-phone market share during 2012, IHS Screen Digest expects Nokia's total device shipments to stabilize in 2013. This will be due mainly to Nokia's continued strategic refocusing on core businesses, along with increased consumer adoption of Windows Phone-based smartphones.

In the meantime, struggling handset manufacturers such as Nokia and RIM retreat and regroup to counteract Google's Android and Apple's iOS predominance in the smartphone market. Even Nokia's entry-level and feature-phones-the company's traditional bulwark segments particularly in developing countries-have been under attack, as Chinese vendors enter the market with affordable and attractive devices, and profit margins plummet amid increasing competition.

Nokia Money was a bold initiative in that it came preinstalled in entry-level handsets and feature-phones. While the company has not disclosed Nokia Money's usage figures, in a broader strategic sense a major weakness of the agent model is the very different level of engagement that customers have with Nokia's retailers as opposed to, for example, their mobile operators' agents. As nearly 97 per cent of India's mobile subscriptions are prepay, there exists a strong, recurring relationship between customers and operator agents by virtue of the need to purchase airtime top-ups that simply does not exist with handset retailers.

For those reasons, this announcement signals a meaningful trend in the increasingly contested mobile financial services arena. Payments processors and mobile network operators establish watershed strategic alliances in order to ensure mass adoption of mobile money services, as they are better suited to engage customers in the way the cyclic nature of these services demands. Recent examples include the partnership announced by Visa and Vodafone to deploy mobile financial services to Vodafone's 398 million customers in more than 30 countries. A corresponding initiative by Telefónica and MasterCard aims to bring mobile money services to Telefónica Movistar's 87 million customers in Latin America under the Wanda brand.

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