Ovum’s innovative service of the month: KT’s MoCa Alliance

OVUM VIEW

As part of the ongoing Telco Services Innovation Radar project, Ovum reviewed more than 100 new telco service launches from around the world in December 2012. Of these, KT’s MoCa Alliance and corresponding mobile payment service was selected as the most important innovation of the month. The sheer scale of its ambition and the relentless pursuit of partnerships make it an important launch. However, success is not assured and rests on KT’s ability to remain at the heart of the offering.

Impressive scale highlights the efforts needed to build ecosystems

The most impressive aspect of KT’s MoCa Alliance is the extent of the ambition evident in the service. At launch, it consisted of a coalition of more than 60 companies ranging from banks to technology enablers. The Alliance is providing users with several key capabilities spanning the “mobile commerce space”, including the ability to use and manage coupons, loyalty scheme points, credit cards, bank accounts, gift vouchers, and electronic money through a single iOS or Android application. The service is available to all South Korean mobile customers regardless of the mobile operator that they purchase their services from.

At the heart of the ecosystem is KT, which is the second-largest mobile operator in South Korea. The level of investment – in terms of capital, human resources, and time – required to develop such a large-scale ecosystem must have been significant. However, efforts such as MoCa emphasize the fact that if telcos want to drive new value-added opportunities, they must be prepared to take on the “heavy lifting” required. Too often telcos have sat back expecting opportunities to land in their laps, when the reality is that they need to pursue opportunities far more than they have in the past. The lost opportunity of location-based services shows just how much can be lost if telcos sit back and wait for the world to come to them.

Partnerships are the key to success

Ovum emphasized the important role of collaboration in the report Mapping Mobile Payments. It is assumed that most telcos lack the skills, reach, and power to drive an ecosystem on their own. Therefore, what KT has achieved as the sole telco in this ecosystem is impressive considering that it is the second-largest player in the market. It is all the more impressive when one considers that even the Isis mobile payment platform is based on the coming together of three of the US market’s national mobile carriers.

The major part of KT’s “heavy lifting” will have been in opening, conducting, and closing discussions with the array of partners involved in MoCa. Partnerships have been a recurring success factor in our Telco Services Innovation Radar, and the MoCa Alliance is another example of their importance. Finding the right partners is also critical and KT seems to have a good range of financial services and technology partners, proving that operators should not attempt to stretch their capabilities to breaking point. The core competencies of connectivity, security, and trust will be the assets that KT brings to the table. The retail partnerships are probably the weakest element of the MoCa Alliance at launch, numbering just 21 brands, which is small considering the size of the retail landscape. However, we expect more partners to be added as the service evolves.

KT’s success will depend on its ability to remain at the epicenter of the offering

While establishing the ecosystem is one thing, KT’s success will be measured by the revenues and return on investment that it generates through its partners. It has been able to develop the MoCa Alliance due to the continued strength of South Korean operators in the domestic mobile ecosystem. Despite increased competition from over-the-top (OTT) players, South Korean telcos still enjoy considerable “pulling power” in their domestic market – particularly in comparison to their peers in markets such as Western Europe.

However, KT’s own payment partners and the large global transaction companies will not continue to stand by and let telcos seize revenues from their traditional markets. Similarly, there is a large number of existing OTT payment services that KT will have to compete with, although many of them still lack scale. The breadth of partners in KT’s approach suggests that the MoCa Alliance has the potential to resonate with South Korean consumers, and it will help KT to maintain its relevance in the market. Whether that is enough for KT to benefit in the long term depends on the precise terms of its partnerships. If it gets too greedy, KT could see itself edged out.

APPENDIX

Author

Steven Hartley, Practice Leader, Telco Strategy

steven.hartley@ovum.com

Further reading

Mapping Mobile Payments (TE004-000640, October 2012)

Telco Services Innovation Radar: 1H12 (TE011-001188, January 2013)

Telco Services Innovation Radar 1H12: Analysis and Case Studies (TE011-001191, January 2013)

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