The CEO of Sweden’s telecommunications giant Ericsson, Carl-Henric Svanberg, talks to Stephen Timewell and Oscar Wendel about the prospects for mobile banking services.

In 1900, 90% of Ericsson’s telecommunications business was in exports. Today, more than a century later, the Swedish multinational’s business covers 140 countries with 55% coming from emerging markets. Ericsson supplies operators and service providers around the world with end-to-end solutions in mobile and broadband internet. For CEO Carl-Henric Svanberg the worldwide penetration of mobile phones has already reached exceptional levels but he is optimistic that there is still a lot more growth to come, the vast majority stemming from emerging markets, with huge potential for micropayment services.

User numbers are expanding

“Today, 2.6 billion people have mobile phones and that is a fascinating number. Only four years ago, we thought that two billion was saturation and that we could never reach further because of what people could reasonably afford. But since then the price of handsets has come down faster than expected. The price of infrastructure and the price of operators’ operational models have come down, making services affordable to an extent we previously didn’t think possible. This is why the number of mobile phone subscribers today has reached 2.6 billion and why we think we can go to four billion by 2010, two-thirds of the world population.”

If the number of mobile phone users reaches four billion, it will be over four times the number of people with a credit card (estimated to be less than one billion). This makes Mr Svanberg bullish about the opportunities for micro-payments. “Although we are never going to have a cashless society, it is clear that when you have a pre-paid card, that becomes a tool for micro-payments.”

In Japan, pre-paid cards (in mobile phones) are already being used to pay road tolls. The charismatic Swede believes that the Japanese are very mobile-centric; in Japan the mobile phone is taking the place of the standard MP3 player for playing music, he says.

Emerging markets focus

However, the real growth in mobile-based services is expected to come from less developed markets, he says. “It could very well be that in mature markets, [mobile banking services] will be used more per subscriber but 80% of the subscribers will be in emerging markets. So seeing it from a world perspective you will find that the emerging markets add up to more potential overall,” says Mr Svanberg. “Also, in the developed markets, people will continue to have so many more ways to handle payments and finances. But for road tolls, why not?”

In mature markets, people spend 2%-3% of their disposable income on communication, whereas in emerging markets people spend two to three times that, between 7%-8%, despite having much less income, because of the huge opportunities better communications bring, says Mr Svanberg.

The mobile role

How does Ericsson see the role of mobiles in banking services? “I see the major focus is going to be in micropayments but I don’t think banks will feel this is business being stolen away from them because it wouldn’t have been there in the first place,” says Mr Svanberg. He accepts that the use of mobiles for cross-border payments is not there yet, but he is confident that more efficient 3G phones will be cheaper in two years’ time.

“When we talk about evolution and development in African economies, for example, two years is a short time. But when we get there [with 3G], the functionality will be the same as on the internet. For the vast majority, the phone will be their access to the internet. But we are not there yet in emerging markets because the [3G] phones are too expensive.”

Although he is bullish about the opportunities, Mr Svanberg is also concerned about security issues, and about getting the right balance between security systems and making mobiles convenient, reliable and easy to use. He is also concerned about the pace of development and the level of trust achieved. “Whenever you have an innovation or technology, it is not the new technology that sets the pace for how fast it grows and gets adopted, it’s the people’s ability to absorb and buy into the ideas,” he says.

CAREER HISTORY

2003: President and CEO, Telefonaktiebolaget LM Ericsson

1994: President and CEO, Assa Abloy Group

1990: First executive vice-president at Securitas Group, with responsibility for alarm solutions and locks

PLEASE ENTER YOUR DETAILS TO WATCH THIS VIDEO

All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker



For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Join our community

The Banker on Twitter