Nokia’s Money strategy begins to emerge

Nokia (NYSE: NOK) today introduced its first major mobile financial service since its investment in mobile money vendor Obopay last March. Called Nokia Money, it gives consumers access to basic financial services, including person-to-person money transfers. It is a good strategic move for Nokia, according to Aite Group senior analyst Nick Holland, but Nokia needs to further refine its services strategy before it can be considered a success.

“Nokia seems to be spinning their wheels a bit looking for a strategic direction,” Holland said. “There was also an announcement about a Nokia netbook. [Nokia] is figuring out, what does it want to be when it grows up?”

As a globally recognized name, a mobile banking provider is a good start, Holland added. Nokia recently began tempering its services strategy, relying on partners rather than its own internal development, but it is also looking to services to revive its struggling brand. Nokia’s hefty investment in Obopay was seen as a way to both capitalize on the burgeoning mobile financial services market and stop the handset maker from being disintermediated by SMS payments that work on any handset over any carrier.

Nokia Money will work through users’ mobile phone numbers for transfers to contacts or merchants, utility providers or for SIM card top-ups. Although the press release stated Nokia Money works on virtually any mobile phone, the service will actually only work on Nokia mobile phone at launch, according to a spokeswoman. Nokia said it intends for the service to be open and interoperable with other payment services as well, but it’s not revealing many details at time.

Holland said the Nokia exclusivity can’t last for long. As Nokia learned with its game-sharing push last year, limiting a service to just Nokia handsets is restrictive, regardless of how big the installed base is. “There’s that classic always stated ‘there are four billion mobile phones and 1.6 bank accounts, what a great opportunity,’” Holland said, “but by restricting it to Nokia, you probably cut out at least three-quarters of that opportunity.”

Nokia is targeting urban and rural consumers, many of whom are in emerging economies and part of the 2.4 billion unbanked or underserved consumers. Obopay focuses primarily on emerging markets like India, but its mobile payments service also works in the US. Nokia has not released the geographies it plans to include in its rollout in early 2010, but it will most likely skip the US where the case for mobile money is weak and focus on emerging markets intead, Holland said.

“I’d say personally the large opportunity is in Latin America,” Holland said. “In sub-Saharan Africa there is already a variety of options working. In China and India there are lots of providers, but Latin America doesn’t have a lot of activity yet. As a continent, it’s lacking initiatives that are active elsewhere. In countries like Brazil, Chile, Mexico, there is a fairly high level of mobile penetration, but not the bank outlets you’d see in big countries.”

Nokia is up against competition from wireless operators’ branded services, such as China Unicom’s m-banking service, which Holland said is insanely popular, and Vodafone’s M-Pesa, as well as dedicated vendors like Firethorn and South Africa’s WizIt. Nokia could also potentially compete with Obopay through its other customers, which include MasterCard Worldwide in 18 markets including the US.

“Every country has very different regulatory practices based on opening bank accounts without having to be in a branch,” Holland said. “Some markets are fairly restrictive, so it will be interesting to see where they go. Nokia is wanting to capitalize on the investment they made, but the biggest thing they have going for them is the brand recognition. For most people outside of the US, Nokia is the brand synonymous with mobile. It’s not like the US where it’s all about Motorola or Apple. Nokia is good in Europe, the Middle East, Africa and Latin America.”