In the 2nd part of XENIRO thought leadership series, we discussed the “how” and “why” 5G + Multi-Access Edge Computing (MEC) + Distributed Ledger Technology (DLT) are transformed into IoT “Digital Banks”. In Part 3 of this series, we will exemplify by demonstrating with a use case. In this example, we take “Lyft” (an on-demand transportation company) and analyze their Cost of Goods Sold (COGS) across the following categories: Network costs | Cloud Services | Payment processing fees. We will then attempt to demonstrate:
- How operators’ 5G “Digital Bank” edge infrastructure could support enterprises such as Lyft in their future business.
- How operators could capture a share of the revenue pool from cloud service providers and 3rd party payment processing entities that weren’t previously possible.
In December 2018, Lyft filed for an IPO with US Securities and Exchange Commission. Here is what has been extracted from the IPO report:
As depicted on the financial report:
- Mobile Operators capture the “lowest” (USD$ 50M) portion of revenue within this ecosystem.
- 3rd Party payment providers and Cloud service providers have the “biggest” (USD$ 410M) revenue slice.
Top tier on demand transportation companies such as Lyft, DiDi & Uber have been testing autonomous vehicles to power their future businesses. Below is a use case demonstrating how additional value can be captured by Mobile Operators.
Stage A: As devices become more distributed, mobile, intelligent and automated, they can interact and transact with each other. In this use case, autonomous vehicles can execute acquired services for EV charging, passing through a toll booth, parking and collecting service charges. This is made possible by assigning IDs to machines with a digital wallet.
Stage B: All payment transactions are processed on the DLT (Blockchain) residing in the 5G MEC infrastructure. Through smart contracts initiated prior to payments being validated on a DLT that is secure, trusted, immutable, transparent and decentralized. Thus, becoming a true IoT Digital Bank at the edge.
Stage C: Decentralized Applications (DApps) for Autonomous vehicles (5G provide ultra low latency & high bandwidth) can be deployed within the 5G MEC platform and orchestrated across multiple MECs depending on the types of applications. Operators can open up their RAN edge to developers, allowing them to deploy any type of innovative DApp services for enterprises, verticals and mobile subscribers. This will generate new avenues of revenue stream, through utilizing networking resources at the edge. Operator owned infrastructure essentially competes with cloud providers.
Payment Processing Fee
- DLT is essentially a distributed ledger where all transactions are processed and recorded.
- Cost of processing transaction on the DLT is much lower (without clearing house) compared with modern day 3rd party payment gateways. For example, Stripe processes the payment on behalf of Lyft and charges a 3% per transaction plus $0.30 / per transaction fee on average. If we take a typical DLT payment gateway such as BitPay that processes tokens on the DLT, transaction fee is less than 1.5%.
- If operators’ 5G MECs take on the role of payment processors for IoT devices through smart contracts, they will have the potential to capture a share of the USD $310M COGS. This will create a win-win situation for both the operator and enterprises such as Lyft.
- Decentralized applications hosted on DLT via operators MEC platforms will enable new revenue streams through service innovation. In turn, this will consume resources serving IoT interactions at the edge, allowing for operators to compete aggressively or partner with cloud providers in utilizing your edge infrastructure.
5G + MECs are being gradually deployed by Tier 1 operators on a wide level scale, the infrastructural investment already exists. All MNOs need is to deploy the DLT platform onto the MEC to transform this into an “IoT Digital Bank”.
Stay tuned for Part 4, welcome to visit us @ xeniro.io