On The Cutting Edge — Mobile Commerce: Driving Adoption

A few years ago, mobile commerce (or m-commerce) was touted as the next killer application - so what happened? Although mobile commerce has not yet become as ubiquitous as some people expected, advances in data networks and growth of the mobile Internet are helping it to gain slow but steady traction in various pockets of the world.

Mobile commerce is a big shift in how people interact with their phones. It involves new technologies, services and business models – and most importantly, consumer demand and adoption. Mobile phones could start to replace our wallets and credit cards in the next few years. But for that to happen, key issues of security, privacy, interoperability, usability, infrastructure and business models need to evolve and be addressed by the industry.

In its early phase, the main technologies that are being used for m-commerce transactions are:

  • Internet Access
  • Near Field Communications

Secure payment is perhaps the most critical part of the model. Two of the main payment methods currently being evolved are:

  • Co-billing along with the user's operator/service provider's monthly bill
  • Charging to a credit card that is associated with the user's mobile SIM Card

More advanced models like direct access to your bank account are also on the works. Some standalone application integration providers have been involved in this area, but I don't expect them to survive long without integration to external services and inter-operable services.

While the mobile commerce area still remains largely untapped, solutions are already beginning to emerge in a wide range of applications. Here are six examples of the kinds of mobile commerce transactions that are happening around the world today:

Mobile Banking & Money Transfers – Banks are embracing the possibilities and running trial programs to provide access to account information or make transactions. Security issues seem to be hampering wide adoption, much as they did when the Internet age started, but now Internet banking has become main stream. Watch for mobile banking to take off in the same way. Growth could be driven by the developing nations, where banks are scarce but the wireless infrastructure is already becoming available.

Mobile Coupons – This technology is expected to pick up sooner rather than later. In this model, a consumer walking into a shopping mall receives coupons to get discounts at nearby stores. There are already quite a few solutions that use the location-based technologies to provide coupons of interest. For example, when you are walking past a restaurant, the restaurant finds that you are there and offers you a 20%-off coupon on the spot. This enables targeted ads, quick and easy delivery that takes advantage of impulse buying and an eco-friendly solution that reduces "junk mail" or print-outs.

Micro Payments or Credit Transactions – Many companies and content providers have started to accept micro payments – transactions which are individually too small to be practical in a traditional credit card payment system, but which add up with volume into a sustainable business model. Smart card based micro transactions are already available; mobile phones are a logical next step.

Mobile Payments – Payment by mobile phone for goods and services – in particular for applications being run on the phone – is already becoming commonplace. This sector is expected to explode thanks to the expected increase in adoption of smart phones in 2009, followed inevitably by an increase in application downloads. However, payments for other transactions (at restaurants and stores, for example) have yet to catch up. One of the main reasons for this is the backend billing and payment mechanisms, often older systems which have not evolved with the times. Operators lack built-in payment mechanisms, credit card companies are waiting and watching, and the banks don't know what is to be done, leaving a major opportunity largely undeveloped.

Contactless Payments – Using NFC (near-field communications) to make transactions instant and painless is an area where many industry insiders are placing their bets. There have been a number of trials around the world employing NFC as a technology; check out my prior article on this technology (March 2008). Very recently, credit giants Mastercard and Visa announced that they would enter this area as well.

Mobile Ticketing – Tickets for travel, events or entertainment can be sent to a consumer's mobile phone via SMS/MMS or downloads and the phone can then transmit the data to a terminal via NFC or by displaying a barcode on the screen. American Airlines is in the lead here, having recently started to offer mobile boarding passes for travelers. According to Juniper Research, over 400 million mobile subscribers worldwide will use their mobile phones for ticketing by 2013.

As you can see, the slow overall adoption of m-commerce does not reflect a lack of ideas or initiative. The problem is slowly evolving industry support and a lack of applications to drive consumer adoption. Motorola has been aggressive in the former area – for example, we recently announced a new collaboration with the China International Electronic Commerce Center to create the M-Commerce Laboratory. By bridging the gaps among industry, government and academia, efforts like this may help to speed up research and commercialization of mobile commerce applications. Out in the field, several developers are driving adoption by making innovative inroads into specific markets around the world. Some examples to ponder are:

AirTel in India has launched of range of Mobile Commerce solutions including Mobile Money Transfer (MMT), Postpaid Bill Payment and Prepaid Recharge on the mobile phone. AirTel is partnering with many local banks and Visa to enable these payments using a solution that has been developed by mChek. AllTel wireless in the US recently launched the AllTel Wallet.

In unbanked areas of the world, users are given PINs allowing them to use their phones as a payment mechanism – in these cases; the vendor can just use the voice network to validate the PIN with the bank in a kind of hybrid m-commerce transaction.

I recently saw an innovative solution that used the power LED on the mobile phone to send out 2D bar codes. This technology could enable the phone to send out bar codes, PINs or any other data needed for mobile transactions at the backend.

Still, there's a long way to go. Although m-commerce continues to be a much-hyped buzzword in the industry, my personal take is that we're still at least three years away from widespread adoption of these services. There are quite a few players who need to become fully committed to get this going: the mobile operators own the networks, the banks own the customer, credit card companies like Visa or Mastercard own a consumer segment. On top of that, consumers need to adopt the technology and application developers need to find a solid business model for their investments. With so many folks in the fray, it's not surprising that adoption has been slowed down. But that also means the opportunity for you as a developer is golden. Come up with a good, innovative business and application model that really works and you can help to drive widespread adoption and acceptance from consumers. It's December and time for shopping – look at the activity around you and start to think about what you can do in mobile commerce.

– Asokan Thiyagarajan, Motorola Technology Evangelist
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