Mobile commerce is languishing in obscurity, so the hunt is on for
the breakthrough application and service. Although some don't share
their optimism, suppliers are confident it will soon get a move
on.
Everyone agrees mobile commerce is going to be big, but it seems no
one concurs on what the numbers will be. Nor can they agree on why
the predictions vary so widely, or what the killer application will
be.
How did this happen in a market with a potential 41m consumers and
why is m-commerce languishing, unnoticed and unwanted?
Part of the answer is that the m-commerce applications have failed
to take off commercially. The Finns, always quick off the mark in
the mobile market, came up with a scheme to enable customers to buy
their ski lift tickets by mobile phone, but that doesn't seem to
have caught on widely. They also produced the idea of paying for
fizzy drinks from a vending machine with a mobile - but when
Finnish parents footing the bill found their enterprising offspring
were buying cans and selling them at a discount to their mates,
that idea looked less than brilliant too.
There are still ideas such as buying ring tones for a mobile via a
mobile; a cute twist from surpriseyourwoman.com in February was
selling love poems at 10p a go (see box). But the killer
application is proving elusive and some think the problem lies with
the operators.
Need for innovation
"M-commerce is unlikely to gain
traction in the UK consumer market until mobile network operators
focus on providing innovative new services," comments Mark Blowers,
a senior analyst at Butler Group, adding that mobile phones, with
their tiny keypads and screens, are far from an ideal device from
which to access m-commerce services.
Voice recognition will help, he says, but the real answer for now
is to focus on the enterprise rather than the consumer market.
"Wireless PDA devices will allow e-mail and PIM data to be
available from any location and at any time," he claims.
In the business market, m-commerce is seen as a concept well down
the line and basic mobile services are still being developed that
will, eventually, provide the platform from which m-commerce can
take place. Basic applications include directory-type services from
companies like Calendra and accounting software from the likes of
Exchequer Software.
Location services are also being developed, with the reasonable
rationale that someone using a mobile device is, by default, out
and about. "If you start with a few basic services, such as being
able to find a cinema from a WAP phone, that is a good starting
point," explains Chris Kingdon, vice president of product
management at local services technology provider SignalSoft. "From
there, you can enable them to see what films are on and reserve a
ticket. This is a realistic way to use m-commerce, but you have to
have the right entry point with information services that then
expand to m-commerce. With 3G, you may even be able to download a
trailer for the film, although it may take a while."
Vodafone also thinks location services could be a big seller. In
February, the mobile operator launched M-Pay Bill, allowing
customers to pay for 'low-cost' digital content on their mobiles,
such as financial information and news. In future, claims Vodafone,
consumers will be ready to pay for location-based services such as
information on local child-friendly restaurants.
Right now, suppliers face an uphill task persuading the public of
the potential of m-commerce. "Most people are very sceptical, so we
do need to pass that barrier," acknowledges SignalSoft's Kingdon.
"The pain is dealing with changing consumer behaviour, so that
people see [m-commerce] as useful. Many services today are quite
poor, so suppliers need to think about creating value, rather than
pointless exercises in futility."
However, it is not just the lack of exciting, useful applications
that is holding up m-commerce. There are lots of technical debates
going on that have to be resolved, mainly around payment systems
and security, but also about standards - so services created by
different providers will be able to interoperate.
As usual, the industry has responded by forming lots of consortia.
These include the location interoperability forum; the PayCircle
consortium, backed by Hewlett-Packard, Lucent, Oracle, Siemens and
Sun, and the European Telecommunications Standards Institute - a
global programme to try and set up a cross-industry body for
security and technical standards.
But companies like Israeli firm Top Image Systems, which is looking
for partners in the UK for its mobile data capture system, brush
aside these obstacles. TIS says it is ready to go with
fully-encrypted, simple mobile systems. "It's ready and we are
waiting on half a dozen projects worldwide," reveals UK managing
director Gideon Shmuel. "There are no technical obstacles."
Others, such as Ahal Besorai, CEO at unified communications
specialist Inclarity, remain less optimistic. "M-commerce is still
in its infancy," he comments. "Eventually, the mobile device will
become some sort of virtual wallet, but the technology is not there
yet. There is a lot of integration work to be done, as well as
consolidation of payment systems. There is a lot of big money
involved and that means there is a lot of politics going on."
Payment on the move
The key to any trading system is
payment handling. With m-commerce, the emphasis has been on finding
a way to pay for many low value transactions as painlessly as
possible for consumers, but trying to decide how to divvy up these
transactions between interested parties is proving a
headache.
"A couple of years ago, mobile network operators were running
schemes where they were getting 50p every time a customer took a
look at their Citibank account via their mobile," comments Chris
Erickson, co-founder of 724 Solutions, a provider of mobile payment
technology. "While they play a real role with a valuable
infrastructure, the level of charges in Europe may be anything up
to 60 per cent of a transaction and that is stifling the market."
In Japan, he says, merchants pay mobile operator I-Mode only about
nine per cent per transaction and Western mobile operators will
have to readjust their expectations if they are to see the
m-commerce market take off. "There will be some grounding in
reality soon," he predicts.
Erickson also says improved payment systems will help shift the
m-commerce market. At the moment, there are two basic ways to pay
via a mobile: the money can be taken directly from the amount of
credit left on a pre-pay phone, or an account customer can be
billed for services. "By the end of 2002, every single mobile
operator will have ways of doing payment other than these two,"
claims Erickson. They may include direct debit from bank accounts
or credit card-style payments - and convenient, flexible payment
schemes will help drive market development, he says.
Ray Anderson, CEO at Cambridge-based payment specialist Bango,
agrees. Bango provides a payment system for mobiles based on
tapping in a short number - the system used successfully by
surpriseyourwoman.com that resulted in almost 2,000 love poems
being sold via mobile phones.
The Bango premium service was launched earlier this year; content
providers choose a Bango number for each service they provide and
promote the number to their users. Once the user reaches the
content site, payment is collected by Bango either through the
operator's billing system or using pre-paid pin codes. Bango sends
a cheque to the content provider once it has received the money
from the operator. Under the system, the content provider receives
between 60 and 80 per cent of the money spent by users. The mobile
operator takes a share if it handles the billing.
Bango plans to extend the system into a pre-paid card payment
system, where users pay a set amount, such as £5, and gain access
via a scratch-off pin number on the cards to content like
information about a specific event. "For instance, we could sell
cards to people when they are queuing at the British Grand Prix at
Silverstone in August, or to people going to the Womad festival,"
suggests Anderson. "At the moment, people in queues are all busy
texting their friends; this would give them access to information
about the event. We are trying to bring the simplicity of phone
numbers to the idea of content."
Selling premium services
A similar idea based on text
messaging is being tried by fast food giant McDonald's as part of
its marketing tie-in with the film Monsters Inc. The retailer has
put peel-off stickers on packets of fries with a code and number
which can be sent via a text message or through a Web site for the
chance to win a prize.
Another company that provides payment services is MobileWay, which
aggregates revenue-sharing agreements from wireless operators. "We
started by developing a network for content providers that wanted
to send content via SMS," explains UK managing director Bernadette
Lyons. "The biggest limiting factor around mobile data is the
question of how to pay."
Lyons says there is a huge potential market for premium mobile
services, with people willing to pay 25p a message to join a chat
application via their mobile phone. "There are a huge number of
people willing to pay that and we also see adult services as a real
potential revenue earner, with prices of one pound a message," she
comments. With demand growing, Lyons is optimistic about the
future. "It is a good business," she claims. "We provide a valuable
service and the margins are good. It's also very cash positive,
because we hold the money."
Despite this, Lyons agrees there is still uncertainty about how
m-commerce will develop: "Everyone assumes it's out there, but
there's not much visibility," she says.
Back to basics
While the network operators, banks and
technology companies try to work out how to develop the market to
their mutual satisfaction, opinions remain divided about how much
progress has already been made. Barry Shrier, sales and marketing
director at payment specialist Paybox, which is backed by Deutsche
Bank, says his company has half a million consumers in five
countries using mobiles to buy things. "You could say that is
pathetic, but that is not the point," he argues. "It look 25 years
for Visa to get 500,000 customers in Europe and we did it in just
over a year."
Rob Price, channel development manager at LPG Innovations, is less
optimistic. "The market hasn't made that leap across the chasm to
become a mass market," he says. "There are a lot of good concepts,
but suppliers are trying to move too quickly.
We think there is a need to look at mobilising basic services
first, because users have to be confident." Price thinks that day
could take at least three years to arrive. So by 2005, it seems,
m-commerce could be more of a reality. But there's a lot to sort
out between now and then.
Further information:
www.bango.netwww.butlergroup.comwww.calendra.comwww.inclarity.netwww.lpginnovations.comwww.mobileway.comwww.paybox.co.ukwww.signalsoft.comwww.surpriseyourwoman.comwww.topimagesystems.comwww.vodafone.com