Why is the use of wireless technology for payments so low?
Whether for business or individual use, the much-hyped promise of a wireless revolution, with its resulting jump in wireless commerce and, consequently, wireless e-payments, has not so far materialised. While the technology for this exists, there is no emerging standard for wireless devices. Software to run wireless payment applications is available from various vendors, but no market leader has emerged. Infrastructure is patchy (notably in the US) or incompatible from region to region, effectively providing only localised adoption with any degree of robustness.
Unlike fixed telecommunications, wireless networks do not extend seamlessly worldwide. Wireless communication, at its most basic level, is not widely recognised in economically underdeveloped regions, in regions with harsh geography, or in markets such as the US with its reliable, low-cost fixed network, which has so far caused wireless penetration to be patchy and lacking interoperability.
Until basic communication can be taken for granted at an infrastructure level, business users and individual users will continue to consider wireless a non-essential option.
Wireless network standards ranging from GSM to CDMA and TDMA, and, more recently, GPRS and i-mode, prevail in different regions. Some regions (such as the US) are struggling to move to 2G+ operations, while Europe is already moving
On the application front, WAP is proving to be inadequate, and users are waiting for improvements to occur. When to use SMS implementation is unclear to many.
Until sharp regional differences die down and interoperability becomes more general, wireless adoption will continue to suffer.
Users can make a wireless purchase using one of many devices, including:
- A laptop on a wireless LAN
- A PDA, such as a Palm VII or a Visor
- A pager, such as Blackberry
- A WAP-enabled cell phone
- Internet access from within a car
However, purchase and payment applications written for one of these wireless access devices may not run on another device. Payment options available on the fixed Internet are not yet widely available for other types of access, so it is not an easy or spontaneous process for a user that is committed to e-payment to make a payment. Rather, the user must plan to bring, or have access to, the appropriate device when payment is contemplated.
Other shortcomings include the size of hardware. Wireless devices have tiny screens that, for the most part, do not support graphics, and that do not even support text communications very well - words have to fit into a small area, which makes any text hard to read. Wireless devices must be manipulated with miniature-sized keys that are difficult for some users to handle. These issues will limit the types of application that will be popular on wireless devices.
Devices are proliferating, but there is no market leader. As multi-network or device-independent access is not generally available, users will wait to try wireless or deploy it only in isolated, limited trials.
It is here that specific and useful developments create excitement among technologists and tantalise potential users with functionality.
How will wireless e-payments work?
They may be beamed from devices to terminals via infrared or short wave technologies.
Users can surf the Internet where they can choose merchandise, which they then pay for by clicking a button on their phone that activates payment software and accesses the customer's account. This method uses "m-wallets", where credit-card information is stored, ideally on servers, and can be accessed by PIN or other secure methods.
Metered payments can be adopted whereby the customer buys goods (such as soft drinks) and is billed on their phone or other utility bill.
Who will be the early adopters?
Current market wisdom holds that certain limited markets are better suited to wireless purchases in the short term, because widespread adoption is not yet a practical option. As to customer type, the youth market and "road warriors" - drivers and commuters - are best positioned to become early adopters of wireless payment technology.
The youth market has an adventurous spirit, is generally eager to try new technology, and has no legacy of pre-conceived behaviour to overcome. In addition, numerous e-payment methods, such as RocketCash, Beenz and Flooz, have been developed with their needs - that is, lack of easy access to credit cards - in mind.
Road warriors are more likely to have credit card access, but will be early adopters of wireless payment methods because travelling takes up so much time in their daily schedule. The ability to run virtual errands while away from the home or office thus becomes an attractive option.
What kinds of things are early adopters going to buy?
Due to the physical size of devices, not even optimistic vendors believe that users will purchase large-ticket items, such as cars or stereo systems, via wireless devices. Such purchases are a surprise bonus, even in the relative luxury of shopping on the Internet with a non-wireless connection.
However, teenagers with time on their hands, and road warriors in a rush will buy goods and information via wireless devices. For teenagers, music, games and personal accoutrements are expected to be popular. For adults, weather, news, traffic, location information and sports will continue to be popular.
Ticketing for movies, concerts and other events is emerging as a desirable wireless commerce opportunity for both groups, along with micro-purchases of sundries, such as beverages and newspapers.
Due to the screen-size limitations, personalised applications are extremely important in wireless e-commerce. Also, the lack of interconnectivity between regions will mean that localised applications - such as information on specific restaurants in a given neighbourhood - will be popular because they meet users' specific needs and are not subject to fading out of range.
Compelling reasons to adopt wireless e-payment are lacking
Even though the technology is available (in however an imperfect state), few users are trying out wireless e-payments. This suggests they are not motivated to do so.
Vendors reason that incentives will help them at least to try wireless commerce.
"Cool" trials may help persuade users
Early in 2001, go2 Systems, a California-based directory provider, launched a series of trials in conjunction with Johnny Rockets, a national chain of retro-style fast-food restaurants. A single Johnny Rockets restaurant in California participated. During the course of the trial, more than 100 customers pre-ordered their meals remotely via handheld devices. Customers had to scroll through complex menus to decide on their orders. When they arrived at the restaurant, their meals were waiting, and go2 Systems paid for all the meals. (Further trials are planned in which customers will pay.) While customers gained a free meal out of this trial, they were introduced to a positive experience of wireless commerce. Vendors hope participants will remember the experience and will be encouraged to try wireless commerce again in the future.
Wireless ASPs (WASPs) are emerging to help companies navigate the rigours of providing a functional wireless platform. E-service companies should follow this market carefully to see if new WASPs can benefit their specific wireless business goals. Traditional ASPs should watch this new market segment to determine if partnership or consolidation makes sense, and how the emergence of WASPs will affect their own wireless strategies.
E-security is of key concern to vendors of wireless payment applications, whether it is enabled via digital certificates, biometric, or uses public key infrastructure (PKI). Wireless e-payment vendors must create strong partnerships with the appropriate e-security vendors. However, there is still no common standard for wireless PKI (WPKI), as the major vendors are trying to push their own proprietary technology. So far, only a few telecoms companies are testing wireless digital certificates; the infrastructure cost is still too high, and only a limited number of wireless services justify such cost, therefore the return on investment is not, to date, guaranteed.
Web hosts may be called upon to enable wireless channels for e-payment applications on behalf of vendors with whom they may have partnerships, or customers who are developing an e-payment application and need assistance in making it run over the Web. Web hosts should carefully nurture partnerships to acquire wireless expertise, or develop staff skills in this area.
E-marketplaces and portals
Operators in these areas should ensure that they have an effective wireless payment strategy in place. This will be applicable in the short term for portal operators which may have a consumer-oriented customer base. It is a longer-term strategy for e-marketplaces, as business-to-business fixed e-payments are generally lagging, and wireless e-payments are even further behind.