The great leap forward

Mobile commerce is languishing in obscurity, so the hunt is on for the breakthrough application and service. Although some don't...

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.net
www.butlergroup.com
www.calendra.com
www.inclarity.net
www.lpginnovations.com
www.mobileway.com
www.paybox.co.uk
www.signalsoft.com
www.surpriseyourwoman.com
www.topimagesystems.com
www.vodafone.com

Read more on IT risk management

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.

-ADS BY GOOGLE

SearchCIO

SearchSecurity

SearchNetworking

SearchDataCenter

SearchDataManagement

Close