Consumers, retailers, advertisers and banks must work more closely together if mobile phones are to replace wallets in an era of mobile commerce (m-commerce), according to a report by consultancy Booz & Company.
The report, m-Commerce Comes of Age: Collaborate to Succeed, said there is a "flurry of activity" among companies that want to launch m-commerce services. But the study warns that businesses wanting to offer mobile services should collaborate to reach the necessary scale to make it feasible. Mobile wallets can offer, for example, promotional offers and loyalty programmes on top of a enabling consumers to use a phone to make payments.
"Decade-long mobile commerce hype looks finally set to deliver. Developed markets are on the cusp of mass adoption, aided by developments in technology and changing user behaviour. Yet what was once seen as simply a new way to pay now has much broader relevance, adding value throughout the entire retail journey," said the report.
Four trends are creating a tipping point for mass market adoption of m-commerce, said the report (see below).
It said that firms are offering m-commerce services to protect their core business and to apply existing capabilities to new areas: "But few will find themselves in a sustainable, value-accruing position. It is highly likely that a dominant scaled solution will emerge within each country. For most, the only way to win at scale is through collaboration in the form of as-yet-untried partnerships."
The services being brought together are leading a diverse range of companies to bring mobile wallet propositions to market, including Google, eBay, Visa and Bank of America.
The report predicts that the next 18 months will be a critical time in the evolution of m-commerce as a variety of companies providing services strive to achieve credible scale.
"Our report highlights that while many companies are seeing m-commerce as a strategic priority, few will find themselves in a sustainable, value-accruing position," said Michael Knott, partner at Booz & Company, "For most, the only way to win at scale is through collaboration. It is through collaboration across all elements that a mobile wallet proposition will come to the fore - one that can revolutionise the customer experience, facilitating a much deeper and more sustainable relationship with the end consumer."
The four trends that could drive mass-market m-commerce adoption, according to Booz & Company
1 - Increased smartphone penetration and improvements in their performance have been pivotal in changing how users perceive and are willing to use their phones, with Apple's iPhone acting as a catalyst. Already, 90% of mobile subscribers in the US and western Europe have a phone that can access the internet. Sales of new smartphones tripled in the UK between the first quarter of 2009 and the first quarter of 2011; in the latter quarter, almost half of new handsets sold were smartphones.
2 - Contactless transaction technology roll-out is well under way, with consumers gaining familiarity with it and merchants recognising its potential benefits. Near-field communication (NFC) technology, a short range wireless RFID technology, allows consumers to make contactless transactions using a mobile phone. Analysts predict that 40 million to 50 million devices enabled for NFC will be sold globally in 2011, and that more than half of new handsets will be NFC-enabled by 2015. Already, the ability to make contactless card payments has helped the roll-out of terminals to stores; the Orange/Barclaycard solution announced for the UK, for example, claims that 40,000 retailers will be able to accept the service when ready.
3 - Shifting consumer behaviour is supporting these technology deployments, with an ever-increasing willingness to access the internet and make transactions using a mobile device. In the US, 20% of adults who can access the web through their mobile devices use them to shop, and almost as many use them to make banking transactions.
4 - Take-up of mobile advertising is growing fast, with consumers willing to click through and sign up, thanks to the lure of highly targeted, personalised offers. In just over a year, for example, more than two million customers signed up for the mobile advertising service offered by O2 in the UK, and Groupon claims to have a global total of more than 80 million subscribers to its local deep-discount service. Overall, brand spending on mobile advertising is expected to grow from 0.5% of total ad spending in 2010 to more than 4% in 2015, with mobile advertising revenue more than doubling each year.