Opening up mobile commerce - Mobile World Live

Opening up mobile commerce

13 JUL 2011

By Johan Rosendahl, managing director, Ericsson IPX
Today’s mobile phones make an ideal platform for instant transactions, representing a huge opportunity for the mobile operator community. Seeking to build on the success of payments for digital goods, the focus has now shifted to the potential for physical goods and services, and the creation of mobile wallets supporting NFC for the optimum consumer experience.
While there are challenges faced in making this vision a reality, a share of a mobile commerce market valued by ABI Research as reaching $119 billion by 2015, is a significant reward.
Users have been making payments with their mobile phones for a number of years. Starting with downloadable ringtones and wallpapers, the market for digital content has continued to grow alongside the explosion in the apps market. At the same time, this space has also seen a range of technical innovations, from the first WAP payment mechanism to more recent breakthroughs such as in-app billing. With these methods payments are deducted from a user’s prepay balance, added to their post-pay bill or even charged to their credit card, though the latter approach has less widespread usage.
User friendly
The key to success has been to offer a simple, user friendly payment method which enables high conversion rates and so far the operator billing mechanisms have been outstanding for end consumer convenience. They would also seem a natural fit for the wider payments realm. However, there are a number of hurdles in the way of this becoming a reality.
While we are seeing the growth of operator-based payments into new areas, the reality is that thus far there have been only a few niche deployments of m-commerce for physical goods and services with proponents facing a range of business model challenges.
There are two underlying factors behind this: firstly, the concept is still relatively new with few businesses currently looking to take advantage; the second is guaranteeing that the cost level of operator-enabled billing is on a par with the value generated for the consumer and vendors compared with cash and credit and debit cards.
Nonetheless, recent changes in consumer attitudes driven by the mobilisation of many web services via apps and increased interest amongst retailers means widespread m-commerce is set to take off. The risk is that companies wishing to sell on the mobile will pass up on using the billing relationships operators have with their subscribers, and will deploy technology wholly independent of the operators’ infrastructure, cutting them out of this potentially lucrative area.
Finding value
The main challenge facing operators is how to align the value chain and ensure the requisite revenues are available to allow all participants to find value. It is also about optimising own internal processes, methods and tools as well as setting the transactional business into the context of high relevancy for their subscribers.
With digital content, the model is very successful  due to the high simplicity, minimal competition and very good conversion rates. The situation with real world goods, however, is somewhat different. Here, the lion’s share of payment is needed to pay for the service or goods and generate value for the merchants.
In addition, sales or business process optimisation needs to be comparable with that offered by using cash or cards. The good part is most of the business volumes already exist and consumers want to go mobile, the operators just need to ensure they consider the alternatives when modelling.
This was highlighted by the recent launch of the Google Wallet service in the US. Aware of this issue, the search giant stated that it would not charge for transactions, but instead generate revenues via targeted advertising and marketing opportunities. While this model may be unattractive to mobile operators there is a middle ground whereby they drop revenue shares in order to make their billing pricing on a par with the value they generate for merchants vs. that of credit card or other means.
Numerous players are now converging on this space from payments, internet and mobile backgrounds. Many have previously toyed with the supra-operator models and are well placed to benefit. MNOs, however, remain in the driving seat though their ability to define technology and existing customer billing relationships.


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