There’s little doubt that m-commerce is quickly gaining traction among U.S. users. But exactly what m-commerce means to the wireless industry is far from clear.
Contactless payments-speedy point-of-sale transactions that are processed through RFID chips-are being deployed at thousands of merchants in the United States and abroad. Last week, Chase Bank U.S.A. said it will begin issuing “blink”-enabled credit cards based on MasterCard’s PayPass technology. The cards will begin shipping to more than 2 million customers this fall, and can be used at 7-Eleven stores, AMC Theatres and other storefronts.
Other credit card firms are pushing contactless payments in an effort to replace cash transactions. American Express is entering the market with its Blue card, and financial institutions including Citibank, Keybank, HSBC Bank and MBNA have announced plans to deploy credit and contactless-enabled credit and debit cards. A slew of retailers and fast-food chains are supporting the new systems, including CVS/pharmacy, Ritz Camera, Arby’s, KFC and Walgreens.
Frost & Sullivan predicts North American smart card microcontroller shipments will top 132 million units this year, growing at a 28 percent compound annual rate through 2010. The Nilson Report, a newsletter covering consumer payment systems, predicts 5 million to 7 million Visa and MasterCard contactless chip cards in the U.S. market by year-end, and 15 to 20 million by the end of next year.
But as retailers and financial institutions partner to deploy high-tech, high-speed payment systems, the wireless industry is largely watching the action from the sidelines. There’s still plenty of buzz about the concept of a “wallet phone” that can be used as cash for a variety of transactions, but the only substantial m-commerce activity occurring on mobile phones today is for mobile content like ringtones, games and applications.
Perhaps the biggest obstacle carriers face in the m-commerce world is transaction speed. The Mobile Payment Forum, an industry association of wireless carriers, handset manufacturers and credit card firms, has met with limited success in trying to integrate mobile handsets into payment scenarios, according to Forum President Simon Pugh.
“Some of the things we’ve looked at is how we can use the mobile phone in the physical environment as an alternative to payment cards,” said Pugh, who doubles as MasterCard International’s vice president of standards and infrastructure. “As MasterCard, I have a view that those are never going to be particularly successful. The last thing you want to do (at a point of sale) is make a phone call. The guy behind you isn’t going to be too impressed, either.”
Wireless phones are being used as payment devices around the world at parking meters, vending machines and movie theaters. Short codes are beginning to gain traction, too, in scenarios where time is less of a factor and proximity is not an issue. As wireless Web use increases, the phone can be used to pay for a variety of goods and services that can be marketed based on user preferences. Fans who surf music-related sites could be offered concert tickets to an upcoming show, for instance, or users who watch TV on their phones could be targeted by cable or satellite TV providers.
“Where the mobile phone shines is the fact that it’s always with you,” said Farhad Farzaneh, vice president of products for Valista. “If you need to have something and you can’t get to the Internet, it’s reasonable you would conduct that transaction over the phone. There are not many of those scenarios, unfortunately.”
Short codes help address the growing concern of fragmentation in the m-commerce industry. With credit card companies launching their own proprietary systems, retailers may be overwhelmed by competing technologies. Near Field Communications (NFC) has become the technology of choice for many large players, but other short-range vendors are also gaining a foothold.
“(Fragmentation) is where it all gets gummed up,” said Steve Shivers, senior vice president of corporate strategy and development for Qpass. “If there is a way that’s working, it’s around short codes.”
But using a phone for a simple over-the-counter transaction at a brick-and-mortar business seems detrimental to both the consumer and the retailer. Simply adding an RFID chip to a handset to enable transactions needlessly adds handset manufacturers and wireless carriers to the revenue chain.
“Generally, the first conversation you have with a carrier, they say, `How much of a transaction am I going to get?”‘ according to Pugh. “We say, `Nothing.’ Our argument is that people will have many ways which they can pay, one of which is the phone.”
So instead of hyping the phone as a “mobile wallet”-implying other wallets are somehow tethered-the key for wireless carriers and developers may be in tapping the phone’s connectivity. Consumers may value a device that can not only complete transactions but can track purchases, access account information and formulate budgets. And retailers could use the platform to deliver coupons and other promotional materials.
The Mobile Payment Forum conducted a trial last year in the Dallas area that exploited wireless technology to benefit both users and merchants.
“We looked at comparative usage vs. having a normal, physical piece of plastic, and the results were encouraging,” said Pugh, noting that consumers signed up for regular alerts from retailers and were willing to receive targeted marketing messages and coupons. “We saw some additional benefits to consumers from using a phone.”
