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M-commerce: A Reality in 2008? 3/16 rcrnews.com Mention m-commerce in North America, & the common response is a roll of the eyes. It’s not hard to guess why. Back in the heady days of the Internet dot-com bubble, m-commerce was one of the many buzz words connected with e-commerce whose promise failed to materialize because the hype was premature. Today’s landscape is much different. Several trends are helping to drive momentum for consumer purchases over mobile phones. They include the growth in mobile data services, advances in handsets & operator networks, consumer acceptance of the Internet as a purchasing & payment vehicle, & growing consumer interest in mobile banking. Discussions of mobile purchases often blur the lines between various types of mobile payment. It is important to take a step back & define m-commerce if the discussion is to be valid. TowerGroup views m-commerce as spanning 3 distinct categories: Handset-based mobile content purchases (e.g., ringtones, games, music for use on the handset itself). Purchases of goods & services via the mobile phone browser (e.g., buying a book on Amazon.com). Purchases completed by near field communication (e.g., micropayments for purchase of newspapers, gum, or other small items by swiping a phone over a POS terminal at a news kiosk or convenience store). Content is king in the m-commerce world & dominates the vast majority of spending via mobile phones. In 2008, 90% of purchases made on the handset will be for content & services to be utilized on the handset itself, & TowerGroup believes the majority of spending will continue to be in this category in the coming years. Handset-based mobile content purchasing is the only category within the mobile purchasing & commerce space that has successfully crossed the chasm of consumer adoption. With mobile purchases still limited largely to content for the handset, it is therefore premature to say that m-commerce is mainstream. Rather, it is still very much an emerging service. Some early adopters are using their mobile devices to make purchases, but the volume of commerce is limited in terms of the number of users & in the number of transactions. Progress on the m-commerce front is evident: Online merchants are working to create WAP versions of their Web sites so they can extend their online presence to the wireless world. They are working to make the purchasing process easier for consumers by allowing users to store payment information on their Web sites, & they are using mobile advertising to drive traffic. One of the most exciting aspects of m-commerce involves enabling consumers to use a handset to purchase goods at the physical POS. While commerce utilizing NFC in this manner holds great potential & trials continue globally, the underdeveloped ecosystem supporting NFC payments will prevent real uptake in this space in 2008 in the US market. Expansion of this market space will require proliferation of merchant POS equipped with NFC payment terminals, broad-based operator support, & widespread consumer adoption of NFC-equipped devices once the other prerequisites are in place. The end goal of m-commerce, regardless of stakeholder, is to drive revenue by increasing consumer convenience. In the case of mobile content downloads, the clear winners are operators & content developers. For m-commerce & POS transactions at merchant locations, the merchants will derive the benefits of increased sales & convenience resulting from consumers’ conversion from cash to electronic payments for small payments & micropayments (defined as $5.00 or less). Credit card associations & electronic payments processors will benefit from the increased transaction volume. This year will no doubt bring continued growth in mobile content & services, an increase in purchases made via mobile devices, & further evolution of the mobile payments & purchasing ecosystem & value chain worldwide. Key players in the traditional payments & Internet payments space, & online retailers will invest in, initiate, & nurture mobile payments strategies. Developments related to NFC are perhaps the murkiest & most difficult to foresee. Few NFC devices will be in the hands of US consumers by year end, but trials & tests will continue throughout 2008 & into 2009. To be sure, we are only on the cusp of developing the full potential of m-commerce.