Banks should put m-commerce before contactless


New research from Ovum says banks that are promoting contactless technology are focusing on the wrong target and should switch their short-term focus to m-commerce. M-Commerce: Seizing the Immediate Opportunity to Build for the Future found industry players are expressing renewed interest in m-commerce as m-banking services take root.

Alex Kwiatkowski, principal analyst at Ovum and report co-author, says the resurgence of m-commerce presents financial institutions with a golden opportunity they cannot afford to miss. Ovum defines m-commerce as being ‘the purchase of physical products, services and digital content where the transaction is initiated and payment completed through use of the over-the-air (OTA) element of a mobile device.’

He adds, ‘Ovum believes m-commerce has a vital role to play in the adoption of the next generation of contactless m-payment instruments. Indeed, banks face losing market share if they do not play an active role in m-commerce developments.

‘In the past, banks were studiously indifferent to m-commerce, preferring to let others – most notably those within the mobile operator community – attempt to stimulate growth. This passivity must change. If retail banks procrastinate over the development of m-commerce, Ovum believes this will cost them dearly in the medium- to long-term as they cannot afford to see ‘PayPal 2.0′ come marching over the horizon to erode further their revenues derived from payments.’

Working with Datamonito’s Financial Services team, Ovum identified several market factors that point towards a renaissance in m-commerce.

Kieran Hines, report co-author and lead financial services analyst at Datamonitor, comments, ‘While m-commerce has witnessed many false starts, the view from the retail community is that the economics of contactless do not stack up for them at present, which has created an industry standoff. This means m-commerce has the chance to come to the fore again.

‘Fundamentally, and unlike NFC m-commerce is something that retailers are keen to pursue and is therefore an opportunity that must be taken by banks if the threat of further loss of payment market share to non-bank competitors is to be avoided.’

Ovum believes m-commerce can act as the foundation layer for other m-payment mechanisms, and instead of being overshadowed by the more fashionable NFC can be a catalyst for future use of contactless services.

Kwiatkowski says, ‘M-commerce acts as a bridge for the consumer to wider mobile activity. It also provides a way for the payment industry to develop a complete suite of product offerings.

‘Crucially for banks, m-commerce is the most easily addressable segment of m-payments. NFC is the largest market opportunity in m-payments by value, but cannot be tapped in the short term. Therefore, m-commerce offers the best target for banks to concentrate on – at least in the short term.’