M-commerce – the Sleeping Giant


By Anjum Sawhney – V P, Solutions Marketing for Convergys EMEA

Although there seems to be no agreed absolute definition of mobile commerce, or m-commerce – some people think of it as a service, others as an application – it can be characterized as a multi-facetted entity, comprising a number of products and services.

Services can range from buying physical goods in a retail store (using the mobile phone as a payment tool), to the purchase of financial services (using the mobile device as a communication tool) and the downloading of software or content with a transactional value.

Precise definitions aside, however, many would agree that m-commerce is another logical step in the emergence of cashless transactions and electronic money flows. Many observers are familiar with technological advances which enable mobile users to subscribe to simple information-based services, as well as SMS-based developments like the ability to order and pay for drinks from a vending machine.

These developments hint at the potential of m-commerce, but the real revolution will only come about when it is embraced by the High Street. This is contingent on a number of factors, not least the development of proven user-friendly technologies, common payment standards and effective regulation.

Above all, the introduction of adequate transaction security and data privacy safeguards will be essential to build consumer confidence. The initial failure of e-commerce to live up to forecasts was not simply due to overestimating the significance of the dotcom economy, but also to underestimating the importance of security.

Market Growth

Growth in m-commerce across Europe has been steady rather than spectacular. While there appears to be a consensus that m-commerce has much potential and will grow, there is less certainty regarding the rate of growth or the total value of the market. Analysts’ forecasts for the total value of m-commerce transactions in 2005 range from €7bn to €24bn.

It is unlikely that the market for m-commerce services will really take off until end-2004 – companies need to build and install new systems and it takes time for a critical mass of people to learn about and accept new ways of buying. In addition, the penetration of m-commerce at European level is critically dependent upon harmonization of certain regulatory and business protocols.

At present, payment systems and business models vary considerably between countries, reflecting different cultural and economic structures. However, the challenge to develop common standards is being taken up by a number of industry consortia and forums, mostly led by mobile network operators or financial service providers.

Business Opportunities & Challenges

Assuming that the technical, logistical and political hurdles are overcome by 2005, what will the m-commerce market look like? As the market matures, so the variety of goods and services on offer will grow from ‘in-band’ content to include ‘out-of-band’ soft goods, hard goods and one-off or repeating services. In-band m-commerce refers to the purchase of content downloaded to a mobile handset (ring-tones, news headlines, sports results).

Conversely, out-of-band m-commerce involves the purchase of any goods and services that are delivered by all other methods (by post or by the customer in person in a traditional high street retail environment). From shopping, ticket booking and personalized information services to banking and insurance, the range of potential services is vast.

The increasing variety of ways that individual consumers and businesses can buy and pay for goods and services will by itself act as a driver of growth in m-commerce.

Just as transactions can be made on the mobile or fixed internet, at real world shops and vending machines, and as P2P payments, so payment can be made by credit or debit cards, bank accounts, mobile bills, and other rechargeable or anonymous cards and stored value a