Put it on my mobile: m-commerce can only realise its potential if merchants and mobile operators work together

It seems not so long ago that the now routine act of sending an SMS was a bit of a novelty. Now, consumer acceptance of the mobile phone as something more than simply a device for making calls is growing. The contribution of faster mobile networks and the falling cost of better quality, full-colour, Java-compatible handsets is giving consumers the means to make use of the new services that are coming their way.

This all has positive implications for m-commerce. The ARC group, for example, estimates that by 2007 the global m-commerce market will be worth over US$20 bn.

One of the main drivers for the accelerated growth in m-commerce is the increase in the types and quality of content that mobile users are able to access. While this includes various high-value items (such as concert tickets) the growth that is expected in the near future will come from digital content and services, most of which will be valued at under [euro]10.

Currently topping the shopping lists are ringtones. More ringtones are now sold in the UK than CD singles and with ITV (an independent TV channel in the UK), Orange and Endemol establishing their own ringtones chart, it would seem that mobile content has gone mainstream.

Furthermore, the digital music delivery market has gone legitimate and is growing in its own right with the successful launch of various platforms in Europe, such as Napster, iTunes and Sony Connect; iTunes alone has sold 5,000,000 tracks across Europe in the first ten weeks of it going live.

T-Mobile and O2 have also started the mobile music bandwagon rolling with proprietary mobile music services on the basis that downloads over the internet will soon extend across other delivery platforms.

Beyond music, content providers are multiplying from games writers to studios spinning off mobile versions of their reality TV formats and news services. The increasing transparency of the mobile internet is giving remarkable scope to the nature of content that can be purchased.

Mobile content and services encompass an increasingly broad spectrum: digital music downloads, ringtones and wallpapers are just the beginning, substantial though the revenues from them are. Content and mobile service providers are developing all kinds of applications and services that will kick m-commerce into an even higher gear. From services such as gambling, voting and blogging, to a broader variety of content. This could include java games, adult content, animated shorts and mobile TV.

For the content providers, it isn't so much a case of looking for buried opportunities as jumping on board before the ship sails!

Show me the money

The appetite for good mobile content is there, but the question is how to pay for it. Premium SMS, the system whereby a series of text messages are used as a proxy for payment, plays an important role in purchasing certain types of content, and will continue to exist alongside other payment systems. However, premium SMS lacks usability, flexibility and the payment guarantee that merchants need and the sense of control that consumers desire. On the mobile internet there is a need to enable a simple payment system that neither necessitates quitting your browser to send a premium rate SMS, nor requires entering credit card details. Indeed, the majority of the content is too low value for credit-card details to be worthwhile.

Currently, most m-commerce is driven through operator portals--more than ten million European consumers make use of them. Orange World, Vodafone live!, Telefonica MoviStar's e-mocion service and T-Mobile's t-zones are all succeeding by providing a significant amount of compelling content to consumers in an easy-to-access fashion.

As mobile content and the mobile internet expands and develops, however, content providers will look to push beyond the portals and give consumers access to the entirety of their content directly.

This need not be an issue for mobile operators. 'Outside' content can be complementary to operators' existing portals, which will never have enough 'shelf space' for all the merchants that would like to appear in the portal. This points to an eventual move by consumers to using both portals and sites of their own choosing. In order to continue to profit from m-commerce to the same degree, it will be necessary for operators to tie themselves firmly into the m-payment value chain, above and beyond their portal activities. Mobile operators are starting to recognise this trend and beginning to set up 'friends of' areas where consumers can consult content that does not make it onto their own portals. This allows the broader distribution of a range of mobile content.

Take note

The evidence is pointing overwhelmingly at a mobile-content rich future and operators, realising that m-content and m-commerce are crucial to their longer term success, know they need to take action.

One of the biggest challenges facing operators is the need to maintain and indeed, grow, their average revenue per user (ARPU). The advent of 3G and stiff competition on both bundled minutes tariffs and spill-over from the mobile virtual network operator (MVNO) pricing wars in Europe will make it harder for operators to maintain turnover without providing additional services and getting the customers to use them.

Clearly, it is in the interest of both mobile operators and content providers to establish a mobile payments network that will allow the m-commerce marketplace to reach its full potential.

Participation in such a platform will form a key part of the 21st century mobile operator's proposition. Mobile users will leap at the opportunity to be able to pay for digital goods and to download and pay for specific local information on their mobile bill, particularly while roaming internationally. It shouldn't matter which operator they are with or who the content provider is--consumers need the simplicity of a payment method they can trust and use across the board.

And this is Simpay's challenge: founded by four of the leading European mobile operators, it is tasked with creating a trusted payment brand that will transcend both cultural and national borders with its simplicity and ubiquity. The aim is to enable consumers to charge digital content to their pre- or post-pay mobile bill across the digital borders of the mobile internet, as well as real-world international boundaries.

When the customer clicks the option to pay with Simpay, the mobile operator provides details of the transaction to the customer's mobile phone screen. The customer clicks to send their confirmation. Simpay's role is to route the payment details--first the payment request and then the authorisation--between the mobile operator (a Simpay member) and the merchant acquirer who, in turn interacts with the merchant (the content provider of ringtones for example). Crucially, Simpay is open to all mobile operators.

Perhaps just as importantly, Simpay offers the opportunity to create a brand that has the international recognition and consumer trust of Visa or MasterCard, making life easier for consumers, and contributing to the growth of the m-commerce industry.

Interoperability is key

The growth of m-commerce is set to benefit many different groups--from one-person games development companies, through established media owners, to the network operators.

No-one is set to lose: it's a matter of making sure we're all ready as each gradual evolution in technology and content pushes us along. Furthermore, like so many revolutions, the speed at which change occurs will depend on how the industry pulls together in the spirit of cooperation. Just as interoperability provided the key to the rapid growth of SMS text messaging in Europe, interoperable mobile payments will help make m-commerce reach its full potential.

Beyond all the difficulties, though, one thing is certain: the m-commerce market is moving fast; network operators and content providers need to be on board.

Tim Jones, CEO, Simpay. The mobile payments company was founded by Orange, Telefonica Moviles, T-Mobile and Vodafone

written by Tim Jones

COPYRIGHT 2004 Horizon House Publications, Inc.
COPYRIGHT 2005 Gale Group