By Paul Rasori
VeriFone
Mobile commerce (m-commerce) is not likely to change your life today. But tomorrow is another story. Shifting consumer trends and a stealthy infrastructure deployment make it likely we will all be impacted by mobile-device-based payment technology before long.
The rapid increase in consumer adoption of cell phones and other wireless handheld devices has produced pie-in-the-sky projections about how much m-commerce will be generated through use of these products as personal payment systems.
The main reason projections have been so varied - and, for the most part, off the mark - is that the definition of m-commerce differs from person to person.
Much like during the early days of the Internet, e-commerce analysts with little expertise in the payments industry seemed to assume that m-commerce would leapfrog the existing payments infrastructure rather than extend it.
So, let's try to define what m-commerce means to our industry. For POS transactions, m-commerce is the use of a cell phone or wireless personal digital assistant as an electronic wallet, which serves as a substitute for plastic credit cards.
The notion of using your cell phone as a virtual wallet may seem foreign to you. But if you take a step back and think about it, most people are more attached to their cell phones than they are their wallets.
It may take as long as eight hours to realize your wallet is missing, but you're likely to figure out in about eight minutes that your cell phone has disappeared.
With the cell phone clearly top-of-mind in today's mobile society, m-commerce players are coveting the top-of-wallet position on your cell phone.
That definition is pretty simple. M-commerce gets more complex when addressing how transactions are made from electronic wallets.
You can execute a transaction by text messaging, by accessing a browser or via Bluetooth, infrared or RFID (radio frequency identification) communications technology. Each of these methods has pluses and minuses. However, it's not realistic to think that merchants will be willing to invest in a variety of access technologies.
Furthermore, without compelling evidence of a movement toward a single standard, retailers are more likely to hold off until the industry settles on a common standard.
Near field communication (NFC) is likely to rise to the occasion. According to a recent report by ABI Research, NFC "enables applications such as payment, access or data transfer with the simple touch of a handset to another NFC device or tag."
To telecommunication service providers and handset manufacturers, NFC is appealing because it provides a broad range of applications, including payment transactions.
ABI reported that "more than 100 trials - many of which have been small or operated privately - have taken place over the past two years, as operators and the transportation and payment partners focus on the uptake of NFC services."
Current or recent NFC payment trials in the U.S. include:
The appeal of NFC devices to card issuers is over-the-air activation of "soft cards" residing on mobile handsets. According to ABI, issuers will reduce costs from printing and mailing cards. This will speed up card enablement because there is no need to personalize and mail cards to account holders.
Contactless payment is a secret weapon in the likely commercial success of NFC. As the pace of contactless payment card technology continues to quicken, we are laying the foundation for m-commerce payments.
Contactless readers based on industry standards are inherently compatible with phones and PDAs that will use NFC wireless signals for mobile wallet applications.
Every standard-based contactless reader deployed today is compatible with NFC-enabled payments. Merchants who move to contactless now will be able to accept mobile phone wallet payments at no additional cost or equipment.
Contactless payment is still far from being ubiquitous. But it is springing up in more and more places every day: in fast food restaurants, cinemas, taxi cabs and other locations.
After distributing 20 million contactless cards and fobs last year, the industry is expected to ship another 25 million or so this year. That pales in comparison to the 200 million to 300 million mag-stripe cards that will be shipped. But it is beginning to make a dent.
Marketing of contactless programs to consumers has barely begun. Visa U.S.A. initiated some clever television commercials promoting contactless, but we've not even scratched the surface when it comes to shifting consumer consciousness.
Until now, incentives for contactless adoption have been aimed primarily at large merchants. At some point, incentives need to be aimed at consumers in the form of discount coupons. These could be sponsored by the card issuers, individual merchants or perhaps by wireless service providers.
Unlike smart cards, m-commerce is bigger than card issuers and merchants. The wireless device and wireless service industries have a huge vested stake in promulgating m-commerce enablement.
They will serve as instigators, partners and potential competitors to traditional payment industry participants. If we don't take the initiative, we may cede future business to other industries.
According to CTIA _ The Wireless Association, there were more than 233 million wireless service subscribers in the United States at the end of 2006. When you consider that the 2006 U.S. population was 300 million, the number of wireless devices is phenomenal.
Of course, in order to move to an NFC-enabled m-commerce world, wireless operators and handset manufacturers have to put NFC into the replacement phones that consumers will be buying next.
Nokia began marketing its first commercial NFC-enabled phone earlier this year. ABI noted that consumer handset churn is increasing from an average of a new system every 18 months to a new system every 12 months.
Regardless of which technology or system ultimately wins out, one thing is certain. It's a given that merchant level salespeople will play a critical role in making m-commerce a reality.
Merchants will be looking for solutions that integrate and coexist with traditional card-based products for many years to come.
Paul Rasori is VeriFone Vice President of Global Marketing. He can be contacted at paul_rasori@verifone.com
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