RISKS AND OPPORTUNITIES IN A MOBILE COMMERCE ECONOMY

ABSTRACT

There has been a tremendous growth in wireless technology in the last decade. This
advancement has changed how people do business in mobile commerce (m-commerce)
environment. Smartphone technology is one important factor driving growth. This is
because as phone software becomes more sophisticated, m-commerce transactions are faster
and easier to engage in. Consumers engaging in m-commerce transactions face issues
common to all forms of distance selling. However, additional challenges exist as a result of
the technology involved and the types of products and services that have emerged in the
marketplace. As m-commerce becomes increasingly ubiquitous and services expand and
diversify, these challenges will become more pressing for consumers who want to engage in
the m-commerce marketplace with confidence.

Key word: Mobile commerce, Consumers, Technology, Challenges

INTRODUCTION

Mobile banking describes the use of mobile-phone-based interfaces to provide account

information and transaction opportunities to customers of financial institutions. From a user
perspective, mobile banking services may be active, such as client-driven account inquiries and
transfers, or passive, such as automatic low-balance notifications. Customers using mobile
banking gain increased convenience and access, as well as the opportunity to detect account
problems such as insufficient funds. Many mobile banking services for financial institutions
simply reproduce banking services already available online, with benefits such as enhanced
customer satisfaction and loyalty, along with increased account activity and related fee income
without the operational costs associated with bricks-and-mortar banking. Mobile banking may
also provide banks with targeted marketing opportunities that facilitate cross selling. Mobile
banking is the original combination of mobile technology and financial services, with the first
programs being launched around the year 2000. Euronet was a pioneer in this space at that time
and has over a decade of practical experience in providing mobile banking solutions to financial
institutions in both in-house and outsourced service models. This background provides a
substantial foundation for Euronet’s mobile commerce strategy of enabling multiple emerging
payment channels via the mobile phone.

MOBILE BANKING TECHNOLOGY

Three primary technologies have evolved to support mobile banking, and the popularity
of each depends a great deal on the geography and demographics of the customer base.

• SMS Text – Store and forward text messaging is a feature available on any handset and with
any mobile operator. It is a very good medium in areas where the bulk of the population cannot
afford expensive handsets and data plan subscriptions with the mobile operator. SMS has the
ability to have 100 percent penetration immediately as any mobile phone can support it. SMS is
also quick and easy, allowing simple transactions rapidly without needing to log into a service.
SMS text also provides the crucial function of delivering notifications to customers based on
account position changes, card transaction activity, payments due, marketing messages and a
wealth of other customer engagement messages. Notifications are particularly useful for fraud
prevention as alerting the customer of transactions occurring makes them part of an active anti-
fraud cycle. The ability to interactively exchange SMS text messages with customers is an area
wide open with possibilities. These opportunities can include cost savings at the ATM by
offering an “e-receipt” instead of paper, sending a summary of loyalty program points, or even
tying the two functions together and giving the customer “green points” for every e-receipt they
select. These offers in turn encourage the adoption of the cost savings measure and provide some
type of value to the customer for a win-win initiative.

• Mobile Browser – This medium is essentially Internet banking on the handset using a mini-
browser to access the World Wide Web. Generally, the Web site will be tailored to optimize the
view and functions of a particular device – this can often be an expensive proposition to the
institution as there are over 6,000 individual device permutations globally today with many more
being added almost weekly. Many institutions choose to support a subset of the wider range of
devices, focusing on a handful of the most popular models. Mobile Browser requires a slightly
more advanced version of the handset, but a true smartphone-class device is not required. Many
mid-range handsets are capable of limited Internet browsing. Key to this channel is a data plan
subscription with the mobile operator. That, coupled with the lack of broadband infrastructure in
many parts of the developing world, often limits this channel to more developed nations.
• Downloaded Application – This technology is also now known as a recent entry to our
vocabulary: the “app.” It is the provisioning of a software application on the handset itself. The
ability to load an application is essentially the definition of a smartphone-class device. By far,
the biggest contributor to this method has been Apple’s iPhone with the RIM Blackberry second.
The market is now widening further with the introduction of new devices and operating systems
such as Google’s Android, the Palm Pre and many, many others. Like mobile browser, the
downloaded application is dependent upon a data plan subscription with the mobile operator,
again often limiting deployment to regions with a strong mobile operator infrastructure to
support broadband communications.

OPPORTUNITIES OF MOBILE COMMERCE

Mobile commerce is not just another screen that enables people to buy online. Mobile
devices offer several interesting features that can augment ecommerce:

Closer / longer

We carry our mobile phone with us during the entire day. According to some studies we
touch our mobile 110 times a day. As a result, mobile phones allow us to be in contact with their
users much more frequently than laptops or PCs.

Bar codes

It is easy to show a barcode or QR code on a mobile phone. This allows all kinds of new
features like using the mobile phone as a ticket, voucher, coupon or gift card.

User Identification

The mobile phone is quickly becoming a way to identify a user. This can be done in
several ways:

● A text message can be send to the device with a pin code

● An RFID chip can be integrated into the mobile phone
● Each mobile phone has a MAC address which can be used for identification.

Product identification

The camera of the mobile device can be used as a scanner to quickly retrieve product
information. Even if no bar code or QR code is available, some apps can scan the photo and
identify what product is shown.

Augmented reality

The camera can also be used as an overlay to show additional information about a
product by the video.

Location-based services

The mobile GPS chip, the WIFI network, the mobile’s bluetooth signal and the mobile
network itself can all be used to determine where the user is. While the location cannot be
precisely identified, the user is usually placed within 10 - 30 meters of his actual location. This
allows for several location based-services, including:

● Sending discount offers to consumers nearby to attract them to the store. However, please
note that in practice few consumers seem to appreciate unsolicited promotions.
● Helping customers to find the store itself and (if the right technology is available) even a
product or staff associate within the store.
● Offering additional product information based on where the consumer is within the store.

Mobile wallet

Nowadays, there are hundreds of mobile payment methods offered which make mobile
payment easier. These so-called wallets not only make online payments easier but in-store
payments as well. Just holding your mobile against the POS can be enough to pay.

Mobile-first strategy

With the rise of mobile as preferred shopping device and all the new opportunities mobile
commerce offers retailers, many retailers have adopted a “mobile-first strategy”. This means that
the retailer first develops new features for his mobile website and apps before he copies them to
the web, making them accessible for PCs and laptops.

CHALLENGES FOR MCOMMERCE

● Evolution of Devices : Hardware manufacturers are constantly coming out with faster
& better smartphones. The new versions of the different OS are also getting smarter by
 the day. Store owners need to keep up with the pace of this evolution to makes the best
out of these hardware and software updates. This ensures their apps don’t fall behind in
the race.
● Fragmentation of Device : Mobile hardware industry is highly fragmented especially
when we talk of Android powered devices. The challenge lies in developing apps that
offer great experience to entry-end smartphone users and yet don’t deny high-end
phone users the experience derived from the best features available on this
phone.Getting the balance right is the biggest challenge.
● Payment Solutions : At its nascent stage, most mCommerce solutions would offer only
a handful of payment options to their customers. But with the proliferation of mobile
wallets it has become a big challenge to ensure customers keep enjoying a wide range
of payment options. Without this, it is practically impossible to bring down cart
abandonments.
● Simplifying Buying Experience : mCommerce is crowded and there are dozens of
similar stores that are selling the same products. With discounts drying up and prices
stabilizing between stores, the key to success lies in simplifying buying experience.
With your competitors pulling out every trick from their hat you need to constantly
think of out-of-the-box solutions to stay ahead of the competition.
CONCLUSION

This paper has shown that the m-commerce opportunities and challenges for
consumers, businesses and regulators. In general, the existing regulatory framework, and in
particular broad ranging consumer law, is able to meet the challenges presented by m-
commerce. However, in some areas uncertainties exist. In particular, information disclosure,
security and liability issues and consumer access to redress continue to be areas where
regulators should remain vigilant to ensure consumer rights are protected and enforced.

This is increasingly important as uptake of m-commerce moves beyond early

adopters - who might be considered relatively savvy when it comes to fair trading or related
matters – to the broader community and in particular vulnerable consumers. Businesses will
seek to capitalise on the additional revenue channel generated by mobile payments.
Consumers will embrace the new products and services on offer to them. In this way, m-
commerce is coming whether regulators are ready for it or not.

Given this, fair trading agencies should ensure that: information disclosure practices
are no less rigorous than would be expected of traditional shopping platforms; consumers
understand the risks involved when making mobile payments, as well as the risks associated
with having funds linked to, or stored on, a phone; and that transparent and well functioning
dispute resolution mechanisms are in place. In this way, fair trading agencies have an
important role to play. The challenge will be how to ensure this role is one that is as agile,
innovative and effective as the technology itself.