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Unleashing the power of mCommerce

Kaustuv Ghosh finds out as to why banks and operators are finally realizing the power of mobile commerce

The mobile industry has been talking about mobile banking services and mobile payments for more than 10 years now. In 2008 we will see financial institutions finally start to fully exploit the potential of mobile commerce (mCommerce).

For financial institutions, remaining competitive means not only meeting customer demands, but doing so in a manner that improves their return on investment through reduced operational and customer-servicing costs, and increased revenue. Worldwide, financial institutions are seeking banking and payment solutions that make best use of their IT investments, providing interest and fee-based income opportunities, whilst strengthening their overall service offerings.

Like Internet banking and electronic payments, mCommerce (mBanking and mPayments) is a way for banks and even mobile operators to create new service offerings with the potential for creating new revenue streams or cost-saving opportunities.

The Rise Of mCommerce

Banks have been testing and launching mCommerce products from the mid to late 90s. After the first faltering steps of WAP banking, banks often restricted themselves to simple push information and marketing alert services. These alerts services, when promoted, have been extremely successful for banks over the last 5 years. This was reflected in the 2007 Sybase 365 global consumer mBanking survey, where information on account balances was the number one requested mBanking service.

In the last few years we have seen a small number of banks start to expand their service offering beyond the simple one way push alerts, both as a response to consumer demands, and to address business issues for the banks, including information request and security enhancement. A great example is on-demand account balance via the mobile phone. Up to 60% of calls to a bank’s call centre involve an account balance request; if a bank moves a portion of these calls to the mobile channel, there are clear cost benefits for the bank.

The need for a multi-channel approach

As banks have started to increase the products and services available via mobile, they have been forced to work within the limitations of their chosen mobile channel. SMS is ubiquitous, but unable to support services that require industry recognised authentication. WAP supports a rich interface, but to be affordable, demands the customer has a flat data-plan. Java/BREW provides the richest available interface, but requires a level of sophistication from the consumer in terms of installation and registration that does not exist for the mass user today. Banks and operators that have gone down this single channel route face limitations in functionality, reach and consumer uptake.

As banks and operators expand their portfolio of mobile products and services, they will need to break out of the single channel approach and offer services via multiple channels to address both the limitations and reach of a particular channel, balanced against consumer preference and confidence in individual modes of access.

mBanking is not just mobile

Globally, online banking has been a great success for banks, offering 24x7 access to their customers while lowering the costs related to serving them. However, with the rise of phishing, and consumer concern regarding internet security, banks and regulatory bodies have looked for mechanisms to provide additional protection for online banking, and to maintain consumer confidence in the service.

The traditional route that some banks have taken is to issue one-time-PIN generators to their customers. This enabled the banks to request this additional PIN in the standard username/password log in procedure. While this solution increased customer security and confidence, it has various downsides—firstly, the tokens are costly to provide and distribute to account holders, and secondly require customers to carry them with them, should they wish to access their online account from more than one location. As most people have more than one account, they could be forced to carry multiple tokens at all times to be able to perform a transaction or consult their account balance online. This is clearly a painful exercise for the consumer.

mPayments

Today, mPayment options flourish in the marketplace and have been complemented by a range of new mPayment services including mobile top-ups, credit cards, direct debit and mobile wallets incorporating the likes of remittance products.

While these services have, so far, come from small independent companies and are geographically based, it is clear these services are a natural extension of traditional banking products and payment instruments, positioning banks and operators as best placed to deliver such products to their customers.

According to a recent report from ABI Research, consumers interested in using their mobile handsets for payments via NFC, want to create new accounts for such services. Exploiting existing financial relationships with consumers will be the best approach to drive adoption of these new payment instruments.

The ubiquitous nature of the mobile device creates the opportunity for new products and services. One such product is mobile remittances. The official remittance market today is worth over 250 billion dollars, and with mobile as the predominant communication tool in the key remittance markets of Asia, Africa, the Middle East and Latin America, it is no surprise that remittances have now been extended to a mobile application.

As with the expansion of mBanking services, the range of mPayments services will expand as consumer confidence in the mobile as a payment instrument increases.

Moving towards maturity

mCommerce, a young but rapidly growing segment, is already providing glimpses into what will certainly become a major means of day-to-day commerce for billions of consumers and enterprises worldwide. It is inevitable that the world evolves from an e-business or web model to an m-business or mobile browsing model. With the maturity gained by growing from an experimental channel to a core customer channel, consistency of experience, reliability and product offering will be of even greater importance.

While mCommerce and its constituent parts, mBanking and mPayments, have yet to materialize in scale or profitability, the removal of service limitations as well as economic and technology issues imposed by a single channel approach, will mean rapid growth. With handsets that now “work” and by offering a multi-channel solution, banks and operators will be able to realize the full potential of mCommerce to address consumer and business needs and create new products and services.

The author is Country Manager for India, Sybase 365 Kaustuv.Ghosh@sybase.com