Mobile Commerce: A Roadmap for Banks and Mobile Operators

In developed nations, however, the benefits have been less obvious, with no convincing success story for mobile payments as an alternative to existing transaction methods. To date, examples of failed attempts (e.g., Simpay) have outnumbered the successful deployments. These experiments have provided several lessons for mobile operators and banking institutions. For example, in spite of some promising success stories (especially parking and transportation) and a potentially compelling benefit for consumers (“pay on the go”), it’s clear that mobile remote payments still lack key requirements for mass-market deployment. These missing elements include global merchant acceptance, robust security, standardization across platforms and networks, and integration with commonly available payment systems (e.g., major credit cards).

In addition, after years of expectations, mobile contactless payments still offer no compelling business case to the players in this space. This could change as near-field communication (NFC) technology becomes more commonplace in smartphones over the next two years. But mobile NFC only offers one piece of the solution: a way to dematerialize plastic credit and debit cards. In fact, NFC can be seen as just another method for simplifying point-of-sale interactions, similar to short message service or 2D barcodes. The payment transaction, whether performed by traditional card networks or more disruptive payment solutions, is not affected.

A successful mobile financial service (MFS) strategy likely would leverage some combination of contactless and remote interaction across different phases of the mobile shopping experience process. The path to mobile financial services depends very much on both the country and the context, but there are three main elements that banks and mobile operators can exploit as they map out their approach.

1. Closing the Loop
A handful of user scenarios are emerging around mobile commerce. A typical experience involves mobile commerce transactions involving a merchant application. The goal here is a seamless mobile commerce transaction over a handset. A second scenario involves a mobile contactless payment. This experience requires over-the-air (OTA) provisioning of a payments application to a secure element, e.g., a subscriber identity module (SIM) or an embedded chip within the consumer’s mobile phone. Increasingly, smartphones would also be equipped with NFC technology that enables a contactless interaction with a compatible NFC reader at the point of sale.

2. Focus on prepayment and postpayment activities
Developing a compelling business case for mobile payments is difficult. The size of the market and the split of transactional revenues among banks, issuers and mobile network operators make it challenging to justify investments in this narrow slice of the mobile commerce ecosystem. This is why MNOs and banks should expand their strategies to encompass prepayment and postpayment activities—the “before” and “after” markets.

“Before” services include geolocation services, targeted ads, promotions, social marketing, and other services designed to raise consumer awareness and influence their purchase preference. “After” services include remarketing, loyalty programs, customer support, and cross-selling/upselling activities.

3. Create the right ecosystem of partnerships
Expanding into prepayment and postpayment markets would require operators and banks to think differently about strategic partnerships. MNOs, for example, may wish to consider partnerships with other network operators as a path toward a cross-operator customer base that could level the playing field against OTT providers, which already provide services across multiple networks.

There is a sense of urgency among banks and mobile operators to establish a beachhead in the burgeoning mobile commerce space. As they formulate their strategy, these organizations must get tactical quickly, piloting new ideas and investing in those that show the most promise.

However the mCommerce landscape evolves, we can conclude that it won’t be a simple extension of existing eCommerce systems. The winners in this space would be able to provide value for consumers and merchants alike, giving them the needed incentive to adopt a new type of technology—a digital wallet, for example—instead of remaining in their credit card comfort zone. Banks and mobile network operators that can extend their strategic vision beyond basic payments to develop prepayment or postpayment services—while creating real benefits for merchants and end users—would find themselves in the best position to succeed.