M-Commerce: Pay On The Way!

The Indian mobile subscriber base has crossed the 113 mn mark. And every
month approximately 5 mn plus subscribers are added to this huge user base.
Another interesting aspect is that though volumes in the Indian telecom segment
are high but the margins are low, so the key for success here is innovation. The
mobile market is maturing and competition between service providers is
intensifying. The operators cannot realize substantial margins only with mobile
voice services. So, as they work towards creating new business models, mobile
commerce is emerging as a service which has great potential to help service
providers to make substantial profit. It is been touted as the next big thing.
The reason being mobile phone users outnumber credit and debit card holders, and
also Internet users 2.5 to 1.

Probir Roy, co-founder, director, PayMate, says, “As mobile use is
overtaking the Internet, so using mobile as a transaction medium is a logical
transition. It's a matter of time when it picks up as an integral part of
VAS.”

M-commerce is emerging as an exclusive channel of distribution leveraging on
the fact that mobiles are quickly becoming more than just communication devices.
According to the ARC group, by 2007 approximately 546 mn users will spend around
$40 bn on m-commerce.

The Take-off

The idea of m-commerce took shape a long time back, yet it has only been an
overly ambitious goal of the industry. One of the main reasons being that
cellular networks capable of securely routing transactions to a payment gateway
are new to India. The other reason: lack of appropriate technology and the
issues pertaining to security and reliability of networks.

However, the Asia Pacific region has emerged as the leader in m-commerce
application deployment. Countries like Japan, South Korea, Singapore, and Hong
Kong are adopting the mobile payment system enthusiastically. In Japan and South
Korea, major wireless operators like NTT DoCoMo and SK Telecom have successfully
implemented m-commerce. Japan has nearly 65% of mobile penetration and now
mobile phones are also doubling up as 'mobile wallets' (cash and credit
cards) combined with services such as GPS and location-based targeting, which
are opening new market possibilities with new revenues streams.

M-transaction has worked mostly in the APAC region, says Balachandran Unni,
head, Mobile Commerce, OnMobile, “There is not too much happening in the US.
Europe is getting into it now but the action is in Japan, Korea, Thailand, the
Philippines, and Singapore. Here it is flourishing because it is really
regulated.”

Between the two types of transactions-low end (downloads and alerts) and
high end (credit and debit card transactions)-the latter is more prevalent in
India. Movie ticket booking, railway ticket booking, impulse shopping etc are
the areas that are gaining considerable traction.

Technologies in Use

M-commerce has the potential to provide huge satisfaction to end users,
generate business opportunities, and provide quick access. There are a number of
technologies that enable mobile commerce such as infrared, SMS, interactive
voice response, mobile scan and contact-less chips. These technologies are
transforming the mobile phone into a replacement for petty cash, and debit and
credit cards; here the payments are charged either through the mobile phone bill
or to the bank account.

• Virtual SIM Card: Can be
  placed in any mobile device. Can be used for transactions on mobile networks
  and can be issued by merchants or service providers. They can be used
  through keypads or through voice commands using interactive voice responses.
• GPRS: This technology can be
  used for online mobile shopping from independent portals or service
  provider's portal. The limitation here is that the mobile has to be
  compatible and the end user must be educated on how to use it. In a country
  like India, where Internet is still an urban phenomenon, GPRS has a long way
  to go before mass deployment.
• SMS: This service is driving
  the Indian VAS markets to new heights and is all set to be the most popular
  medium for m-commerce too. Its strengths are familiarity with the end user
  and mass acceptability. 
• Voice: Voice being a
  convenient medium for those who are not very tech savvy will take m-commerce
  to a larger user base including the rural areas of the country.

Bumps in the Way

Despite all the hype, m-commerce has still has not gained speed in the
country. According to Roy of PayMate, “The overriding hype and expectation has
kind of built a wall around m-commerce. The prevalent assumption is that this
service is for the elite, which is not the case.”

Another area which needs to be dealt with is the issue of security and
reliability. The Indian user is still not comfortable with the idea of giving
away his debit or credit card number over the phone. Also, security is a major
concern for m-commerce to flourish. But as Balachandran Unni says, “There are
a number of payment options for people such as cheque pick up, cash on delivery
etc, so the number of people actually paying through cards is not very
significant. Security is not a concern technologically, it is just a matter of
the mindset that needs to be changed.”

There are ways such as tamper-proof digital certificates to authenticate the
identity of users, for example PIN or passwords. Biometrics such as voice
recognition is another area, which can be used to offer greater protection.
Wireless PTAs (personal Trust Agent), which is a micro client code embedded in a
phone and allows use of private keys, digital signatures etc, are some more
advanced security features.

“The services that are introduced are tested properly and after extensive
parameterising,” says Roy. “Once the desired levels are achieved, the issues
of security and reliability are addressed to a large extent.”

The 'Convenience' Factor

Other than the obvious factors such as rising subscriber base and falling
ARPUs of the service providers, there is one more aspect, which will play a
crucial role in growth of m-commerce as a utility service-and that is
convenience.

M-commerce provides the end user the ease of payment anywhere, anytime and
this is the feature which is expected to popularize the service.” What is
critical is to ensure that whatever service we have to offer, convenience and
ease of use has to be the key,” says Unni of OnMobile.

“Customer adoption will drive m-commerce,” says Roy. “How they adopt
it, will be the key driver as it's a new paradigm. It will require a change of
mindset so that people can feel comfortable and acknowledge the convenience of
the service.”

The Big Opportunity

Although in a nascent stage, a number of players have ventured into the
Indian m-commerce segment. OnMobile provides services such as movie ticket
booking through its voice systems. Paymate has tied up with Citibank to provide
SMS-based m-commerce services and Jigrahak has launched a payment platform
called “NGpay” for online mobile shopping, to name a few. Telecom service
providers such as Reliance and Airtel have been providing services such as bill
payments, railway and airline ticket booking etc.

To sum it up, it is evident that the opportunity is immense and mobile
commerce can be seen as a potential revenue driver for the industry players. On
the retail section, m-commerce provides new sales channels; and financial
institutions can gain real competitive advantage by offering services such as
m-banking.

The possibilities are innumerable. Once the pace is set, m-commerce will
become the way of life on mobile.

Sonia Sharma

sonias@cybermedia.co.in