IN-DEPTH: Mobile commerce is following a similar trend to that seen in the early days of online commerce a decade and a half ago. Travel companies understand the need to develop their services to facilitate mobile shopping. The travel industry needs to make sure consumers feel as secure paying with their phones as they do making credit card purchases online.

By Ritesh Gupta

A new study by Juniper Research forecasts that NFC will facilitate transactions valued at $74 billion by 2015 as NFC is increasingly used for the payment of goods in-store and as transport tickets; this is over treble the estimated value of this market in 2011.

The study has indicated that the increasing use of mobile devices as an alternative to credit cards and paper tickets is one of the fastest growing segments of the mobile commerce market. The report shows that the rapid adoption of mobile devices for commerce-related applications is by no means limited to NFC. All segments - money transfers, banking, payments and coupons - are forecast to exhibit significant growth rates.

According to Juniper, four of the segments (money transfer, physical goods, NFC and coupons) will more than treble in transaction value over the next three years, whilst digital goods, banking and tickets will still on average, double over the same period.

Other key findings:

-  SMS is the key to widespread mobile banking service adoption.
- Without interoperability mobile money transfer services will struggle to gain a critical mass of users.
- Whilst mobile coupons still represent the smallest mobile commerce segment, it is demonstrating the highest growth rate.

A report released by PayPal in November last year indicated that 2016 will be the year when UK shoppers will be able to use their mobile phones to pay for things on the high street with digital money rather than cash, cheques or cards.

Acceptance

Consumers are in control, and they want to shop anytime, anywhere. And retailers are moving swiftly to tap this opportunity.

Mobile commerce is changing the way people shop and pay, and the ways in which merchants of all sizes engage consumers, John Donahoe, eBay Inc. President and CEO stated recently.

In 2011, eBay mobile commerce generated $5 billion in retail volume, and PayPal mobile generated $4 billion in payment volume. eBay’s mobile apps have been downloaded more than 70 million times. In 2012, eBay expects to do $8 billion in mobile commerce retail volume, and PayPal expects to process $7 billion in mobile payment volume.

PayPal recently teamed up with Spanish ticketing company, Entradas.com, to allow consumers buy tickets with a mobile phone and PayPal. Ticketing is the second most popular ecommerce category behind travel in Spain. According to Entradas.com’s CTO Arcadi Magre, 110 million cinema tickets, 20 million theater tickets and 5 million concert tickets were sold online last year, and Entradas.com accounts for 45 percent of online ticket sales in Spain.

PayPal has also collaborated with Yotel to allow consumers to book a room at Yotel’s flagship hotel in New York, or one of their cabins at London Heathrow & Gatwick and Amsterdam Schiphol airports, with PayPal on smartphones. There’s no need to download an app. Users need to visit the Yotel website on their mobile device and follow the instructions to book a room in under 60 seconds.

Security

Security is definitely a major concern among consumers as the whole thing involves their money.

Juniper’s report mentioned that mobile commerce providers need to keep security issues in mind. Even if there is a perceived, if not actual, security risk in the mind of users, not only the specific mobile commerce application, but also the whole mobile commerce market may be set back until user trust is recovered.

The travel industry, too, needs to make sure consumers feel as secure paying with their phones as they do making credit card purchases online. This is going to be critical as companies attempt to crack the consumer behaviour in order to make mobile wallets and NFC payments a mass offering.

Travel Industry

Specialists point out that consumers are ready and anxious for these types of services to be offered and the hospitality industry is very intrigued with the mobile service opportunity.

“Unfortunately, they are moving slowly to it,” says Todd Kelly, Vice President of Mobile for LodgeNet.

Kelly said each brand is struggling with their individual make/buy decisions.

“They are generally unfamiliar with mobile and their organisational structures make it difficult to move quickly in the adoption and deployment of new technologies and services. As such, they will require a good amount of education, and a strong industry first mover, to spur the industry into wholesale adoption,” added Kelly.

m-Commerce is challenging because in many cases the platform to transact over are still immature, says Glenn Gruber, AVP, Market Development, Travel Technologies, Ness Technologies.

“For all the hype around NFC, it’s a long ways away from being viable. There are very few phones that support it and even less infrastructure.  Add on top the competing mobile wallets from Google, ISIS and PayPal, amongst others, I think it will be several years until it’s ready for prime time. And by then it’s possible another technology comes along,” said Gruber.

Gruber added, “But you can still transact via mobile devices using traditional credit cards through an app, a mobile website or an employee with a device and Square dongle. But since m-Commerce needs to be about speed, mobile apps, where you can store credit card information to reduce transactional friction, has a significant advantage over mobile websites. It’s just not easy to enter credit card numbers or log into a website on a small screen.”

Kelly says companies should focus on optimising the presentation of choice parameters to fit the platform.

“Too many retailers still try to do too much with mobile. Less is definitely more when it comes to mobile. Of course, you can still do a lot but you have to meter the data flow and focus heavily on good UI. Purchase infrastructure (credit card etc.) is no longer a gaiting factor in my opinion,” he said.

And for mobile wallet and NFC mCommerce it all comes down to establishing universal standards, deployment of supporting hardware and software, and resulting retailer adoption, concluded Kelly.

It is also pointed out that NFC is not synonymous with mobile payments. The industry is already seeing growth in mobile payments, and that’s set to continue regardless of the fact that very few consumers have NFC-enabled phones.