Mobile Commerce 2.0: A Focus on Mobile Payments

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M-Commerce

Mobile commerce (m-commerce) is the “ability to conduct commerce using a mobile device.'[1] The common sense notion of this involves activities such as: buying and selling goods, using or offering services, banking, redeeming coupons or loyalty points, reserving tickets, etc. Of course a major requirement to execute these activities is the ability to pay for these goods and services through mobile devices. It has been said that the essence of m-commerce in the future will be focused on enabling mobile payments to the unbanked population due to the significant growth in smartphone usage.[2] For these reasons, this wiki will focus its attention on mobile payments.

Moving away from the common-sensical notion of m-commerce, the last section of this wiki will also talk about an emerging concept known as m-commerce 2.0. It involves capturing localized and contextual information generated from the hardware in smartphones and combining it with dynamic, more personal web 2.0-generated information from customers. This concept allows businesses to utilize more relevant and personalized information, augmenting and enhancing both the online and offline shopping and payment experience for consumers.

"With recent development of sensor-rich smartphones with positioning devices such as GPS receiver, context-enriched services including location-aware services are rapidly becoming the most prominent future of computing industry. A new generation of context-enriched services is aimed at delivering contextualized, customer-oriented services by using context information such as location, social situation, people nearby, and user profile." -Journal of Computer Networks and Communications, 2012[3]

Contents

History and Emergence of M-Commerce

History and Evolution of Money

Evolution of money

Mankind has come a long way in developing an effective way in which people can obtain the things they need for their daily lives. Before 600 BC people had to acquire the goods or services they needed by utilizing a personal skill or craft to make or offer their own unique good or service through a barter system. One could imagine the complexity and controversy involved when determining a fair trade, because people could not as effectively compare the value of one good to the value of another.

Trading was made more easily with the development of coinage after 600 BC, where pieces of metal were used as a widely accepted symbol to represent the value of any type of good or service. After 806 AD paper money was invented creating a cheaper representation of value and also providing larger denominations. It was not until 1960, where credit cards could be used and people could purchase things with the swipe of a card.

The concept of value and money was being transformed, from having been represented by physical objects, into digital information that could be viewed on a screen. Now, the way a person can conduct business is being shifted to a device generally known as a mobile phone; but, with the power and capabilities of this device, the word phone does not accurately describe the breadth of its use. [4]

History and Emergence of M-Commerce

Mobile commerce is a fairly new arena of commerce that emerged in the late 1990s. At that time, m-commerce was limited to SMS text technology, which was considered congested, vulnerable, and naive to security threats.[5] It was an era in which advanced and sophisticated smartphones did not exist; most consumers had 'dumbphones' that looked similar to this. It was not until 2007 with the launch of the Apple iPhone and other smartphones soon after, where m-commerce shifted to smartphone applications.

Chronological History

  • 1997: M-Commerce began in Helsinki, Finland, when two Coca-Cola vending machines where installed that accepted purchases via SMS text. Later that year a mobile phone banking service, that used SMS text, was introduced by Merita Bank in Finland
  • 1998: The first downloadable digital content for mobile phones came in the form of ring tones, offered by Radiolinja in Finland.
  • 1999: Smart Money in the Philippines and i-Mode by NTT DoCoMo in Japan were the first two national m-commerce platforms introduced.
  • 2000: The spread of mobile phone enabled services commenced such as the launch of mobile parking payments in Norway, train ticket purchasing in Austria, and airline ticket purchasing in Japan.
  • 2002: The European Telecommunications Standards Institute (ETSI) appointed Motorola's Joachim Hoffmann to develop official standards for m-commerce. Also that year, a book titled M-Profits by Tomi Ahonen was written
  • 2003: Oxford University offered the first m-commerce course.
  • 2007: The launch of Apple's iPhone started the shift of m-commerce from SMS text into mobile applications

Benefits of M-commerce

TESCO, shopping with QR codes in a brick-and-mortar store

Benefits for Consumers

For Consumers: Focuses on 3 Things, Speed, Convenience and Security.

1.Speed

Speed is one of the best selling features of mobile payment systems. With a click of a button, scanning of a QR code, or a wave of your NFC enabled smartphone, you are able to pay for virtually any good or service in a matter of seconds. You can even wire money to friends and family without lining up at a bank. Different methods of shopping, paying, and managing money in this way along with the facilitative technologies are discussed in more detail in the sections below.

M-commerce enables you to pay for goods and/or services right off your phone, rather than waiting in a line the traditional way. Moreover, m-commerce also makes browsing and shopping faster and more effective as well. Users can browse online stores anywhere at anytime, much quicker than the traditional physical store by using the search function. By utilizing mobile payment systems (via browser and application), users can shop make their purchases online with ease.

There are also mobile technologies speeding up the transaction process in brick-and-mortar storefronts. NFC payment is a trending technology that enables the transaction process in real life physical stores to be sped up considerably. Rather than handing over cash and waiting for change, swiping or inserting a card, or scanning a QR code, NFC payment allows one to simply place their phone near an NFC enabled device to complete the transaction.

2.Convenience

With mobile payments via applications, users are able to log in to their account and purchase their goods almost anywhere. With the advancement in the cellular industry, smartphones now have the capabilities of a laptop computer. With that, purchasing goods and services with mobile payment is so easy and fast for users. Whether you are stuck in traffic or want to don’t have the time to get a gift for someone, all those problems can be solved with mobile shopping and mobile payment. Majority of the mobile payments enable users to log-in to their accounts to pay for their purchases. The user will simply scan either the QR code or submit the total they want to pay. Its payment made simple.
Devices that Mobile Payment works on

3.Increased Security*

With mobile payment, you will get an increased security when you purchase goods and services online. No longer will the buyer have to risk his/her credit card info when making a purchase at a site he/she is not familiar with. With mobile payment providers, the buyer will only have to enter their credit card info once in their mobile payment account. Once that’s done, the buyer can make purchases with the mobile payment system itself. This way, the mobile payment provider (Paypal for example) will absorb all the risks associated with making the purchase online, leaving the buyer risk-free.

Note*: There's been controversial issues regarding whether or not Mobile Payment's security is as safe as service provider say it is. The security issues section will touch base on this.

4.Environmentally Friendly

With mobile payment system, there is no paper trail, as receipts and confirmation are not the default to speed up the transaction process . All records are done and tracked online so there are no receipts. However, users have the option of printing out receipts if they wish but majority of consumers do not keep a receipt on their purchases.

5.Easier To Track Expenses

Expenses can be tracked easier with mobile payment systems. Instead of keeping traditional receipts and reconciling them at the end of the month, one can easily track their expenses via the history page in mobile payment systems. Users can also utilize the search function as well so it makes finding receipts easier.

Benefits for Businesses

Benefits for Seller:

Good form of advertising

Using Mobile Payment system is a great way to promote your business. If businesses have an application for their business that their customers can log on and make purchases, it would help promote the business because the application is stored in their phone. Also, customers are more likely to shop with your business because they already have your app on their phone so it touches base with the convenience factor.
Mobile Payment System

Replaces Current POS System

For small businesses that don't want to invest in a POS system, using mobile payment is a great alternative. Since POS service providers require you to either lease or purchase their POS systems, the fees could diminish your profit margins. With Mobile Payment systems, the owner does not have to purchase or assemble any expensive equipment, all he/she require is an internet connection and a device that can access to the internet (Ipad, Tablets, Computer) and they can use it. However, the mobile payment service providers will charge a transaction fee for every transaction so it depends on the nature of the business to see if it's worth it to use a mobile payment system.

Potential to develop partnerships with other vendors

With mobile payment systems, different businesses can form partnerships to assist in creating promotions and brand awareness or even develop an Iphone/Android Application together. A good example would be if a Yoga studio can collaborate with a healthy restaurant in developing a promotion for Yoga and healthy enthusiasts. They can combine their efforts in developing a promotion where newcomers can purchase a trial package that includes unlimited Yoga as well as a free meal at that restaurant to attrach new customers. All that customer has to do download their app for free to pay using their mobile devices and then are able to be eligible for the discount. This touches base with being a benefit to advertise your business, since your app is now on their phone.

M-Commerce Industry Analysis

The landscape of the mobile commerce industry has evolved greatly since its genesis in Finland of 1997. Firstly, there has been an explosion of smartphone and tablet adoption across the globe since then, leading to a rapidly expanding market over the years. Secondly, companies and creditors alike continue to innovate and create a myriad of mobile shopping experiences and mobile payment solutions for smartphones and their users. These innovations have significantly broadened the scope of what m-commerce means. Companies are continuously innovating and utilizing new technologies to foster, streamline, and enhance mobile commerce shopping experiences and mobile payment solutions.


There are many different emerging technologies being utilized by organizational and individual innovators that are being brought together to foster m-commerce and mobile payment solutions. Some technologies enabling m-commerce have been mainstream for many years (SMS), some are recently becoming mainstream (mobile browsers, location-aware applications), while others are less developed and have yet to become mainstream (context-enriched services).


Below are several frameworks employed to dissect the m-commerce industry.

Hype Cycle

Gartner Hype Cycle, 2012

The 'Hype Cycle' is a graphic framework developed by Gartner that summarizes trending and 'hyped' technologies it predicts will become commercialized in the near and distant future. Gartner develops this graphic by aggregating and analyzing its accumulated knowledge and experience in the field of IT.[1]


Here, the Hype Cycle framework is being used as an instrument to gain insight into how emerging technologies are contributing to the maturity of the m-commerce industry, how they are facilitating the advancements of mobile payments, and to help formulate the current and future structure of the industry.


Technologies nearest to farthest away from mainstream adoption:


Due to the varying maturity and nature of these emerging technologies, some of them have a higher potential to impact business value over others. Generally speaking, sophisticated and less-developed technologies that are farther away from mainstream adoption have the highest potential to add value to businesses and consumers.


Presently, the most mature technologies enabling m-commerce are (i)mobile app stores, (ii) location-aware applications, (iii) media tablets, and (iv) QR codes. App stores like Apple's App Store and more recently, Android's Google Play have had a great influence in the maturation and structure of the m-commerce industry. Apple's App Store was a pioneer for getting consumers to pay for things through an application. To put things into perspective, Apple generated $2 billion dollars from its App Store alone in the second quarter of 2012.[2] Of the over 600,000 apps on the app store, many are location-aware applications utilizing the GPS hardware in iPhones. The use of smartphones and media tablets have become so mainstream that having a mobile app for your business had been deemed essential by Forbes Magazine.[3]


The next most widely used emerging technology to foster m-commerce is QR codes. Since its commercialization, many companies have utilized QR codes in a variety of ways. In the context of m-commerce, when QR codes are scanned they allow the consumer to:

  • access detailed information about products and/or services
  • add items to a shopping cart
  • trigger a mobile payment

Essentially, the scanning of a QR code can be incorporated into any use case or business scenario.


More sophisticated technologies impacting m-commerce that are farther away from mainstream adoption because of less developed applications are: (i)Private Cloud Computing (ii) NFC payments, (iii) Context-Enriched Services, and (iv) Augmented Reality. These newer technologies are roughly in the introductory stages of their development. None of them have achieved mass adoption like the four technologies mentioned above. That said, these technologies are more sophisticated, and therefore have a higher potential to impact the structure of the m-commerce industry. This ultimately influences industry profitability, as well as the division of added value between businesses and consumers.

Private cloud technology has far-reaching implications for the m-commerce industry and for the whole IT industry itself:

  • Remote computing power
  • Remote disk-drive space
  • Remotely sync multiple devices for purchased apps
  • Remote data locking
  • Remote back up and restoring capabilities
  • Remote data wiping
  • Interoperability capabilities

These capabilities have the potential to help overcome a wide variety of m-commerce barriers:


Google's significant investment in creating the Google Wallet, which utilizes NFC payment technology, could have a big impact on the structure of the industry. Google is attempting to make NFC payments a standardized way of paying for goods and service, much like the credit card has become standardized. There are several barriers that Google must overcome to make this vision become a reality.

Much like the QR Code, NFC can be incorporated into any use case or business scenario to trigger any desired action such as transferring money, media files, or even opening an application.

Context-enriched services and augmented reality are currently the two least influential technologies that have not made much of an appearance in business yet. They need further conceptual development before they can make any real impact in m-commerce. That said, these latter technologies are more involved with integrating mobile applications into brick-and-mortar storefront environments [4] This gives us some clues into which direction m-commerce is heading in the future -- something discussed thoroughly in the last section of this wiki.

Industry Structure

Porters Five Forces

In identifying the structure of the mobile commerce industry, we have chosen to investigate the competitive forces that are moulding the landscape of the industry through an external industry analysis framework known as porters five forces.[5] We are focusing in on "industry rivalry" and "threat of entry" as they are the forces that influence the structure of the industry the most.

Industry Rivalry: High

Many companies in the m-commerce industry are of two kinds: i) companies that are taking m-commerce initiatives and integrating mobile shopping and payment solutions into their business models, and ii) companies that are in existence to specifically solve the mobile payment problem. There is fierce competition between companies to provide a standardized mobile payment solution. At the same time, there is also tenacious competition amongst companies who are striving to differentiate customer experience, engagement, and satisfaction through m-commerce. This makes the industry highly fragmented with no single major winner (yet).


Threat of Entry: High

There are many new firms that are entering the m-commerce industry. This includes new startups that are very small in size, varying all the way up to large corporations like Google and Apple. Since there are many small startups in the m-commerce industry specifically attempting to standardize mobile payments, mixed in with the big players attempting to integrate shopping and payment, there are actually hundreds of firms in the industry. Here is a brief list of notables in the industry:

  • Google Wallet
  • IOS Passbook
  • Square
  • Groupon
  • Paydragon
  • Popmoney
  • Payfirma

Here is a video exemplifying Paydragon. As you can see, it is an example of a company that is taking m-commerce initiatives and integrating mobile payment solution into their business model -- a growing trend that contributes to the highly fragmented industry.


Substitutes: High

There are several different methods to shopping and paying for goods. Shopping alternatives include:

  • M-commerce websites optimized for shopping from a smartphone
  • E-commerce websites optimized for shopping from a PC
  • Brick-and-mortar stores

Payment altneratives include:

  • Cash
  • Credit
  • Debit
  • Cheque
  • Mobile Payment (QR Code, NFC Payment, Browser, Integrated Business App)


Supplier Bargaining Power: Low

Firms are in an environment with intense competition and are investing in uncertain mobile innovations. To reduce risks and uncertainty in entering the market, companies need to give incentives to consumers to use their products and services, usually in the form of discounted or even free services. Consequently, the majority of social welfare is extracted by consumers. These factors lower suppliers bargaining power.


Buyers Bargaining Power: High

Buyers have many options to choose from and generally have no obligation to use one service over another. This is because the industry is highly fragmented; there are no standardized mobile payment solutions, and there are many established companies offering incentives to shop at their store through mobile channels.

Industry Maturation

As reflected above, emerging technologies and competitive forces play a significant role in affecting the profitability and maturity of the m-commerce industry. We are at a point where businesses must assume that customers are accessing information about their company through mobile channels.[6] Therefore, m-commerce has matured to a point where it has affected the whole domain of commerce itself. Currently, innovations in m-commerce are spurring at an alarming rate. Mindful of all these characteristics, it can be said that the maturity of the m-commerce is in the mid-introduction stage when viewing through the industry maturation life cycle framework.

Industry Life Cycle

Other Industries Being Disrupted

Advertising Industry

With the spread of smartphone use being the main access point to the internet, online advertising has been less profitable as a result. The advertising industry is experiencing major issues in generating mobile advertising revenue.[7] Likewise, Facebook is having issues generating ad revenue due to the fact that the majority of its users are shifting to using mobile devices. This is a major issue for Facebook because ad revenue is one of the only ways to monetize their free apps. Facebook has attempted to address this issue by offering advertisers the choice of buying mobile-only ad placements.[8]

"The poster-child of mobile banking is Kenya, where some 14m people now save and send money using M-Pesa, a telephone-based banking system. It allows them to deposit with or withdraw cash from a network of small agents."[9]

Banking Industry

With innovative mobile payment solutions emerging from companies and organizations alike, more and more substitues to cash and cheque are hitting the market. This has significantly impacted the landscape for banks, because the transfer of money is being bypassed by traditional banking institutions.[10] This has put banks under duress, as they are very large and bureaucratic, and do not have the capabilities of adapting like these new, flexible, innovative, and nimble start up firms.[11]


Mobile Banking Penetration February 2012

Handheld Gaming Industry

The handheld gaming industry has been one of the most heavily hit industries since the emergence of mainstream smartphone usage. Mobile games have drastically decreased the profitability in the handheld industry by offering users to play games for a fraction of the price, or even free.[12] Below is a graphic showing the changes in industry market share from 2009-2011:


Mobile Gaming Industry

Approaches to Mobile Payments

The whole experience of handling money and payment approaches may be all about to change as our mobile devices enable us to access several different forms of transactions, including scannable barcodes, mobile coupons, self checkouts and many others. With so many payment solutions available, it is changing the way we pay for food, coffee, taxi, clothes, etc. These mobile applications aim to improve the way we move money around, by providing more convenient ways and faster processing.

The three main categories for mobile payments are

  • Accepting Credit Cards on Mobile Devices
  • P2P (Peer-to-peer)
  • Hybrid

Accepting Credit Cards on Mobile Devices

The idea of mobile card acceptance allows businesses to accept payments through their mobile device by transforming it into a point of sale terminal. There are many features and benefits for mobile card acceptance including real time authorization, allowing for fast reporting and tracking. It provides an easier way of tracking transactions and sustainable paperless methods.

Square

Square is one of the big players in mobile card acceptance, it allows small businesses to accept payment anywhere and anytime.[13] There is a charge of 2.75% on every credit card transaction with no monthly fees or set-up costs. Customers sign the screen and receive the receipts by email. One unique feature for Square is that it allows iPads to act as cash registers with its app. Here is a video of a Square user, exemplifying how businesses can accept credit cards with mobile devices


-Square application is available for the iPhone, iPod Touch, iPad and Android-based mobile phones

-Accepts major credit card holders (Visa, Mastercard, Discover, American Express)


Payfirma

Payfirma Mobile Card Acceptance

Payfirma users can download a mobile app that allows major credit payments to be entered manually, or swiped with the card reader.[14] It is the first one of its kind in Canada, transactions are made in real time, and no information is stored on the app or the reader. Customers can sign right on the screen, and receipts emailed instantly showing transaction details and the signature.

-Mobile payment system for iPhone, iPad, IPod Touch, Blackberry, Android

-Accepts major credit card holders (Visa, Mastercard, JBC, Discover, American Express, Union Pay)



Snapshot of different providers

Fees vary from the different providers, some charge monthly, while others only charge a per transaction fee. As mobile payments are not mainstream yet, there is no standardization of device compatibility and only major credit cards are currently being accepted.


Fees
Device Compatibility
Accepted Credit Cards
Square
Pay-as-you-go 2.75% per transaction
IOS, Android
Visa, Mastercard, American Express, Discover
Payfirma
$10 monthly fee and 1.99%-2.92% per transaction
IOS, Blackberry, Android
Visa, Mastercard, American Express, Discover, JCB, Union Pay
Intuit GoPayment
Pay-as-you-go at 2.7% per transaction or choose $12.95 monthly plus 1.7% per transaction
IOS, Android
Visa, Mastercard, American Express, Discover

Peer-2-Peer

P2P payments are essentially electronic payments that move money from one bank account to another, it is built around a customer's current banking relationship and the existing process of financial institutions to create seamless integration between accounts. Similar to online banking, however, electronic payments are made via mobile by text or email. This method allows customers to make payments to anyone, anywhere, anytime using the existing online and mobile banking applications, eliminating the need for cash, checks and in-person meetings to make payments. P2P makes it convenient to pay your landlord,
How PopMoney Works
room mate, cousin, babysitter, etc. The services allow multiple transfer options, including one-time, recurring or future-dated payments. This generates new transaction-based revenue for banks in lucrative P2P payments space and promotes green banking.

PopMoney

Popmoney is a personal payment service that allows you to send or request payment via email or text. Available at 1,400 trusted financial institutions, mostly in the United States. Popmoney will only pull funds from your bank account (checking, savings, and money market accounts).


How it works: Sending money

  • 1. After signing up and creating a profile, click the Send Money tab and choose a bank account. Enter the recipient's name, mobile number, email address, or their bank account number.
  • 2. Choose an amount and payment date.
  • 3. Include a message.
  • 4. Notification sent. Your recipient will receive a pickup message letting them know you've paid.


Fees:

Action
Fee
Sign up
Free
Pickup money
Free
Send money
$0.95 per payment
Request money
$0.95 per payment


There are limits to the amount of money you can send or request, and the number or transactions you can make in a day and over a rolling 30-day period.

Send Money

Limit
Amounts
Per payment
$500

Per day
$500

Rolling 30 Days
$1000
Number of Transactions
Per day
15

Rolling 30 Days
30


Request Money

Limit
Amounts
Per payment
$500

Per day
$500

Rolling 30 Days
$2500
Number of Transactions
Per day
20

Rolling 30 Days
30

Hybrid

The hybrid payment system is exactly what it sounds like, it offers both mobile card acceptance and P2P methods. An example of a Hybrid service is Paypal. The original service of Paypal already functions as a peer-to-peer service as it allows its customers to send and receive money online. Now with a new addition, called "Paypal Here", customers can use a chip and convert their mobile devices into a point of sale terminal mobile card acceptance. Individuals who already have a Paypal account might be more inclined to use it's service simply because of their previous experience and it is widely accepted.

More Approaches

PayDragon Mobile App

There are also other independent mobile app technologies that are available. Services such as GoPago and PayDragon link to a credit card and use location awareness technology that allows users to view different restaurants around the area and order and pay using the mobile device. This allows users to save time by not having to line up and go straight to the pick up window once their order is ready.

There are also emerging collaborations between Mobile Network Operators (MNO) and banks, one main example in Canada right now is the launch of a "mobile wallet" as a joint venture between Rogers and CIBC. CIBC and Rogers — alongside credit-card issuers Mastercard and Visa Canada — will enable smartphone devices to act as a physical CIBC credit card and pay for groceries, gas, restaurant bills and other small ticket items by the end of 2012. How it works: Rogers would contain your CIBC financial information on a secure sim card and use near field communication (NFC) enabled devices to send data to a small terminal near a cash register. Rogers will charge a flat-rate “rent” for a customer’s CIBC credentials to be stored on their SIM card, the small, removable chip that acts as a digital repositories for wireless usage, numbers, contact information and other personal data. The idea is to digitize existing CIBC cards and enable mobile devices as a purchasing agent.


GoPago

Digital Wallet

Google Wallet Vs. IOS Passbook

A Comparison of the Big Players:

Google Wallet
IOS Passbook
A year since the launch of service
Coming on Fall 2012
Partnership with Mastercard and Citibank
Storage for receipts, loyalty cards, and boarding passes, and other retailers' existing apps
Uses NFC
Uses software and QR codes
Over 300,000 merchants accept google wallet
Will be available to all IOS users

Who should be the main provider? This is still to be determined, but according to a survey by AlixPartners, 74% of US consumers interested in having a digital wallet would choose their primary bank as their preferred provider, compared with 23% who say they would pick PayPal and 15% who chose Google as their preferred provider

What WIll It Take for Mass Adoption? With so many upcoming applications, all of the different providers want their own version. These are some of the important variables that will determine the success of these new technologies.

  • Availability of technology - NFC enabled devices are still quite limited to this day, this is one barrier for Google from reaching mass adoption.
  • Simple and ease of use - It must be seamless and easy for users
  • What's in it for me? - It must serve some benefit for users to convince them to switch, this could either be to save time or money
  • Security - Still a big issue as consumers are concerned about the security of allowing mobile applications to access sensitive information

Mobile Commerce Barriers

Privacy Issues

One of the issues that increasingly arises in m-commerce is the privacy issue. Since mobile payment systems are relatively new, many customers are uncomfortable inputting their personal information on mobile payment sites or applications. It's useful to note that the same issues were brought up with the introduction of online payments with banks. Users were concerned and afraid of putting their personal information online and performing transactions online. This issue can be mitigated if the mobile payment service providers (sites and applications) have the necessary protection. This way, they can inform and assure their customers that their privacy is protected and they will have peace of mind. Hackers can also get users credit card and bank information over and above personal information from their mobile devices as well -- that is another topic discussed down in the security section.

Security Issues

Smartphone Security Issues In the Media

Despite m-commerce having some security benefits, there are always security risks when new technologies are being utilized without explicitly thinking of malicious applications. For example, if you use Google Wallet with NFC hardware on your phone, and later sell that phone to another person, vulnerabilities have been identified that allow the new owner of your phone to access your google wallet account and freely use your money.[1] Two possible scenarios for this to happen are:

  • If your android phone is rooted, your PIN(s) to your credit card(s) are stored on the device memory, rather than the NFC chip itself. If a tech savvy hacker were to get a hold of your phone, she would be able to crack your PIN, along with any other passwords stored on your phone, through a brute force attack.
  • If your android phone is unrooted, your PIN is stored on the NFC chip, but there is still a method to gain access to a previously activated Google Wallet. "The method is foolproof, all the user has to do to enable Google Wallet is reset the data under the app settings, which will prompt them to enter a new PIN without asking for the old PIN. After wiping the old data, this new bypass allows the user to link the account to a Google Prepaid Card, which then provides access to all previously available funds."[2] This second vulnerability does not require much skill from the hackers perspective. Simply having the knowledge of this vulnerability means you are capable of doing it, assuming you can follow these three steps.

It should be noted that Apple has not released NFC for iPhones yet due to security concerns pertaining to the technology.[3]

Malware/Spyware

M-Payment System Model

A tech savvy hacker has shown that he can make an NFC android device automatically go to a website of his choice, by bringing his own NFC device in close proximity to it, forcing the phone to execute malicious code upon opening the site.[4]

The following scenario is a theoretical implication that is possible if a tech savvy hacker has enough time, effort, and resources to hack a merchants NFC payment-receiving device, like the person mentioned above. If a merchants NFC device is somehow hacked (which has been shown to be possible above for NFC smartphones) it could potentially be encoded to send out malicious code when another NFC device is brought in close proximity to it. If this code mimics the transaction process and triggers your device to execute a payment, this could actually trigger your phone to accept and execute the malicious code before or after executing the actual payment -- compromising what could potentially be all your credit card and personal information on your phone. This could all take place when you thought you were simply making a payment. This theoretical situation is analogous to older technology: it could be the equivalent of receiving an email with a malicious attachment, having your computer open the attachment automatically, executing the contained script without your acceptance.


There are different kinds of vulnerabilities with Mobile payment systems. The three most common ones are:

Vulnerability Diagram

Vulnerabilities in GSM

With the advancement in smartphones, mobile payments have been used more on smartphones than tablets. This could pose as a risk for users as hackers can potentially hack into the network in order to retrieve personal information or transaction history that will reveal the user's personal information. Since all users use GSM, it pose as a risk if hackers are able to hack into the GSM network on the cellphone service provider.

Vulnerabilities in the choice of Platform

This vulnerability lies within the Mobile Payment service provider's platform. If that platform is not developed or secured properly, hackers are able to retrieve user information/passwords or even transactions they had done. This is one of the main reasons why users are reluctant to take on the mobile payment service.

Vulnerabilities in Choice of Technology

QR codes, NFC and bluetooth being utilized for mobile payments systems, vulnerabilities in those technologies can potentially compromise the security of the payment transaction. If hackers were to intercept raw data being exchanged between two devices, they may be able to reconstruct it to find personal or banking/credit card information from the user. Items such as Bluetooth air sniffers can enable hackers to sniff out the raw data so although it is rare that a hacker would go to such lengths, it is a possibility.

Interoperability Issues

Since there are a variety of different mobile payment vendors, it is very difficult for businesses to select a specific mobile payment service. A business would prefer choose the industry standard for payment systems, however, in this case for mobile payments system there is no industry standard. This act as a potential barrier because businesses are reluctant to go with Mobile Payment systems because no one else is doing it and there are so many to choose from that customers may want to use a different payment option instead. In order to mitigate the interoperability issue with mobile payment systems, a market leader has to emerge so that way, industry standards will be set so then business owners would then want to jump on-board. A good example would be Ebay heavily endorsing Paypal. With that, paypal is able to grow exponentially in the last few years and ebayers would specifically use Paypal because Paypal is the industry standard for Ebay.

Lack of Use Cases Available

Unfortunately, since the concept of mobile payment is still relatively new (compared to the use of Online Banking or purchases), there is not enough use cases to fully understand the capabilities (and drawbacks) of mobile payment systems. There is not enough use cases to formulate solutions/patterns to understand where the opportunities and threats of mobile payments system lie. And because of this issue, businesses and customers are very reluctant to take on this service. Speculators believe that in the next few years, mobile payments are going to take off because of the development of smartphones and tablets however, these are speculations only. Our team believes that mobile payment systems will eventually be a success but probably in the next 5-10 years.

Acceptance Across Cultures and Countries

When it comes to making purchases using a mobile device, different cultures have adopted this technology more willingly than others. According to a survey conducted by Accenture, Asian countries have given greater acceptance towards mobile commerce than western countries. The survey consists of 1,100 tech-savvy consumers across 11 different countries around the globe. China, with a 76% positive response rate towards making mobile payments, takes the lead followed by India at 75%. Outside of Asia, Brazil also showed enthusiasm towards mobile payments showing a 70% positive response rate. In the western world, however, only 26% of respondents in Europe and the US showed signs of welcoming mobile commerce. One commonality amongst all respondents was that privacy and security was a major concern with the use of mobile payments. According to the charts below Asia shows a much more positive perception towards m-commerce and view it as a convenient method of purchasing goods. Asian respondents also show significantly greater signs in using the technology for their shopping and banking activities. [5]

There are many possible explanations for why this trend has occurred. One possibility is that the eastern countries that have taken up m-commerce have recently become more technologically advanced. Many would say that these nations are considered emerging economies and as such have just begun to invest in new innovations. By investing now, these countries will be able to obtain the latest advancements and jump onto the latest trends around the world. Western countries, where the majority of their investment was towards innovations many years back, are still using that older technology today. As a result, these turn of events have created a leapfrog effect where eastern societies have surpassed the west in their use of the latest advancements. Also, because the majority of western society is still used to their current technology, those people will have a harder time shifting and adapting to new technologies.

Future of M-Commerce

The Future of M-Commerce

There are many business implications and opportunities with the growing number of people accessing the internet through their mobile phones and the expanding market of m-commerce. To start this section off, we will first begin with a 1994 quote from a notable technologist, futurist, and entrepreneur:

  • "The Wallet PC is a futuristic device. Instead of having tickets to the theater, your Wallet PC will digitally prove that you paid. It's our vision of the small, portable PC of, say, five years from now." –Bill Gates, 1994[2]

Its safe to say Gates had the future right, albeit back in 1994. Unfortunately, we no longer have technology guru's in our current era with the intuition and amazing vision Bill Gates had back then; nor do we have the ability to measure the accuracy of any current predictions of the future till enough time has passed. Nevertheless, here are some recent predictions of the future of the m-commerce industry from an expert perspective:

  • "Back in 2005 a research firm predicted mobile payments would total $10 billion by 2010. The actual total was nearly $100 billion, and it is expected to be double that in 2011." -Birds Eye View, February 2012[3]
  • "[Mobile] transactions will total nearly $1 trillion by 2014" -eMarketer, February 2012[4]
  • “M-commerce growth is set to quintuple in the next 5 years, resulting in $31 Billion in revenue by 2016.” –Vayu Media, April 2012[5]
  • “By 2020, smartphones will replace cash and credit cards as the preferred payment method.” –Digit Trends, April 2012[6]
  • “Today’s consumers are not solely motivated by the idea of replacing their leather wallet with a mobile device; rather, they are interested in a digital wallet solution that can offer an integrated shopping experience.” – Teller Vision, June 2012


One thing is sure -- we are talking about billions of dollars in growth. In recent years, with the rapid expansion of the m-commerce industry, many business leaders have been asking:

  • How can our business benefit from m-commerce?
  • Does our business model suite, or fit, m-commerce?
  • Do we have the organizational capabilities of utilizing mobile commerce?
  • If not, how can we adapt our business model and develop the necessary capabilities to utilize and benefit from m-commerce?

When you ask questions like these, there is always some likelihood that some other individual, group, organization, institution, or web community, known as the crowd, has asked similar questions via the internet, and that someone has posted an answer to them (opinionated or researched). Below is a mobile strategy for businesses drawn from the internet that helps solve these pressing questions.

Mobile Strategic Framework for Businesses

Errol Apostolopoulos, a writer for the Optaros web community, has developed a mobile commerce strategy he terms “miniaturization vs. mobilization vs. mobility.” [7] His strategic framework outlines the steps that companies can go through to enhance customer experience and ultimately benefit from the growing industry of m-commerce.

This “3M” mobile strategy can also be used by business leaders to critique how much potential value their business is capturing through m-commerce channels. For example, simply miniaturizing a traditional website does not yield the same value as offering a fully mobile, contextual and location aware application and/or service. The former example resembles more generic and common sense thinking of m-commerce, while the latter captures the essence of m-commerce 2.0. This will be discussed more thoroughly in the next section.

1. Miniaturization

Miniaturizing an existing e-commerce website is usually the first step that business tend to take in attempting to enter the m-commerce industry. It mainly requires some interface and format miniaturizations, therefore, it does not require significant time or effort to implement. Although doing so is a short-term solution that is incapable of adding much value in the long-term, it has the virtue of being ‘quick to market.’

2. Mobilization

Once a company has miniaturized their website and successfully implemented the changes, the next stage is to begin researching and adopting mobile interface and design best practices to maximize user experiences. This is the stage to start thinking about moving from a “mobile friendly” revenue channel to “made for mobile.” This involves a considerable amount of effort in comparison to the previous stage, as it requires the business to fully re-code their website into mobile-specific coding language such as HTML5, XHTML, and CSS3.

3. Mobility

Once the company has successfully adopted mobile interface and design best practices and re-coded their website in mobile-specific coding language, there website is truly "made for mobile." If the organization has followed this framework up till this point, this means that the company has invested a considerable amount of time,money, and effort in doing so. The organization now see's the world through the lens of m-commerce, with a new frame of reference in serving its customers. The firm should focus on developing use cases and business scenarios that can only take place in the mobile context. This addresses the lack of use cases barrier to mobile commerce discussed above. Essentially this a time for businesses to:

  • Utilize the mobile context
  • Realize the value in contextual generated information
  • Realize that users create dynamic, relevant, and context-rich information
  • Create unique customer experience only possible on mobile
  • Utilize location-aware capability
  • Push relevant information to influence consumer behaviour
  • Begin to develop and/or integrate more sophisticated technologies and applications into new or existing business models

M-Commerce 2.0

To resurface the 'hype cycle' framework discussed above, m-commerce as a whole has fairly high, or 'hyped,' expectations at this point in time. This is because there are so many emerging technologies coming together personalizing and augmenting consumers shopping experience. Mindful of the research and observations conducted in writing this wiki, it can be said the m-commerce is just about to reach the inflated peak of expectations.

M-commerce 2.0 is a concept that is well represented by the final stage of the mobile strategic framework discussed directly above. It is an emergent paradigm that is still in the process of developing, as it can only move forward as fast as the capabilities of our technology can keep up. Not only are technologies still developing, but organizations themselves are also in the process of developing the agility, flexibility, and change management capabilities needed to attain the adaptability required to survive in our quickly changing environment.

M-commerce 2.0 is about realizing and utilizing many emerging technologies to offer enhanced consumer experience and overal satisfaction. This not only includes shopping through the screen of mobile devices, it also includes utilizing all the latest hardware built into smartphones, and realizing the value of locally generated information, whether it be generated from smartphone sensors or users, to augment brick-an-mortar store shopping experiences as well. "For example the cross-operator mobile payment system in Austria enables consumers to not just pay for car parking, but to also extend their parking period without needing to return."[8]

At a very high conceptual level, M-commerce 2.0 can be seen as utilizing every piece of information possibly generated by smartphones and their users to add both online and offline value to the consumer. This of course means that information generated through web 2.0 tools is of high value in m-commerce 2.0. Advancements in the information provided by hardware in smartphones is fairly static when compared to the nature of information provided by web 2.0. For example, the information that needs to be captured to experience true mobile augmented-reality shopping might need hardware that may not be on the market for 5-10 years. On the other hand, web 2.0 information is available today. It is dynamic and always relevant as it is always changing and getting updated every hour, minute, and second of every day. M-commerce 2.0 involves realizing that the new port to the internet is the smartphone and tablet, and that these devices are continuously being upgraded with more sophisticated hardware and software year over year. It is about harnessing both static and dynamic information to enhance customer experience, increase customer satisfaction, ultimately influencing their behaviour and increasing the value of your business.

References

  1. http://econsultancy.com/ca/blog/10446-will-m-commerce-overtake-other-payment-options-infographic
  2. http://beginnersinvest.about.com/od/billgates/l/blbillgatesint.htm
  3. http://birdseyevieweu.files.wordpress.com/2012/02/roadmap-to-mobile-commerce-2-0.pdf
  4. http://www.emarketer.com/%28S%28ymbd3s55k43s1k555nvcjgvf%29%29/Article.aspx?R=1008242#538qGsw470Gdp0hv.99
  5. http://www.youtube.com/watch?v=Lgbe-MuZ8Js
  6. http://www.digitaltrends.com/mobile/study-by-2020-smartphones-will-replace-cash-and-credit-cards-as-preferred-payment-method/
  7. http://www.optaros.com/blogs/mobile-commerce-strategy-%E2%80%93-miniaturization-vs-mobilization-vs-mobility
  8. http://blogs.sybase.com/dmallon/Mobile-Finance-and-Banking/get-ready-for-mcommerce-2-0-the-directors-cut

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