Mobile commerce is at a turning point, and it is the evolution of global standards that is driving the application, says John Hurley.
Mobile commerce is at a turning point. We are fast emerging f rom the “evolution” phase, the slow process of introducing a new concept for transactions into the market. The next stage is “revolution”, when the technology reaches tipping point and adoption speeds dramatically.
The industry has already overcome a major challenge. It has educated its market so that the concept of mobile commerce is now widely accepted. Most people recognise that being able to pay for things through a mobile phone makes services more accessible. Operators are clear that adoption of m-payment is essential to unlock the full potential of mobile data. To move mobile commerce from a new concept in the public imagination to a familiar practice, there are more challenges to be met. The most pressing is a technical challenge – the need for a global mobile payment standard.
We all know that consensus on standards takes time. We are travelling along a path to mainstream mobile commerce adoption and the good news is that signs on the road over the past two years have been encouraging. As with all innovations, however, the shift from m-payment hype to adoption will not be red to green — there will always be a period of flashing amber as the industry ties up the final loose ends.
Why a global standard?
If the industry has got along so far without a global standard, it is really so crucial? The answer is yes. A universal standard is essential to produce the quality services that will allow mobile commerce to gain real market traction. Perhaps most importantly, an open, interoperable standard will make the transaction process painless. The consumer will have a simple, enjoyable experience that will encourage them to use this method of purchasing again and again. It will be easy for financial institutions and merchants to become involved, increasing the user’s options and simplifying the transaction process.
Content providers will receive settlement quickly and efficiently, enabling them to re-invest in new services that will continue to drive and stimulate the market.
A global standard will allow users to choose services from any operator, rather than remaining tied to a single operator’s offering, enabling roaming payments, driving competition and improving the user’s experience. It will be easier for new entrants to get into the market, bringing healthy competition that will encourage development of compelling new services, in turn driving consumer adoption. Operators will have a hassle-free process to manage services that increase revenues.
Safe and secure
One of the main barriers to consumer adoption of mobile commerce is end users’ perception of security. The reality is that m-payments offer an excellent standard of security, which is at the level of encryption used by banks. Achieving a critical mass of customers and merchants is not held back by the technical levels of security attached to a transaction, it is determined by how safe users feel.
Huge progress has been made in reassuring Internet users that data is safe when processed online, whether for shopping, banking or other services. The mobile industry is still going through this process and the development of a global standard is a critical element of this.
For end-users, whether payments are made by credit or debit cards via the mobile phone, or the sum is added to the user’s phone bill by the wireless operator, there are serious security issues to be tackled. With high-profile media coverage of mobile phone theft, the idea of deducting money directly from your bank account from the mobile is worrying, and users need assurance that stringent security measures are in place to prevent abuse of the system.
These include privacy protection through standards for loading and deleting financial and personal data on mobile phones, cardholder authentication methods and device These include privacy protection through standards for loading and deleting financial and personal data on mobile phones, cardholder authentication methods and device security through PIN entry and key storage. In essence the experience we are used to on the high street with all the repudiation possibilities of a transaction must be replicated over mobile. A global payment standard simplifies all of these features in even in the most complex of transactions. By branding the standard, the industry can build consumer confidence in an instantly recognisable trademark that communicates trust and safety.
Working together
The lack of a common payment mechanism remains an obstacle to mobile commerce, but this is an area where the industry has been working together for several years. The level of collaboration we have achieved is no mean feat. We must remember the mobile industry is still very young. Until recently there has been little co-operation between the major players, and while things are improving, some tension and competition remains.
The industry is collaborating to replace numerous proprietary standards developed in isolation by various stakeholders in the mobile value chain with a single standard. A number of bodies have been established to work on a payment standard. Notable groups include the Mobey Forum, the Open Mobile Alliance, Paycircle and the Liberty Alliance Project. Each of these bodies was established by a different segment of the value chain and it is only natural that they are pushing forward versions of a standard that best serve their own interests. The newest and most promising initiative is Simpay.
The Mobey Forum is dominated by the financial institutions whose mission is to encourage the use of mobile technology in financial services. The Mobile Payment Forum was set up to standardise features and functions for secure payments. The Open Mobile Alliance, which has established the mCommerce And Charging Working Group, is also working on m-payment related issues. It was set up to encourage user adoption of mobile data services by specifying market driven mobile service enablers that ensure service interoperability. Paycircle, dominated by suppliers of infrastructure such as Siemens, HP, Oracle, Sun and Lucent, was set up in January 2002 to accelerate the use of payments technology and encourage the adoption of open payment APIs. The Liberty Alliance Project, an alliance of non-profit and government organisations from across the world, was formed with a similar objective. It aims to deliver and support a federated identity solution, enabling single sign-on for consumers as well as business users in an open way.
The diversity of these groups reflects the diversity of the industry and highlights the challenge we face in working together to identify and achieve a common goal. The groups are now clear on what they need from a payment standard. For a truly global standard that meets the needs of every player in the industry, the groups must work together closely.
Siimpay out in front
Simpay is front and centre of standards developments, certainly from a European perspective. Founded by the “big four” — Vodafone, T Mobile, Telefonica and Orange — Simpay is developing an interoperable payment infrastructure. It will emerge as a branded payment option for low value purchases and possibly also a European clearing house. Simpay will launch its micro-payment solution in Q1 2005. In the interim members are promoting their own m-payment configuration in their domestic markets.
Key to the success of Simpay is the ability to attract merchants and other digital brands. Once they have connected into a single payment provider they can access a limitless consumer marketplace – the operator alliance provides for technical integration for example: Operator A and Operator B’s subscribers can access the same content based on a commercial agreement between A and B rather than repeating the technical integration. Simpay was launched by some of the most powerful forces in the mobile industry, creating strong market awareness which will help attract both merchants and subscribers. Media interest in Simpay has been far greater than in most of the other bodies.
The metaphor of global airline alliance structures such as OneWorld and Star Alliance illustrate how cross-industry collaboration can benefit every player, even competitors, through enhanced speed of adoption. The strategy behind this airline alliance is based on global roaming in the travel category. A single identity, in this case the frequent flyer number, is recognised by all the other carriers in the alliance as the traveller roams using competitor airlines. The traveller experiences recognition and benefits on a consistent basis. Importantly, high value customers are identified and treated according to the amount they spend, not the amount they travel.
In the mobile market, this model allows a subscriber to retain their operator’s user interface, which they are familiar with, even when they purchase content or hard goods provided by a competing mobile operator. They cannot be poached by a competing operator as only key information is being shared between competitors in the Simpay network – namely the mobile payment ID (like the frequent flyer number) and not the name and address of the user. The benefits are clear — and rapid adoption has made this a global phenomenon.
How close are we?
It is clear that the industry faces a major challenge. So will we ever reach the goal and achieve the global payment standard that will fuel mCommerce adoption? I believe we will. Cast your mind back to when email was built on proprietary protocols specific to academia, the US military and serious computer enthusiasts. A mere three decades later, consider the 600-plus billion messages that are sent every year with sophisticated attachments and encryptions. Email has dramatically changed the way we work and play. Yet it has not been so long since it moved from a market deeply fragmented by a number of incompatible standards to a market united by a common standard. Today email is ubiquitous because the proprietary systems are largely gone — vendors have either adopted the standard or died. Email is a fully interoperable, global system as a result of many years of work and heated dialogue between its developers. The same will be true for the mobile commerce industry, and I believe we are will on the way to achieving the same success that email has enjoyed.
The mobile commerce industry is maturing fast. There are undoubtedly still challenges to be overcome, but through a more collaborative approach that is putting the bigger picture above rivalry and tension, we are in good shape to achieve our goals. The challenges we face are the same as those overcome by any successful technology as it develops. We are well on our way to developing a global payment standard, which will have an enormous impact on adoption of mobile commerce. I am confident that the industry has learned lessons from the path email followed and that we will see mass-market adoption of mobile payment services soon.