NEW YORK-The potential mobile-commerce revolution may well be in the intensive care unit, “but we’re not ready to declare it dead,” said David Bishop, director of wireless/mobile services for The Yankee Group, on Nov. 29.
By year-end 2005, domestic carriers could realize a collective $3.7 billion revenue boost from m-commerce, provided they surmount a host of looming obstacles. That means, “it’s not a killer app to create 3G, but its not bad,” he said at the research organization’s “Mobile.net: The Wireless Internet Explosion” conference.
Bishop, an economist who has worked for Sprint PCS and the Federal Reserve Board, said projections of a “cashless” society on the horizon have proven false for three decades so far. Americans use cash or checks for 94 percent of all purchases and 75 percent of the value of all such transactions.
Credit card issuers charge more for purchases made over the Internet because of greater risks of fraud and customer repudiation of transactions after the fact, he said.
People also tend to use credit cards rather than cash for larger purchases, and they are less likely to buy big-ticket items without examining them first.
Replacing cold, hard cash with wireless cyber cash for small purchases imposes its own set of hurdles. Merchants may be unwilling to invest in the infrastructure required to process sales with low dollar amounts.
Nontraditional wireless carriers, like the networks that collect tolls electronically, have a jump-start in this space and are making inroads with fast food restaurants. Likewise, some nationwide gas retailers use their own wireless transaction processing both at the fuel pumps and in their own convenience stores.
“Scarcity is what creates value, but money isn’t broken, so how do we get out of this mess?” Bishop said.
AT&T Wireless Services Inc. has pioneered one alternative Bishop believes could well prove a model for the collaboration needed among mobile telecommunications operators, Internet service providers, banks and merchants. The carrier’s customers can register on a computer server for coupons, which they must opt to retrieve onto their handsets at the point of sale. The banks, not the retailers, process the discount.
Besides taking the onus off the cashier, this system also sidesteps the controversy emerging over advertisements pushed willy-nilly to wireless handsets.
“Earlier this week, the British government made some noises about banning the push, even if consumers opt in,” Bishop said.
Location-based services also are engendering a backlash from consumer groups, which fear an invasion of privacy.
“There was the much publicized incident in which Sprint PCS and AT&T Wireless used MINs (mobile identification numbers) to give their customers access to content sites, thereby giving content providers access to phone numbers. Fortunately, no one abused this,” Bishop said.
“Privacy concerns cannot be stuffed under the rug. They must be addressed.”
Telecommunications providers also must confront consumer indifference to mobile commerce, consumer irritation with network service quality and consumer concerns about network security, he said.
Of 2,900 mobile-phone customers interviewed for a new Yankee Group survey, just 22 percent expressed some or strong interest in m-commerce. Similarly, a separate new survey, this involving 2,100 online retail buyers who also own a mobile communications device, revealed that just 14 percent expressed any degree of interest in m-commerce.
While service reliability is improving as carriers fill in their networks, the United States is a highly mobile society with low population densities when compared to Germany, Japan and the United Kingdom, Bishop said. This environment means ubiquitous coverage and high degrees of reliability are distant goals.
Although The Yankee Group still is fine-tuning its analytical tools and projections for mobile commerce, its ballpark estimate is that m-commerce will account for 1.3 percent of total retail transactions by the end of 2005. E-commerce will comprise about 5 percent.
“Our attitude is one of cautious optimism, but a lot of things have to come together before m-commerce will work,” Bishop said.
