Insight Analysis: Our Mobile Cash Future
Frost & Sullivan has forecast that m-commerce is set to take off over the next few years and that the market for mobile transactions will be worth $25 billion by 2006. This equates to around 15% of all estimated online e-commerce consumer spending.
Paying to access the internet and peer-to-peer payments will bring in the bulk of the forecast revenue, accounting for 39% and 34% of spending respectively in 2006.
Ben Donnelly, research analyst at Frost & Sullivan, states: “Analogies can be drawn with the introduction of credit cards 50 years ago, currently the principle alternative to cash. They were perceived as a niche product and unnecessary luxury for many years until global technology standards made them viable for the mass market.”
Mobile payments are well suited to such transactions as booking and paying for tickets, managing stock trading and other last-minute or impulse purchases.
“Mobile payment also increases the lifestyle efficiency of consumers, making use of “dead time” that could otherwise be wasted doing nothing. For example, users are able to make purchases walking down the street, pay bills while they wait for a train, or pay back a debt to a friend immediately after a meal,” added Donnelly.
Mobile payments actually offer a higher degree of security than credit cards, since both the phone and a PIN are required as authentication. “The fraud risk is minuscule compared with credit cards,” Mr Donnelly explains, “a stolen mobile phone is far harder to crack than forging a signature on a credit card.”
As both the phone itself and a PIN are required to make payments via mobile, this method of payment is considered safer than credit card and additionally may assist internet commerce by allaying fears about disclosing credit card details over the web.
Mobile operators may be able to recoup much-needed revenue by offering such services to consumers and merchants alike.
“These financial institutions are conscious of the threat to their business posed by network operators and mobile payment start-ups. They need to ready themselves for mobile payment enablement and galvanise into action when adoption gathers pace. Banks want control over mobile payments, but at the same time, they are keen to collaborate with operators in the development of other wireless banking services,” Donnelly concluded.
A separate piece of research, the Mobinet survey from AT Kearney, found that 44% percent of mobile phone users would like to use their mobile phones for small cash transactions. The kinds of services they wished to pay for via mobile transactions included bus, taxi and train fares and items from vending machines. However, only 2% of respondents to the survey which included 5,600 mobile phone users across four continents, had actually made a payment via there mobile at the time of the study.
Intent to use m-cash, as the services are being called, was highest in Japan at 50% percent, 46% in Europe, 43% in the rest of Asia and 38% in the US.
“Consumer tastes in the mobile arena are fragile, so it is imperative that the community of mobile phone makers, carriers, content providers and financial services companies rally quickly to provide mobile cash capabilities before consumer interest wanes,” said Paul Collins, analyst at AT Kearney. “The Mobinet Index recorded high numbers for intent to use mobile phones to access the Internet 18 months ago. Those numbers have fallen drastically, primarily because the mobile community hasn’t provided consumers with enough reasons to access the Internet with their phones. Mobile cash could suffer the same fate if consumers aren’t soon given compelling opportunities to use it.”
Also out today were figures for February 2002 from the Mobile Data Association (MDA) which show that the UK average daily figure for text messages sent across the four UK GSM network operators was 44 million, compared to only 28.8 million during February 2001.
The MDA believes that the February figures confirm that “the increasing growth in text messaging established in 2001 is set to continue this year”. 1.2 billion text messages were sent in the UK last month, the MDA believes that this figure will exceed 60 million per day by the end of 2002.