Mobile Shopping: Soon a reality

People buy movie tickets, book flights, pay mobile bills and insurance premiums using their mobile phones. The next logical step would be buying fast food, music, groceries, etc. through the same mechanism. By Manjari Juneja

M-commerce in India is mostly limited to payment of utility bills and purchase of a few items including air tickets. However, the potential seems huge, especially when you look at the high penetration rate of mobile phones among the urban and the rural population as well as the fact that India has 500 million plus mobile subscribers, roughly twice the number of people with an active bank account.

Security and transmission speed have been major issues, but with initiatives such as 3G and the RBI’s recent guidelines on setting up mobile wallets, the m-commerce scene is looking more promising. Once money transfer increases on this mobile channel, m-commerce will take off in a big way.

Sunny Rao, Managing Director, India and South East Asia, Nuance, said, “M-commerce is nascent today. Most early services are geared towards top ups, movie tickets, flights etc. with a large number of the services dependant on the consumer having a credit card. The market is largely limited to users with credit cards and small transactions are possible when billed on to the phone bill. However, ubiquitous usage is distant. Business models are still in their infancy in India and scale has not been achieved.”

Added Sandeep Srivastava, VP, Mobile Business Solutions, Comviva, “One of the biggest opportunities for m-commerce, particularly in emerging economies, lies in mobile remittance. Mobile remittance has the potential to function as a gateway into the banking system for the under-banked and unbanked segments, which make up as much as 70% of the world’s population. For many beneficiary households, as well as migrants, remittances are the single point of contact with the formal financial sector. By providing remittance services via mobiles, banks and other financial institutions can attract new customers to related financial products—such as deposits, loans, and insurance—deepening financial access in the recipient economy. With the onset of 3G, the m-commerce industry is expected to benefit significantly. Technologies such as voice authentication and verification will make m-commerce easier and more secure.”

Farhad M Madan - Assistant Vice President, Business Development, Utiba Mobility, said, “Services such as ticketing, domestic money transfer, utility payments, content purchasing, pre-paid recharge etc. have huge potential in the mobile commerce domain. When a mobile wallet is used to make these payments, the wallet will not always belong to the customer who is doing the transaction. Retail channels will be the early adopters of this service and end consumers will initially depend on the retailer’s wallet for the execution of these services.”

Most products and services that are currently being sold on the Internet (e-commerce) have the potential of moving to the mobile platform (m-commerce). Services like DTH recharge, movie ticketing, bill payments, insurance premium payments, travel booking and even shopping have already made the transition to the m-commerce platform.

Much of this exists today but is limited to consumers with higher end handsets and those having credit cards. In the future, you are likely to be able to transfer money, purchase products and services and link the purchases to your wallet. Any service that has true utility value and is simple to use is bound to succeed. However, if the consumer is required to learn how to handle a complex mobile application in order to achieve this, then such a service is likely to remain a niche.

Deepak Chandnani, President Asia & Africa, Obopay, said, “M-commerce can be done through regular phones as well as by using SMS. However, we need to ensure that the communication is encrypted. It should not be repeatable. Two way authentication is required. Mobile payments will actually change the way people live. It already exists in many countries in Asia and Africa as well as in the US and Japan.”

Anuj Kapur, Country Head, Service Delivery Solutions, Telcordia India, said, “The reality is that m-payments are already happening in other parts of the world. India is a different market altogether with a different commercial and cultural background. Mobile-to-mobile (M2M) payment technology is available but it is yet to be utilized.”

A nascent market

Given the infancy of the market, growth projections vary. The ability for this segment to achieve those numbers depends on the success of the various business models that are being piloted. The real growth lies in the large segment of the population that does not own a credit card, high-end phone or GPRS connectivity and is likely to be familiar only with vernacular languages and semi-literate to boot. This segment stands to benefit the most from such services as they have no other complementary mode of access to such services.

The rural market is playing a fundamental role in the growth of the mobile sector which enhances the prospects of embracing m-commerce services and applications. The rural subscriber base is expected to grow at a CAGR of 85% in coming years.

Vijay Shekhar Sharma, Managing Director and Founder One97 Communications, said, “It will take some time before m-commerce picks up in a big way in India. The primary reason is the lack of sufficient payment options on the mobile platform, with credit card payments accounting for the bulk of the transactions. Of the 500 million plus mobile subscriber base in India, only 30 million have credit cards, thereby limiting the reach of m-commerce. Even if banks enable debit card transactions on the mobile phone, the reach would increase to around 120 million. There would still be this big base of over 350 million users who have a mobile phone but do not have a bank account or credit/debit card and hence have no readily available financial instruments for making a mobile payment.”

Bottlenecks

An area that is grossly under-researched is the ability to use the now-ubiquitous phone network to provide a number of m-commerce services. M-commerce does not always need high speed data capabilities on the phone, it can also be handled effectively using voice technology and augmenting it with multi-factor voice authentication to secure financial transitions. Any organization that can bring a bouquet of services together under one umbrella and under one number increases utility.

With the large pre-paid base and cash economy, telcos can achieve scale and significantly reduce costs. A lack of initiative from telcos will spur banks to move into this area and leverage their established infrastructure. The prospect of banks using telcos as their distribution channels seems likely.

Pravin Vijay, Director of Marketing, Flytxt, said, “One of the key challenges is the setting up of payment network infrastructure to enable financial transactions on the mobile phone. Mobile operators, a relatively new player in this ecosystem, would call for a fair deal as they hold this infrastructure together. It would be interesting to see how this ecosystem develops in the coming years.”

These issues can be addressed by the use of voice as the medium for carrying out the transactions. This way even low end phones with no GPRS or mobile Internet connectivity can perform m-commerce transactions in a secure and easy manner.

Rajesh Dongre, COO, m-commerce, Vodafone, said, “The existing price-war among telecom operators in India has led to operators offering services at affordable rates and I see no reason to doubt why m-commerce services will be an exception. With regards to transmission speeds, it has various dependencies which the industry is doing its best to resolve. Also, with the coming of 3G there is a probability that there may be a set of customers willing to pay a little more for much faster speeds of transaction.”

Future trends

The use of voice biometrics will see increased adoption in powering mobile commerce. 'Tap and pay' for in-store shopping and 'voice wallets' (using your voice print in addition to secure information) for mobile shopping are emerging trends on the access side. We are likely to see service aggregation to bring a number of services under one brand as a supply side trend.

Jagdish Mitra, CEO CanvasM, said, “This year we will see personalized applications and services being offered to the majority of the population with technologies enabling mobility with banking, ticketing, near field communications (NFC), location based services and advertising solutions. NFC, is a short-range wireless connectivity technology, will dramatically simplify the way that consumer devices interact with one another, helping people expedite connections, receive and share information and even make fast and secure payments.”

Mobile couponing is yet to take off in a big way in India. It is still done mostly at locations around metro cities and is limited largely to the food and apparel business. However, unlike online couponing which still needs a printer and Internet connection, mobile couponing doesn’t pose such inherent challenges. Going forward as mobile payments mature, it is expected that mobile shopping will reach every nook and corner of the country especially in urban areas and cover many more merchant networks. Instant coupon delivery and redemption and POS technology are some areas where there is still some work going on. Micropayment mechanisms like mobile wallet will encourage shopping on the mobile channel in a big way as it will give consumers a new shopping experience coming from the convenience attached to it. If advertisers and mobile network infrastructure providers succeed in bundling offers along with mobile payment mechanisms, it is going to transform the way that consumers will transact and shop.

Srinivas Mogalapalli, Director, Product Engineering and Management, Messaging and Mobile Marketing Product Unit, OnMobile, said, “The 3G rollout will enable replication of the Internet user experience on the mobile phone. In 2010, this will significantly benefit the adoption of m-commerce. Another technology that will break through in the future is the ability to scan barcodes using the mobile camera at the retail outlet to do comparative shopping with online retailers.”

The mobile phone will emerge as a popular payment channel because of its portability and ubiquity. However, it remains to be seen how regulatory bodies, banks, payment service providers and operators will come together and work towards making both macro payments as well as micro payments possible through this channel and there are security issues and network challenges to be tackled.

manjari.juneja@expressindia.com