Mobile Banking Finds Some Success in the US, While Payment Services Face Mounting Concerns.
A new study by Harris Interactive finds a virtual glass half full/empty scenario developing in the US mobile commerce space. Depending on which way you look at it, the domestic m-commerce market is either poised for explosive growth, or is doomed to follow in the footsteps of other “once hot, now not” slow growth areas… such as mobile video or Bluetooth marketing.
First, the “good” news: US consumers are increasingly taking to mobile banking services for activities such as balance inquiries and fund transfers. The survey “finds 16 percent of mobile phone subscribers already use mobile banking services, with 60 percent of these people using the services at least once a week.” Of those not currently engaging in mobile banking services, 35 percent expressed interest in “checking bank account balances and transferring funds via their mobile devices. A third of those surveyed (33 percent) also said they would like to receive text message alerts from their financial institutions.”
However, US consumers draw the line at conducting actual financial transactions via mobile. A mere 19% of those surveyed had any interest in “mobile wallet” services, while only 16% expressed interest in “mobile shopping.” Consumers cited three core reasons behind their lack of interest in the channel:
- Security Concerns. 66% claimed “Security / Encryption” was their primary concern, while 63% cited “Exposure to Fraud”, and 61% were concerned they “Might lose device with valuable information.”
- Price Sensitivities. 58% of those surveyed identified “Cost” as a reason for their lack of interest in mobile commerce services. 33% were either “very” or “extremely concerned” with how “price per transaction” would affect the overall cost of mobile transactions.
- Quality Issues. “Usability”(43%), “Reliability” (37%) and “Speed of Network” (23%) rounded out the top reasons for lack of interest in m-commerce.
Joseph Porus, Vice President, Harris Interactive, remains optimistic on the potential of mobile commerce while also cautioning against taking a consumer’s “expressed interest” in future products too literally. “Payment is where we’re all the applications are headed,” said Porus “[but] there’s also a halo affect with all of these studies when it comes to interest levels. Once a consumer actually sees the [product or service], along with the price, you can usually cut the ‘Interest’ number in half. Still, these numbers are very encouraging.”
You can find some of the raw data here: .pdf link.
UK Operators Try a Radical Approach to Tackling Thorny Issues Like Commerce and Advertising: Cooperation.
It’s obvious that the mobile marketing industry must resolve several key issues if mobile is ever to emerge as a legitimate marketing channel. These overreaching issues, mostly relating to a lack of standardization and of market access, are simply far to broad to be solved by any single entity within the space, regardless of their size, technological prowess, or market share. These big issues must be addressed by the industry as a whole, and unfortunately too few global markets possess the maturity to put aside their competitive instincts and collaborate on market solutions that benefit all members of the mobile value chain.
Thankfully, operators in the UK seem determined to buck this trend.
Looking back, clearly one of the first truly significant examples of (mobile marketing-related) industry-wide cooperation was the achievement of “intercarrier SMS” functionality, or the ability for consumers to send text messages to anyone, without regard as to whether the sender or the recipient are on the same wireless network or not. Obviously this challenge could have only been met on an industry-wide basis, with all the carriers in a particular territory coming to agreement on the base technologies and economics of the system. The results speak for themselves: Text message volume increased 350 percent in the first seven months after interoperability was introduced in the UK in April of 1999, and a similar effect was seen after interoperability was introduced in the US in 2001. In hindsight, most in the industry agree that text messaging would have remained a niche service with fairly limited appeal had this key milestone not been reached.
In further gestures of industry cooperation, the British operators appear keen on tackling sticky issues like mobile commerce and accountability in mobile advertising with a similar unified approach. Both areas, commerce and advertising, face key hurdles that can only be addressed by the industry at large… and leave it to the British to continue to set an example to the globe on how cooperation and civility has the potential to “elevate all peoples” –or in this case, all peoples looking to monetize mobility.
- Easy Billing on the Mobile Web. Starting back in May 2006, the five largest UK operators (Vodafone, Orange, 3, O2 and T-Mobile) created the Payforit organization – with the goal of standardizing and launching the necessary systems to enable “seamless and secure” (off-deck) WAP commerce of digital content. From an organizational perspective, Payforit builds upon the successful “Aggregator” premium SMS model in that the m-commerce standard establishes a group of “Accredited Payment Intermediaries” who utilize a common set of API’s to connect directly to all five carriers… in this case for the purposes of authentication, and (ultimately) carrier managed billing. The system officially launched in September of 2007, and early results indicate the standard represents a marked improvement over existing premium SMS billing systems. In the two months following the launch, Bango reported that “92 percent [of Payforit transactions] were completed successfully with an error rate of less than 1 percent… with refund levels at below 0.01 percent,” representing a “significant reduction in the need for costly customer care” Furthermore, Bango found that the average transaction speed “across all five networks [was] five seconds” – another significant improvement over premium SMS. Additionally, mobile game developer I-Play reported a near “15 percent conversion rate” on its mobile web site following their implementation of Payforit
It should be pointed out that although these results are highly encouraging, Payforit is not (as of yet) the “m-commerce” silver bullet we all desire. Unfortunately Payforit is limited to small transactions of less than 10£, and only for soft (digital) products. The organization has made no public statements indicating that the carriers intend on expanding the program to include larger transactions and/or to accommodate non-digital (physical) products, unsubstantiated rumors and overzealous public comments notwithstanding. The reasons behind these limitations was likely driven by carrier unwillingness to accept the risks associated with essentially “vouching” for larger-sized, physical purchases. Additionally, a complex regulatory system in the UK’s financial sector presents significant hurdles for carriers wishing to (directly) facilitate large transactions. Currently the carriers do not fall under the UK’s (banking) regulatory system due to the low Payforit purchase price ceiling of 10£, but any increase would likely land the operators into this undesirable (read: the reddest of tape) direction.
Still, Payforit represents a tremendous leap forward in the evolution of mobile commerce. With this platform the critical obstacle of authentication via the mobile web has been overcome, and with it the comes the very real potential for secure, unrestricted mobile web-based transactions of any type of good – at any price point. In order to reach this ultimate goal we would need to see a supreme display of cross-industry cooperation, where the carriers agree to share their authentication data with the banks and credit card companies (either directly or via an intermediary). One can only imagine the tedious negotiations that this type of complex (and lucrative) arrangement would entail.
- Eying Real Accountability in Mobile Advertising. As with commerce, the UK wireless operators are displaying a similar willingness to band together to take on the most significant challenge impeding the long term success of the mobile advertising market: accountability. In a joint release issued at this year’s 3GSM in Barcelona the very same five leading UK carriers announced that they had “formed a working group to define common metrics and measurement processes for mobile advertising.” The working group will be focused on drafting a feasibility study examining “the deliver[ry] of cross-operator metrics to the media and advertising communities” in the UK. No timetables were revealed other than that the group planned on releasing “recommendations” before the end of 2008.
It is no secret that there is a profound need for drastically improved mobile advertising metrics (cross-carrier or otherwise). Many industry leaders and publications have become increasingly vocal on the lack of real accountability in the mobile ad space and how this will ultimately hold back the industry if it is not seriously addressed. As cookies and page scripting aren’t viable options on the mobile web, our only real hope for true accountability in the immediate future lies with the carriers.
Ultimately, it will be interesting to see what approach the working group recommends. If history is any guide they will probably suggest a scenario similar to the aforementioned SMS and Payforit model, whereby a select few companies will be “given” (the right to purchase) preferential access to (in this case) key mobile web tracking data. This data is necessary to calculate crucial (and rudimentary) campaign stats such as unduplicated audience/reach and frequency, over multiple and overlapping wireless networks. These companies will then either act as data brokers and/or serve directly as providers of campaign and publisher-side metrics. This scenario begs some follow-up speculation, should the working group indeed decides to go down this well-worn path…
- Which companies will get the nod? Traditional fixed-line internet ad serving companies and networks (Atlas, Doubleclick, etc) and their mobile cousins (Amobee, AdMob, et al) will likely be competing with the site metrics specialists (Overture) and data brokers (Telephia, M:Metrics), as well as some of the more ambitious SMS aggregators and Payforit Accredited Payment Intermediaries looking to make a more aggressive push into advertising services. Serious spoils to the victors no doubt.
- What Data Points will be Passed by the Carriers? It would fair to say that at a minimum the carriers would need to pass an anonymous Unique Identifier to the ad server or other 3rd party. Other highly coveted data points of interest include subscriber IDs (mobile phone numbers), location and subscriber data. The former stands a good chance of inclusion in specialized cases should a real need be identified (such as a m-commerce extension), while the latter two seem too controversial for immediate consideration.
The Opacity of Hope? Undoubtedly the mobile marketing industry faces tremendous challenges if it is to realize its great potential as a promotional channel. While it’s commonly known that these challenges will only be met if the companies making up the mobile industry can put aside their differences and agree on common goals and approaches, it is encouraging that markets like the UK are taking a leadership position in this area. We can only hope that other markets will soon follow suit.
Stamford, Ct-based reach firm Gartner, Inc recently published a study exploring consumer attitudes regarding Mobile Shopping services – both in the U.S. and U.K. markets.
The report, entitled “M-Commerce Retail Consumer Shopping Preferences,” surveyed over “2,000 consumers in the U.S. and the U.K. to assess the likelihood that they would undertake a variety of mobile shopping activities, from price checking and product browsing to ordering and paying for a product from a mobile phone.”
Gartner claims that “few of the more-likely shopping activities that consumers will want to do on their mobile phones, such as finding stores and checking prices, will be provided by portals and price comparison engines.” The research firm also released the following “Key Findings” from the study:
- Checking Prices and Finding Stores both popular mobile usage cases. Both “activities were in the ‘top three activities’ to be done on a mobile phone in both the U.S. and U.K.”
- Consumers are more open to mobile “comparison shopping” verses actual mobile commerce. Twenty-four (24%) percent of U.S. consumers were “likely” use their mobile handset to “check prices”, versus twelve percent (12%) were likely to “buy on a mobile phone. U.K. consumers posted similar responses (eighteen percent check price, eleven percent buy).”
- Consumers relatively open to receiving mobile promotional offers. “Openness to receiving promotions on a mobile phone ranked third in the U.S. and fourth in the U.K. Twenty percent (20%) of U.S. and sixteen percent (16%) of U.K. respondents stated that they would ‘be likely to want to receive promotions’ on their mobile phones.”
- A18-27 represents current “Sweet Spot” for mobile shopping services. U.S. respondents ages 18 to 27 “were, on average, 1.98 times more likely to do mobile shopping activities than… respondents (ages 43 to 61). In the U.K. this trend is even more pronounced, with A18-27 “average 2.63 times more likely to do mobile shopping activities than their boomer counterparts.”
Analysis: For many leading and diverse business categories such as Consumer Package Goods (CPG) and Quick Service Restaurants (QSR), Mobile Shopping services (including related activities such as Mobile Couponing) represents the critical “last mile” in the evolution of Mobile Marketing.
That said, as is typical in research pieces such as the Gartner study, the publicly released research data often portrays too rosy a picture… as to not do so would limit the study’s appeal to its target customers (Venture Funds and well financed start-ups).
On its face, the data suggests that roughly one in four US consumers are “likely to” engage in mobile comparison shopping, and one in eight are “likely to” engage in mobile purchases of hard goods (interestingly enough, both data points are higher in the U.S. than in the U.K.). However, when pressed, Gartner reveals a more challenging scenario for prospective m-Commerce merchants. The research firm reveals that “the mobile phone is too complex for users to feel comfortable using them to buy physical goods”, and that “in addition to complexity, the second-biggest reason not to shop on the phone is fear of having their location tracked,” this according to Moconews.net. Both seem highly plausible – but rather conspicuously, neither of these two highly revealing insights are identified by Gartner as “Key Findings” in their press release announcing the study.
We find ourselves in agreement with Gartner’s recommendation that “M-commerce technology vendors should differentiate themselves by providing multichannel capabilities, such as enabling mobile-phone-generated orders to be picked up in a store or allowing consumers to save mobile-phone-created shopping sessions to be later continued on a Web browser.” While both evolutionary “half-measures” rely on other, legacy commerce channels (such as online or point of sale), both seem a good fit as “transitionary tactics” towards the brass ring that is the “fully fledged” m-Commerce transaction model.