Chapter 6 : Mobile Commerce

6.1 Introduction
The term e-commerce denotes business processes on the Internet. The general definition of e-
commerce does not say anything about the kind of device that the end user use to gain access to
the internet. The underline technology could be wired as well as wireless. The term m-commerce
is all about wireless e-commerce, that is, where mobile devices are used to do business on the
internet, either in the B2B or B2C market. M-commerce is actually a subset of e-commerce

One of the basic examples of m-commerce has to do with receiving sales promotions via the
hand held device. The most common application would involve the service provider sending text
messages to the subscriber that promote new product offerings, free trials on additional services,
or other types of promotional campaigns. The subscriber is not charged a fee for the text
message, and often can respond with a return text message without incurring any type of fee.
Several major cellular services off subscribers to opt into this type of m-commerce, or be
excluded from receiving the messages.

Offers that are received through the use of m-commerce may be accepted and paid for using the
hand held device. For example, if a customer chooses to respond to an offer, there are usually
several payment options available. The most common option is adding a charge to the monthly
invoice for services rendered. However, many companies that engage in m-commerce also offer
the option of paying for the item by the use of a credit card that is linked to the SIM card on the
hand held device.

In comparison to e-commerce, m-commerce offers both advantages and disadvantages. The

following list summarises the advantages of m-commerce:
6.2 Advantage of M-Commerce
Ubiquity: The use of wireless device enables the user to receive information and conduct
transactions anywhere, at anytime.
Accessibility: Mobile device enables the user to be contacted at virtually anytime and
place. The user also has the choice to limit their accessibility to particular persons or
times.
Convenience: The portability of the wireless device and its functions from storing data to
access to information or persons.
Localization: The emergence of location-specific based applications will enable the user
to receive relevant information on which to act.
Instant Connectivity (2.5G): Instant connectivity or "always on" is becoming more
prevalent will the emergence of 2.5 G networks, GPRS or EDGE. Users of 2.5 G services
will benefit from easier and faster access to the Internet.
Personalization: The combination of localization and personalization will create a new
channel/business opportunity for reaching and attracting customers. Personalization will
take the form of customized information, meeting the users’ preferences, followed by
payment mechanisms that allow for personal information to be stored, eliminating the
need to enter credit card information for each transaction.
Time Sensitivity – Access to real-time information such as a stock quote that can be
acted upon immediately or a sale at a local boutique.
Security – depending on the specific end user device, the device offers a certain level of
inherent security.

6.3 Disadvantages of m-commerce

small screens of most devices still limit types of file and data transfer (i.e. streaming
videos, etc.)

standards guiding applications and technology development and connection(s)

WAP and SMS limited to small number of characters and text.

 use of graphics is limited

less functionality for mobile Internet over mobile phones and existing generation of
handhelds than for mobile computers (laptops and next generation handhelds)

user interface is often difficult to learn how to use

limited bandwidth

limited roll out of higher bandwidth mobile networks and devices (i.e. 3g networks and
wireless broadband networks are predominantly located in cities) cost of establishing
mobile and wireless broadband infrastructure

technology constraints of mobile devices (memory, processing power, display

capabilities, input methods)

security of data moved across some mobile and wireless networks

businesses investment in hardware and infrastructure is seen as riskier as rapid evolution

of mobile and wireless technologies continues.

6.4 Wireless Technologies

Just as the TCP/IP and the general purpose Web browsers are being the current principal drivers
of Internet growth and this in turn makes disparate devices to connect themselves and
communicate and interoperate. Similar protocols, technologies and software will play a very
important role in heterogeneous wireless devices to interoperate without any complexity. In the
recent past, a common communications technology and uniform interface standard for presenting
and delivering several distinct wireless services on wireless devices - Wireless Application
Protocol (WAP) have emerged. The WAP specifications include a micro-browser, scripting
language just like JavaScript, access functions and layered communication specifications for
sessions, transport and security. These specifications enable interface-independent and
interoperable applications. Many of the wireless device manufacturers, service and infrastructure
providers have started to adopt the WAP standard.
The transmission rate of Current access technologies (2G), such as TDMA, CDMA and GSM, is
dramatically slower ( between 10 and 20 Kbps) than the dial-up rates of desktop PCs connected
to the Internet. 2G technology has steadily improved, with increased bandwidth, packer routing
and the introduction of multimedia. The present state of mobile wireless communications is often
referred to as 2.5G. It is believed that by the year 2003, 3G wireless technology will be available
for use. This, in addition to higher bandwidth rates, can take the transmission speed up to 2
Mbps. 3G is expected to facilitate: enhanced multimedia (voice, data, video, and remote control)
transmission, usability on all popular modes (cellular telephone, e-mail, paging, fax, video-
conferencing and Web browsing), routing flexibility (repeater, satellite, LAN) and operation at
approximately 2 GHz transmit and receive frequencies.

6.5 M-Commerce Applications

The general m-commerce applications are categorized as transaction management, digital
content delivery and telemetry services. The applications can be further subdivided into passive
and active m-commerce applications. Active application relates with the applications in which
the user has to take the initiative on his wireless device. In contrast, the passive applications
themselves get activated towards accomplishing the assigned jobs or facilitate the users to carry
forward.

Active Applications

M-commerce transactions point to online shopping Web sites tailored to mobile phones and
PDAs which are being equipped with the capabilities of browsing, selection, purchase, payment
and delivery. These sites also include all the necessary shopping features, such as online
catalogs, shopping carts, and back office functions as currently available for desktop computers.
Leading online booksellers already started the commercial activities for wireless devices.
Another important m-commerce transaction is to initiate and pay for purchases and services in
real time. The highest volume of m-commerce transactions using wireless devices in the days to
come is bound to occur on the side of micro-transactions. When individuals reach for their e-
cash-equipped mobile phones or PDAs instead of coins to settle micro transactions, such as
subway fees, widespread use of digital cash will become a reality.

The second important one is regarding digital content delivery. Wireless devices can retrieve
status information, such as weather, transit schedules, flash news, sports scores, ticket
availability and market prices, instantly from the providers of information and directory services.
Digital products, such as MP3 music, software, high-resolution images and full-motion
advertising messages, can be easily downloaded to and used in wireless devices when the 3G
transmission technology becomes usable. The proposed arrival of better display screen and
higher bandwidth will surely trigger the development of innovative video applications. This will
help wireless users to access, retrieve, store and display high-resolution video content for a time
of entertainment, product demonstration and e-learning.

The last major application of m-commerce is telemetry services, which include the monitoring of
space flights, meteorological data transmission, video-conference, the Global Positioning System
(Global Positioning System), wildlife tracking, camera control robotics, and oceanography. Thus
in the near future, wireless phones and appliances can be used by people to contact and
communicate with various devices from their homes, offices or any where at any time. For
example, delivery drivers will ping intelligent dispensing machines or users can transmit
messages to activate remote recording devices or service systems.

Passive Applications

This type of applications seems manifold and exciting. Instead of using dedicated cash cards for
automatic collection of toll charges, digital cash can be used by integrating cash cards with
mobile devices. Mobile users can easily pay and record payment of toll, mass-transit, fast-food,
and other other transactions

Nowadays mobile users can send and receive short text messages up to 160 characters that show
up on the user's display screen. As digital convergence becomes more commonplace, all kinds of
mail, such as e-mail, fax documents and digitized voice mail, can be received passively. Thus it
is felt that in near future there will be many novel services for mobile users for a fixed fee.
Further on, users may be tempted for some services free of cost for viewing audio or video
advertisement delivered to their wireless devices. Any kind of security breach, illegal intrusion,
unusual event or unacceptable condition will trigger automatic notification to users irrespective
of location. Airline companies are testing this technology to alert frequent air passengers
regarding seat availability and upgradation, to notify the changes made in the timings etc.
through wireless devices.

Passive m-commerce telemetry is the foundation of still another form of interactive marketing.
Stores will be able to market their products and services by constantly transmitting promotional
and inducing messages and doling out something towards getting the attention of both passers-by
and remote mobile users.

The general m-commerce applications are:

1. Mobile ticketing

Tickets can be sent to mobile phones using a variety of technologies. Users are then able to use
their tickets immediately by presenting their phones at the venue.

Tickets can be booked and cancelled on the mobile with the help of simple application
downloads or by accessing WAP portals of various Travel agents or direct service providers.
Mobile ticketing for airports, ballparks, and train stations, for example, will not only streamline
unexpected metropolitan traffic surges, but also help users remotely secure parking spots (even
while in their vehicles) and greatly facilitate mass surveillance at transport hubs.

2. Mobile vouchers, coupons and loyalty cards

Mobile ticketing technology can also be used for the distribution of vouchers, coupons and
loyalty cards. The voucher, coupon, or loyalty card is represented by a virtual token that is sent
to the mobile phone. Presenting a mobile phone with one of these tokens at the point of
sale allows the customer to receive the same benefits as another customer who has a loyalty card
or other paper coupon/voucher. Mobile delivery enables:

economy of scale
 quicker and easier delivery

effective target marketing

privacy-friendly data mining on consumer behaviour

environment-friendly and resources-saving efficacy

3. Content purchase and delivery

Currently, mobile content purchase and delivery mainly consists of the sale of ring-tones,
wallpapers, and games for mobile phones. The convergence of mobile phones, mp3 players and
video players into a single device will result in an increase in the purchase and delivery of full-
length music tracks and video. Download speeds, if increased to 4G levels, will make it possible
to buy a movie on a mobile device in a couple of seconds, while on the go.

4. Location-based services

Unlike a home PC, the location of the mobile phone user is an important piece of information
used during mobile commerce transactions. Knowing the location of the user allows for location
based services such as:

local maps

local offers

local weather

people tracking and monitoring

5. Information services

A wide variety of information services can be delivered to mobile phone users in much the same
way as it is delivered to PCs. These services include:

news services

stock data
 sports results

financial records

traffic data and information

Particularly, more customized traffic information, based on users' travel patterns, will be
multicast on a differentiated basis, instead of broadcasting the same news and data to all Users.
This type of multicasting will be suited for more bandwidth-intensive mobile equipment.

6. Mobile Banking

Banks and other financial institutions are exploring the use of mobile commerce to allow their
customers to not only access account information, but also make transactions, e.g. purchasing
stocks, remitting money, via mobile phones and other mobile equipment. This service is often
referred to as Mobile Banking or M-Banking. More negative issues like ID theft, phishing and
pharming are lurking when it comes to mobile banking, particularly done on the mobile web. Net
security technology free from redundancy and paradigm shifts away from mobile web-based
banking will be an optimal solution to mobile banking in the near future.

7. Mobile brokerage

Stock market services offered via mobile devices have also become more popular and are known
as Mobile Brokerage. They allow the subscriber to react to market developments in a timely
fashion and irrespective of their physical location.

8. Auctions

Over the past three years Mobile reverse action solutions have grown in popularity. Unlike
traditional auctions, the reverse auction (or low-bid auction) bills the consumer's phone each
time they place a bid. Many mobile PSMS commerce solutions rely on a one-time purchase or
one-time subscription; however, reverse auctions are high return applications as they allow the
consumer to transact over a long period of time.
9. Mobile purchase

Mobile purchase allows customers to shop online at any time in any location. Customers can
browse and order products while using a cheap, secure payment method. Instead of using paper
catalogues, retailers can send customers a list of products that the customer would be interested
in, directly to their mobile device or consumers can visit a mobile version of a retailer’s
ecommerce site. Additionally, retailers will also be able to track customers at all times and notify
them of discounts at local stores that the customer would be interested in.

10. Mobile marketing and advertising

Mobile marketing is an emerging concept, but the speed with which it's growing its roots is
remarkable. Mobile marketing is highly responsive sort of marketing campaign, especially from
brands’ experience point of view. And almost all brands are getting higher campaign response
rates. Corporations are now using m-commerce to expand everything from services to marketing
and advertisement. Although there are currently very few regulations on the use and abuses of
mobile commerce, this will change in the next few years. With the increased use of m-commerce
comes increased security. Cell phone companies are now spending more money to protect their
customers and their information from online intrusions and hackers.

6.6 Payment Methods

The main payment methods used to enable mobile commerce are:

premium-rate calling numbers,

charging to the mobile telephone user's bill or

Deducting from their calling credit.

Registration of a credit card that is linked to a Sim Card.

Categorisation of M-Payment Systems

Most e-payment systems are not suitable for use in a mobile context that is, using a mobile
device and communicating over a mobile telecommunication network. This is due to the special
characteristics of mobile devices and mobile telecommunications. In the following, we
categorise m-payment systems according to the whereabouts of the customer’s money:

1. Software electronic coins – electronic money stored on the mobile in file format.

2. Hardware electronic coins – electronic money stored on the mobile device on a smart
card.

3. Background account – electronic money stored in a remote account at a trusted third

party.

Software Electronic Coins

In this case, monetary value is stored on the mobile device and the customer has full control of
his/her money wherever he/she goes and whatever he/she does. An electronic coin is represented
as a file containing, among other information, a value, a serial number, a validity period and the
signature of the issuing bank. Since software electronic coins are easy to copy, the validity of an
electronic coin depends on its uniqueness in terms of its serial number. The customer transfers
electronic coins to the merchant, who forwards them to the issuing bank for the “double spending
test.”

Hardware Electronic Coins

In this case, monetary value is stored on a secure hardware token, typically a smart card, in the
mobile device. The presentation of electronic money is not important, as long as it is stored
securely on the smart card. Electronic money could be represented as a simple numeric counter.
In order to get to the money, the customer’s smart card and the merchant’s payment server
authenticate each other and a secure channel is set up between them. Then, electronic money can
be transferred from one to the other. This approach is quite attractive because smart cards
provide an additional level of mobility. That means the payment smart card can also be used in
POS transactions. E.g., Geldkarte, Mondex and Barclay card.

Background Account

Here, the money is stored remotely on an account at a trusted third party. Depending on the
specific payment system, the account could be a credit card account, a bank account, or an
account held at the network operator. For example, in some cases this data is sent in the clear
(e.g. a credit card authorisation) not providing any security against eavesdropping and in some
cases this information is encrypted and digitally signed, providing anonymity to the customer
(e.g. SET – Secure Electronic Transactions).

6.7 Key Issues of M-Commerce

The success of M-Commerce depends on:

Evolution: Technology and Business models are constantly evolving which will demand
flexibility and patience on part of all players.

Customer loyalty: Who will ‘own’ the customer? Partnerships among players from
various industries will be necessary for most, if not all, m-commerce initiatives, and, in
turn, will alter the nature of any one company to own their own customers.

Cross-sector knowledge gulf, where the different parties will need to learn about the
functions and limitations of the services provided by the other players, for example,
operators will need to know about content and applications.

Moving up the value chain: To respond to market opportunities some companies have
develop subsidiaries in order to react more rapidly to market challenges. For example,
Sonera has developed Sonera Zed, to provide portal and application management services
such as location based mobile yellow pages as well Smart Trust, to develop secure
solution for m-commerce transactions. And Citicorp has established e-Citi to develop a
wireless access gateway strategy for financial service providers.
End Chapter Quiz

Q1. WAP stands for ______________________.

Q2. Which of the following is a major characteristic of m-commerce?

a. Reachability

b. Ubiquity

c. Convenience

d. Localization

Q3. Which of the following is not a limitation of m-commerce?

a. Personalization

b. Bandwidth

c. Health hazard

d. graphics

Q4. Which of the following is not an advantage of m-commerce?

a. Ubiquity

b. Bandwidth

c. Localization

d. Personalization

Q5. Name three M-Commerce Applications: _____,______,________.