The M-Commerce Hype

There is a television advertisement making the rounds featuring an Italian setting, a vending machine, an old gentleman and a young, attractive woman.

As the man walks up to a soda vending machine on the edge of a nice Italian piazza he realizes he doesn't have enough small change to purchase a drink. He spies the fountain and decides to dig in for some coins. At first, there's no one around to see him put his hand in the fountain. But of course, there are three nuns nearby, and they catch him right at the moment when his hand parts the water.

Cut to a shot of the young woman standing in front of the machine.

She stares intently, making her choice.

She then takes out her mobile phone, aims and clicks. Out pops a can of soda.

This IBM ad may whet your appetite for mobile commerce and the convenience it purports to offer, but the reality of m-commerce, as it's called, is decidedly mixed.

Some highly publicized m-commerce initiatives from companies such as have been pulled before they have even gotten off the ground, while companies such as McDonald's are moving forward with m-commerce tests.

"The trouble is that the value chain for m-commerce is fragmented," according to Simon Buckingham, CEO of London-based Mobile Lifestreams Ltd., a wireless consultancy. Buckingham means that so many things need to happen in order for m-commerce to be a viable commercial opportunity. "The phones need modifications, the networks have to be more secure, and the banks, credit card companies and hosting companies have different IT infrastructures to integrate," he says.

Indeed, with proprietary networks containing vital customer information, many financial services institutions may be loathe to share the data with mobile network manufacturers. "Everyone wants to be close to the consumer," notes Buckingham. "Right now, we're all looking for standardization."

One attempt to set standards for m-commerce is being led by the Mobey Forum (, an organization backed by Nokia Corp., Siemens AG, LM Ericsson Telephone Co., Visa International Inc. and several international financial service companies, including UBS Securities Inc., HSBC Holdings PLC, Deutsche Bank AG, Barclays Bank PLC and ABN Amro NV. Last week, the Mobey Forum released standards for a preferred payment architecture. The requirements recognize that the preferred solution for m-commerce payments should be operator-independent, based on a bank-issued second chip (which would sit next to the GSM SIM chip in the mobile phone) and suitable for the mass market.

Banks and mobile-phone makers, which are members of the Mobey Forum, endorse this direction. In addition, they describe a server-based wallet that combines end-user authentication with a secure protocol for server-based interoperability.

Basically, there has to be a way to know who you are and a way to connect you to a pre-established payment system.

But wait.

While this seems simple enough, there's another body creating standards for m-commerce, too. The San Diego-based Mobile Electronic Transaction Initiative (MeT) is establishing a framework for secure mobile transactions, ensuring a consistent user experience independent of device, service and network. MeT is backed by many of the same Mobey participants, such as Ericsson, Nokia and Siemens, along with Motorola Corp., Panasonic Computer Co. and Sony Corp.

The jumble of standards hasn't held some companies back from working on m-commerce technology. Wayne, Pa.-based FreedomPay Inc. is installing radio-frequency identification devices in McDonald's restaurants in Idaho. Similar to the electronic tollbooth payment system now available in many metropolitan regions, about 2,000 people have signed up for the free plastic wands that attach to a key ring. A customer can pay for a meal by waving it in front of electronic sensors in restaurants or drive-throughs and can add value to the wand by using a credit card online or over the telephone. While this may fall into the category of m-commerce, it still doesn't involve a mobile telephone. A French start-up called Enition, which has offices in Mountain View, Calif., is trying to solve some of the issues related to cell phone m-commerce by combining a payment method with metering usage software. The company has a pilot program slated for Europe next summer. This brings up some of the other differences making m-commerce more of a brilliant advertising campaign than a revenue generator.

"To what degree is the phone the right interface?" asks Buckingham. "Mobile-commerce people already have cash and credit cards. Perhaps in Scandinavia, where people are used to SMS and other mobile services, the market for m-commerce will be good. Given the lack of smart card usage in the U.S. and the lack of text-based messaging in the culture, I would be skeptical, at least until the market is less fragmented," says Buckingham.

So what kind of mobile technology does Buckingham see as having a chance of success?

"Visual commerce, in which you are able to take a picture of something you want to buy and send it to someone else to get his or her opinion, something simple like that," he says. "What is happening is technology is pushed on potential users without knowing what they need, or even what they want. We believe in simple services."

Copyright © 2001 IDG Communications, Inc.

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