JBS Group, Business Advisory Services

Monday, October 18, 2010

Mobile Transactions; What Will it Take For Success?

There have been many points in history when humanity changed the way they conducted transactions. From the trade of tangible goods as currency like goats, camels, gems, precious metals and people to precious metal coinage. Then to paper representing the promise to pay precious metals or other valuable goods. It was not long ago that plastic cards with magnetic strips or memory chips replaced  paper currency and checks for many people in many societies. The Internet has also changed the way people transact by creating electronic and virtual currencies. Banks also no longer move paper or precious metals but instead move 0’s and 1’s through electronic pipelines around the world.

We are now at another one of those transition points in our history; when plastic cards will be replaced by small devices capable of conducting electronic transactions of all flavors at physical points of sale, the Internet and between individuals.

Like all transition points in the past this one is populated by many technological differentiations. While in the past it has been different methods of transporting and exchanging things of value, now the differentiations include many means of communicating those digital euros, pounds and dollars. RIFD, NFC, Contactless, USB, SMS, WAP and more acronyms that we can keep up with. Then there are the physical forms of purses and wallets that will carry all the digital money and tickets. Of course the mobile phone operators and manufacturers of mobile handsets have spent millions convincing the press, investors and the technologically savvy that the mobile phone is the wallet of the future. That confluence is about ‘everything in your mobile phone’. Is this true or have we been fed and fallen for the company line? Are there other form factors for that future mobile electronic wallet? The fact is that there are numerous form factors that people will use as their electronic wallet device. It is extremely foolish to think that everyone in the world wants to or will use their mobile phone as their wallet. There will be dedicated electronic wallet devices, wallet watches, wallet mp3 players, wallet keyfobs, wallet cards, wallet smart keys and other wallet devices that we had not even thought of. Let’s examine the mobile phone handset though.

At the time of this writing there are very few mobile phone handsets in the world with native NFC, Near Field Communication, for conducting transactions at point of sale terminals. Also at the present time most companies and developers are focused on the attempt to turn existing mobile phones into payment devices. Many companies have been attempting to use SMS for transactions. This has not gained much traction in Europe or the US where banking is fairly secure and advanced. But it has gained quite a bit of traction in Africa. For POS transactions there are companies attempting to use Contactless tags embedded in stickers, microSD cards, SIM cards and attachments to specific mobile phones. There are software applications on mobile smart phones for online banking, payment, ticketing and loyalty. But mobile phone transactions are still off to a slow start.

There are a number of keys to making mobile transactions a success.

1.   Interactivity. Mobile transactions must include some sort of message back to the user after the transaction. The message must be something that the user deems valuable. A coupon, loyalty message, gift or personal message of some kind.
2.   Security. Users must be able to completely trust that they can conduct their transactions securely. That using their mobile device for transactions will not lead to identity theft or transaction fraud.
3.   Profitability. Mobile transactions must be profitable for every player in the ecosystem.  
4.   Compelling Reasons. There must be compelling reasons for merchants to incorporate mobile transaction technologies at their points of sale such as NFC readers at the physical POS or Java Applets at their web store. Users must have compelling reasons to use mobile transaction technologies. There must be things that they can do with a mobile device that they cannot do with cards or cash.
5.   Simplicity. Mobile transaction technologies must be incredibly simple or no one will use them.

When all of these pieces are in place in a mobile transaction system then we will see the technology explode like nuclear fission. Over the course of the past 14 years I have been involved in the mobile industry I have seen only one system accomplish this.

For more information contact Jon Shore at jshore@corporateconsulting.net or though his consulting website; http://www.corporateconsulting.net/.
Jon Shore has been involved in the mobile transaction space for the past 14 years. Among his invention accomplishments are an SMS ticketing and loyalty system and a very secure NFC transaction system for all sorts of mobile devices.

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