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The world's largest mobile phone operator, Vodafone Group, launched its initial mobile payment business trials in the UK, Germany and Italy on Thursday.
The company says the trials are intended to test Vodafone's global payment platform, developed by an unnamed third party. Additionally, Vodafone said its rollout of the full commercial service for the UK, Germany and Italy, markets serving in excess of 50 million customers, will not commence until later this year. Vodafone operators in other countries, such as Eircell Vodafone in Ireland, will progressively roll out the payment platform with other countries expected to come on line later in 2002.
In general terms, the service will allow Vodafone customers to make purchases using their mobile phones or other mobile devices, seamlessly across most of Europe, the company claimed. Payments on the trial platform will be made through established payment instruments such as credit cards and debit cards.
Not only will the service let users buy digital goods, such as ringtones, logos, music or access to wireless content, but it will also enable purchases of physical goods. Moreover, Vodafone said that over time it would extend the functionality of its mobile payment platform to service purchase points such as vending machines as well as to fixed retail shops.
"I think the way to look at this is in terms of phases," explained Jon Earl, senior investment relations manager at Vodafone. He said the company expects digital purchases to dominate initially, followed by purchases of physical goods such as books and CDs. "Beyond that you may see this kind of service move into vending machines and eventually in the real world retail space, but it is difficult to say when that will happen," Earl said.
"As part of the Vodafone service offering, we want our customers to be able to use their mobiles as a payment tool, so ultimately, they will be able to pay for services and make purchases in shops or when they're on-line," said Thomas Geitner, chief executive, global products and services with the Vodafone Group.
Only two years ago, the m-commerce industry was predicted to be huge, but to the dismay of operators and some users the market has done little to this point. For the most part the poor performance in the market has been driven by a number of key factors, most notably the lack of high-speed mobile services such as 2.5G and 3G.
Of course 2.5G has now been introduced in most European markets and 3G is beginning to appear in small pockets across Europe in places like the Isle of Man and Monaco.
Yet the e-commerce market still has not emerged and analysts blame issues that harken back to the early days of e-commerce such as poor security, unfriendly user interfaces and unfamiliarity with the concept of m-commerce.
Vodafone is tackling at least one of those issues, security, in a move to bolster consume confidence in the technology. Vodafone customers will be identified by their mobile device in every purchase and will be able to confirm and authorise each purchase via a PIN code, the company said. Additionally, the customer's payment and address details are kept in a secure "wallet" requiring no direct entry of data over the Internet.
Moreover the company said, in order to make its service as "attractive and convenient as possible," the mobile operator is consulting with banks and payment service providers across Europe to develop open interfaces to facilitate the adoption of its payment services.
Whatever the current hang-ups from the consumer end are, analysts continue to predict that m-commerce will take off in a big way. Last year research firm IDC said once "the ice is broken," the mobile commerce market will be flooded with activity. Callie Nelsen, senior analyst with IDC's Wireless and Mobile Communications research claimed that "On-line shopping is gaining popularity on the wired Internet, and despite security issues and concerns from wireless end users, e-commerce over the wireless Internet will also explode."
IDC estimates the number of m-commerce subscribers will skyrocket from fewer than a thousand in 1999 to more than 29 million in 2004. Meanwhile, the value of their transactions will go from being too small to count to close to USD21 billion during the same time frame.
"Wireless vendors can help break some of the barriers to the market's growth by making the wireless buying experience fast and easy," IDC said. The research firm went on to say that vendors should explore payment options that do not involve users sending their credit card numbers over a wireless device, citing e-wallets as a good alternative.
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