M-Commerce: Mobile Commerce’s Next Step

With m-commerce shifting into high gear, consumers are expecting a faster, user-friendlier checkout experience. Delivering that kind of experience won’t come from advances in handset hardware, but software.

by Peter Lucas

In the world of mobile commerce less is more, especially when it comes to checkout. Savvy merchants learned years ago that the small screens and tiny keyboards on mobile phones make it tough for consumers to navigate a checkout page without having to scroll and type in their personal and account information—tasks mobile shoppers want to avoid.

Mobile shoppers prefer large, user-friendly navigation tabs, small bits of information that make it easier to follow the navigation path, and auto-loading of account and personal data to minimize typing. In short, mobile shoppers don’t want to be overwhelmed with options.

Although many merchants have attempted to meet these criteria by paring down their e-commerce sites to accommodate mobile users—a vast improvement from just a few years ago—these are still essentially e-commerce sites. Hence, the online-shopping checkout experience remains primarily geared for consumers sitting at computers with large keyboards, not for shoppers making purchases on the fly with smart phones.

“The small screens and keyboards of mobile devices are an impediment to conducting a mobile transaction,” says George Peabody, director of the emerging technologies advisory service for Maynard, Mass.-based Mercator Advisory Group Inc. “There needs to be a better user interface to make the mobile transaction as easy as possible, and banks and merchants are still in the early learning stages.”

M-commerce experts agree that a richer, user-friendlier experience will come through advancements in mobile software to improve checkout at the virtual point of sale and cameras for capturing barcodes and QR codes to streamline checkout at the physical point of sale. Their reasoning is based on the evolution of mobile handsets, which have steadily shrunk in size since cell phones were introduced in the 1980s.

‘Payments Battleground’

The first generation of cell phones was not much smaller than the bulky wartime walkie-talkies from which they evolved. Today’s smart phones are sleek, pocket-size, Web-enabled computers. With so much computing power in the palm of the hand, it is unlikely handset makers will increase screen and keyboard sizes if it means increasing the overall size of the device. Instead, they will rely on software to improve all aspects the end-user experience, including checkout.

“Software will drive advancements in mobile checkout,” says Will Wang Graylin, founder and chief executive of Roam Data Inc., a Boston-based provider of m-commerce platforms and applications. “The goal is to reduce the number of prompts needed for a shopper to complete checkout and ultimately get down to one-touch checkout.”

Digital wallets that hold the consumer’s credit cards, driver’s license, etc., are considered to be the prerequisite for achieving one-touch checkout, according to Graylin.

Indeed, Roam Data expects to debut a mobile wallet during the first quarter that will transfer all of a consumer’s account and personal data, such as billing and mailing address, to a mobile merchant simply by opening the wallet and clicking the buy button on the merchant’s checkout page. To accept payment, merchants will need to be running software supporting the Roam Data wallet on their checkout page.

“Having to navigate fewer screens speeds the checkout experience and helps boost conversion rates among mobile shoppers,” says Graylin. “Speed and convenience are the name of the game in mobile checkout.”

Unlike traditional auto-fill applications that require merchants to maintain a consumer’s account and personal data on their server, customer information in the Roam Data wallet will reside in the cloud on a secure remote server, thereby removing the burden of data storage from the merchant, along with the subsequent risk of compromise by hackers.

“Mobile is the next major payments battleground and [merchant] acquirers need solutions to compete with the likes of PayPal, which is aggressively pursuing mobile checkout,” adds Graylin.

Other players in the digital-wallet game include Google Inc., Visa Inc., Discover Financial Services, American Express Co. and Isis, a consortium formed by wireless carriers Verizon Wireless, AT&T Mobility, and T-Mobile USA.

Google’s wallet, which launched last September, enables payments through a Citigroup Inc. MasterCard PayPass contactless card and a Google virtual prepaid card that consumers can fund using any major credit card (“A Wealth of Wallets,” January). Visa and Isis expect to debut wallets later this year.

‘Hooking the Consumer’

Since banks and the payment networks are expected to play a key role in the development of digital wallets, it is only natural that wallets be integrated into mobile-banking applications.

One advantage of this is that apps—applications built specifically for one provider or service—connect to a Web site faster than the time it takes to enter a Web site’s URL (address) into a browser, because they are written in code native to the device. As a result, apps can be launched at the touch of a finger, which is perfect for shoppers on the go.

In comparison, connecting to a mobile wallet on a bank’s Web site through the mobile phone’s browser is a much slower process because the browser interprets the HTML and JavaScript programming languages used to construct the site.

To download a Web page, the browser must send a request for each piece of data on the page being viewed. The more JavaScript files on a page, the more requests the browser must make of the server to download the page. One way to streamline the number of requests for content between a browser and server is to bundle JavaScripts into as few files as possible.

Other advantages of m-commerce apps include making use of features built into the handset, such as leveraging its GPS system to show a shopper a deal at a nearby store. They also can leverage other native phone functionality such as contact lists, calendar, and photos. All this functionality makes mobile-payment apps cool.

“Launching an app that can facilitate payment is a lot faster than connecting to a Web site through a browser,” says Richard Crone, chief executive of San Carlos, Calif.-based Crone Consulting LLC. “The last thing any bank wants when it comes to a mobile transaction is to frustrate the consumer and turn them away before they complete the transaction.”

Several payments experts believe that mobile bill payment is the first step to getting consumers hooked on using their mobile-banking application for transactions at the point of sale. That means the bank’s brand will play a role in adoption, as consumers naturally look to their bank for new payment solutions.

“Once consumers get used to using the phone for bill payment they will take the next step and use it for other types of transactions. The key to hooking the consumer is providing a rich, actionable experience that makes them want to use the application,” says Jim Simpson, vice president of information technology for Lubbock, Texas-based City Bank Texas, which has more than 30 locations in the Lone Star State. “Software has the edge in providing that experience over the browser.”

City Bank, which began testing a mobile bill-pay application in 2011, is waiting to see how consumers respond to it before pursuing other mobile-payment capabilities.

‘Circle the Wagons’

While apps can deliver a streamlined transaction process, one downside is they tend to be specific to the major operating systems. An iPhone app only works on Apple Inc.’s iPhone, which uses the proprietary iOS operating system. An Android app works only on a mobile device running Google’s Android system, and so on.

Android and Microsoft Corp.’s Windows Phone operating systems work on multiple manufacturers’ devices, but the multiplicity of manufacturers and operating systems still limits the reach of any single app.

Some leading m-commerce retailers have built apps for all the major devices, but that requires development dollars and time, as well as maintenance and upgrades for the code on multiple platforms. Despite the cost, Simpson believes that selectively building mobile-payment apps for multiple platforms is worthwhile for banks.

“Building an app for a specific phone is a speed bump for banks with large [numbers of] customers,” he says. “It’s best to look at the most popular handsets and mobile operating systems and determine which of those your customers are using and move forward accordingly.”

Which mobile devices consumers favor can be determined by identifying the signal emitted from the handset’s operating system when users access the bank’s Web site.

Another downside to apps is that Apple places stringent guidelines on software developers and rigorously tests each new app to make sure it meets performance requirements before the app can be included in its App Store.

Developers working with Android phones, on the other hand, start with a base version of the operating system, then modify the user interface, home screen, keyboard, and other features to create their own unique apps.

“There are a lot of different flavors of Android devices and while that is good for developers, it raises the question whether Google will eventually circle the wagons and rein in developers [the way Apple has],” adds Simpson.

Better Cameras

One area where mobile-phone manufacturers are making changes to the actual handset that can improve mobile checkout is the camera. With lens quality and megapixel ratings for smart-phone cameras improving with each generation, capturing a quality image of a barcode or QR code that can be read by a scanner is easier than ever. (The phone user must download an app or apps that read the codes.)

That’s a big plus for banks looking to leverage mobile phones as payment devices at the physical point of sale without relying on near-field communication (NFC) technology, which requires a special chip in the phone as well as contactless terminals at the point of sale. Both currently are rare, though increasing.

Photographing a barcode is similar to the currently more common practice of snapping a picture of a QR code, which is automatically read by the phone’s browser, then connects the shopper’s phone to a mobile Web site via a URL string embedded in the code.

In the case of making a transaction at the point of sale, a QR code can be photographed, which then connects the shopper via the phone’s browser to a checkout page. The consumer is then prompted to complete the transaction.

Mobile-payments experts predict banks initially will leverage the phone’s camera to capture barcodes and QR codes to facilitate mobile bill payment before applying the concept to the point of sale.

Indeed, some billers are starting to include barcodes and QR codes on invoices that when imaged take the consumer to a landing page where they can pay their bill. Consumers can either enter the number of the account from which they wish to pay the amount due, or, in the case of a recurring bill, select an account on file and click the pay button.

“Cameras can be used in place of keyboards for certain functions, such as payments,” says James DeBello, president and chief executive of Mitek Systems Inc., a San Diego-based provider of mobile-imaging solutions. “Snapping a photo of a barcode simplifies tasks that require keyboard entry.”

As mobile users get used to scanning QR codes to pay a bill, it won’t be long before the concept is modified to enable payment at the physical point of sale, predicts Roam Data’s Graylin. Mobile users would open their digital wallet and create a single-use payment token for the amount owed that appears on the phone’s screen. The token, which could be a QR code or barcode, would be scanned and a digital receipt uploaded to the consumer’s mobile wallet.

“The physical and virtual point of sale are converging,” says Graylin. “Scanning a payment token is really no different than scanning a digital coupon off a phone at the point of sale.”

‘New Shade of Lipstick’

Despite the rapid advance of mobile technology, merchants and banks are still trying to get their arms around its nuances. Streamlining the checkout process through applications that minimize the number of steps to complete a payment will go a long way toward attracting consumers to m-commerce.

Getting there, however, requires banks to keep in mind the type of experience mobile shoppers want, especially when it comes to checkout.

“Convenience is what will drive consumers to use mobile devices at the point of sale,” says consultant Crone. “That means banks can’t put a new shade of lipstick on their e-commerce bill-payment application and call it an m-commerce application. It’s going to require developing user interfaces specific to the channel that allow consumers to quickly and easily complete transactions on the go.”