Big hurdles face big m-commerce revenue: study

What kind of animal will mobile commerce (m-commerce) prove to be in the financial jungle? Judging by the latest study released by the Boston Consulting Group (BCG), m-commerce is about as ferocious as a koala bear at the moment but it will blossom into a raging bull in the form of an economic powerhouse.

According to the latest BCG study entitled Mobile Commerce: Winning the On-Air Consumer, one in four owners of mobile devices stops using m-commerce applications after the first few attempts. The report cited high consumer frustration as the impinging factor – slow transmission speeds, wonky user interfaces and high costs associated with wireless services – but added equipment manufacturers are already addressing the issue.

Despite the lukewarm review, the report lauded future wireless applications and services and stated there were more than 15 million m-commerce users worldwide by the middle of 2000. It predicted by 2003 there could be about 300 million global users, generating revenues of about US$4 billion. Based on that belief, the study estimated the value of goods and services purchased electronically with m-commerce devices will approach US$50 billion the same year.

“What’s clearly happening is the service providers are taking action,” said Marc Gilbert, Canadian tax e-business leader with BCG in Toronto. “On the device side of things they’re moving aggressively.”

Gilbert contended that the adoption rate of m-commerce technology in Canada is such that it will have a notable impact. He cited the current adoption rate of mobile professionals and corporations who have already embraced wireless e-mail capabilities.

“Wireless e-mail is really taking off,” he said. “On a personal level, yes I can see the value in it, and yes I think it will happen (a healthy m-commerce adoption rate).”

He added that Canada has relatively low mobile service costs comparative to some European countries.

The study contained the results of a global survey of current and potential m-commerce users that excludes Canadians. Its findings show other G8 nations’ m-commerce users often compare the speed and functionality of accessing the Internet via a PC against the relatively slower and more cumbersome on-air (read: wireless) experience. Surveyed users from America and Scandinavia through to Europe, the Far East and Australia, also openly griped about the difficulty of using a phone keypad to type messages and the general unreliability of the wireless service as their top beefs. Gilbert stated the findings are still relevant to Canada in that the figures compiled from the U.S. branch of the study are reflective of the expectations and attitudes in Canada, only with a slight lag. However, he would not comment on what the perceived adoption rate of m-commerce users might be here.

“What the figures clearly show is over half of the global consumers surveyed expect a universal payment tool,” Gilbert noted. “And yes, industry is certainly trying to create an interest.

“I think for consumers, [m-commerce] is a demand they’d like fulfilled if the capability is there.”

According to the report, about 82 per cent of current and potential users think the mobile device will become their personal travel assistant within the next three years. Eighty-one per cent believe the use of wireless devices in their daily routines will also become commonplace. Given the high level of consumer acceptance in the vaunted technology, the study predicts that by 2003 m-commerce will be where the Internet was in 1998 in terms of transaction value. In the B2C (business-to-consumer) space, total revenues are expected to approach US$100 billion, half of which will derive from data transmission charges, e-mail subscription fees and advertising.

An added chink in the m-commerce armour, however, may lie in the prickly issue of taxation, particularly here at home. Pierre Bourgeois, Canadian tax e-business leader for PricewaterhouseCoopers LLP in Montreal, said the conundrum of how to apply traditional taxation polices to e-business in general is creating confusion.

“Canadian legislation needs to show some guidance,” Bourgeois said. “There is a report due in Ottawa at the federal level next year and their timing is good. Canadian companies are now on the Internet bandwagon and they’re seeking some guidance as well.”

Meanwhile, elsewhere on the planet, the BCG study concluded with some distinct differences between each surveyed global region. For instance, Gilbert pointed to the overall usage of the mobile concept in Japan comparative to others.

“In Japan, teens are predominantly using the technology to play games and find their friends and have fun – it’s really unique,” he said, noting other countries’ users were primarily businesspeople. “It is so fundamentally important to look at the cultural differences between each geographical users’ perspective.”

The majority of surveyed users spend less than five minutes using m-commerce applications at one time and only eight per cent of those use m-commerce services for more than one hour per week. By contrast, the average American on-line user will surf the Internet for about 31 minutes per session on a fixed connection. Furthermore, the report found the top five reasons for using m-commerce devices were: to save time, get up-to-date information or real-time information, make communication easier and more effective, keep in touch with friends/family and to have security in an emergency situation.

It added the most desired services consumers would like to access on their mobile device are either not widely available yet or are still in the development stage. Those services include mobile banking, location-based services and regional information.