The mobile phone is evolving into a power commerce tool, enabling consumers to review products, run price comparisons, access inventory levels and to make transactions both over the mobile network and also at the retail point of sale. However, while industry commentators have hailed the virtues of mobile commerce for some time consumers have not responded positively beyond buying ringtones and wallpapers for their phones. So why will m-commerce begin to blossom in 2012?

Firstly, some big web retailers indicate that mobile is becoming a significant sales channel. In July 2010 Amazon announced that mobile devices generated US$1 billion in sales, 3.5% of its net sales during the 12 month period. Last month Ebay stated it expects to process $3 billion in payments (via PayPal) in 2011. To dispel the view that big ticket items aren’t ripe for mobile commerce Ebay indicated 3-4 Ferraris are sold via its mobile app each month!

Secondly, we expect to see more retailers create mobile sites enabled for mobile commerce. For a long time web traffic from mobile devices has been negligible, but once it accounts for over 10% of traffic, as it is for some retailers, merchants start to view it as a missed sales opportunity. 

Thirdly, a slew of services will be launched in 2012 enabling consumers to make small value payments by tapping their NFC enabled mobile phone against an NFC retail point of sale. 2012 will be a critical year for driving NFC handset sales and also encouraging retailers to adopt the technology, although we expect end-user adoption to lag due to inertia.

Finally, consumers increasingly recognise that product reviews and price comparisons conducted on mobile enable better purchasing decisions in and outside the store. Importantly, mobile payment is convenient and enables consumers to buy products when and wherever they want.

This post forms part of RCR Wireless' Analyst Angle: 2012 mobile trends - mobile commerce, product ecosystems, location integration

When I saw last week’s latest NFC payments trial announcement by the GSMA, I have to confess my immediate thought was - So what? Another day, another contactless payment trial.

In 2006 I estimated that by 2011 mobile would facilitate $35 billion worth of contactless transactions, which has clearly been wildly off the mark! I hold my hand up and admit that I underestimated how slowly it would take to roll out mobile contactless payments. Despite this, it remains my opinion that handset based contactless payments will eventually support billions of transactions, driven mainly by strong convenience motives. Ever decided not to bother buying a snack or a magazine at a newsagent after seeing the length of the queue? Well, contactless payments should mean faster movement of queues; less waiting and greater likelihood you will complete your transaction. Importantly for businesses it will scale down cash handling costs. Yes, there are some competing contactless instruments, like contactless cards, but why bother thumbing through several cards in your wallet when you can just whip out your phone and be on your way?

The technology implementation of contactless payments on handsets has been agreed on by operators and device vendors through the GSMA Paybuy initiative. Furthermore, facilitating contactless payment is part of the strategy of leading payment companies (banks and credit cards) like MasterCard, and Barclays. So what’s preventing full deployments? Operators are waiting for the handsets from vendors. The handset vendors are waiting to see when retailers upgrade their terminals to accommodate contactless payments. Meanwhile, merchants won’t invest in contactless technology until they see evidence of wider deployments of contactless payment instruments, so we're in a deadlock situation. To their credit (pardon the pun) banks and major credit card companies are taking the lead by distributing and marketing contactless payment cards. Over time this will lead to growing adoption of contactless infrastructure among merchants and remove one of the barriers to take off.

However, critical business model issues still need to be resolved. Operators want compensation for subsidising these new payment instruments into the market and they are in a position of control because payment applications will reside on SIM cards issued by them. Within an established ecosystem for payment accommodating an extra few mouths to feed will remain a key challenge, and an area which we intend to investigate further in up coming reports on contactless payments later this year.

Nitesh Patel