In part 1 of this article, we looked at m-commerce's struggles in relation to other mobile markets like mobile ads and video while also discussing some of the issues mobile retailers face today. But another aspect to m-commerce's growth (or lack thereof) is the issue of mobile payment providers. Only recently have we begun to see some changes in this space - at least in developed markets like the U.S. With the recent launch of several new mobile payment services, consumers should soon become more comfortable and open to the idea of using their phones to make purchases.

Interestingly enough, the "comfort factor" in using a mobile to make a purchase is more of a problem here in the developed world. In developing markets, however, where critical infrastructure like bank branches and high-speed internet is often lacking, people use mobile phones for all sorts of things including mobile banking, mobile money transfer, mobile education, and mobile medicine.

For example, one of the more successful mobile phone money-transfer services is M-PESA, a branchless banking service which has seen success in Kenya, Tanzania, and Afghanistan. Then in Sri Lanka, parts of Africa, and other low-GDP regions a company called Amdocs even helps mobile users to spend their minutes like currency.

Closer to home, the recent partnership between mobile service provides Fundamo and Clickatell may help to bring additional mobile banking initiatives to more advanced mobile markets. Like the U.S., Fundamo's technology is currently used in one third of all mobile banking deployments globally while the U.S.-based Clickatell works with institutions like First National Bank, Standard Bank, MoneyGram, Capitec, Nedbank, Moneybookers, New Heights Microfinance Bank, and others.

Getting Comfortable Paying with Our Phones

One key component to m-commerce's potential success is establishing a comfort factor among consumers when it comes to paying for things with mobile phones. Facebook's role in helping to mainstream this trend should not be overlooked. The company has begun testing mobile payments via a partnership with Zong which would allow users to purchase Facebook credits via their cell phones. Although not in effect yet, once the "flip is switched" so to speak, there will immediately be a large potential customer base for using mobile payment technology. And because it's Facebook, there will be a certain level of trust in the technology. (Yes, we know that's odd given Facebook's numerous privacy stumbles in the past, but overall, the mainstream population won't likely be all that wary.) In addition to the Zong/Facebook partnership, a mobile payment service called Boku has already launched within Facebook and in other social networks, too.

Other mobile payment initiatives introduced this year include MasterCard's launch of their MoneySend™ technology and Nokia's launch of Nokia Money, both being mobile money transfer services. MasterCard is working with Obopay, to deliver their person-to-person payment technology to U.S. consumers. Even though this is not a service intended for mobile retail use, its availability will help to further solidify the concept of using mobile phones as payment devices among consumers.

Obopay, as it turns out, is also the company powering Nokia's new service. With Nokia Money, users will be able to send money to other mobile users via their phone as well as pay for services, pay utility bills and refill prepaid SIM cards. Unfortunately, the company is launching the service in Asia and Africa next year, but has not said if or when it will arrive in other markets like the U.S.

According to David Schwartz, Sr. Director, Product & Global Marketing at Obopay, partnerships like these are only the beginning of what's about to become a major trend. "While some think that mobile commerce is still in its infancy, the market is actually growing at impressive rates," he says. "Gartner estimates by the end of 2009, there will be 74.4 million people using mobile devices to purchase goods and services worldwide, and predicts that number will double by the end of 2012 globally. Since our inception four years ago, Obopay has helped a countless number of people stay connected from sending money to a child in college across the country, to splitting a bill - it's proven to be both easy and secure."

Consumer Experience Matters

With these upcoming mobile payment services, it won't just be availability that matters. Also important is making sure the services themselves work as advertised while still simple enough for use by the average mobile phone owner. Bryce Marshall, Director of Strategic Services at direct digital marketing firm Knotice, agrees. "The future for m-commerce is bright but there are challenges, he says. "For m-commerce to reach its full potential, both the consumer experience and the transaction process must be improved."

For the consumer experience to excel, companies need not only to develop mobile payment applications but develop standards as well. That's why this year Visa Inc. partnered with GSMA, a mobile communications industry group representing hundreds of operators worldwide to develop standards for mobile money management. They've deepened their investment in mobile payments in other areas too, including making a minority equity investment in Monitise plc, a U.K. mobile payment firm, and also teamed up with NeuStar to accelerate worldwide mobile adoption.

Availability + Usability + Large Userbase = Adoption

With all these mobile payment initiatives launching from brand-name companies like Facebook, MasterCard, and Visa, it's only a matter of time before consumers reach enough of a comfort level with mobile payment technology to make an impact on the m-commerce industry. By integrating mobile payments into mobile applications, similar to how Apple does now via their in-game purchases, paying via mobile will eventually become second nature.

But for now, it seems that we're still on the cusp of what could be the next big mobile trend and are just waiting to see it take off. For m-commerce to succeed in the developed world, we'll need to see more retailers making their move into this space as well as new technology that lets people pay with their mobile phones. We're only seeing baby steps being taken at the monment, but with the growth of the smartphone market (in the U.S., up 47% in Q2 of this year), there will soon be so many mobile users online that it will become impossible to ignore them any longer.

With these levels of growth, we're also seeing related mobile services getting a boost. App stores, both phone-based and carrier-based, are popping up left and right, mobile video usage is booming, and mobile ad markets are seeing dramatic growth, too. However, there's one area that hasn't yet benefitted from the mobile revolution: mobile e-commerce.

The indicators of increased mobile web usage are everywhere. Just this week, we heard Facebook reporting their mobile growth had tripled from December of last year to this past month, for example. And then there's AT&T, the carrier for Apple's iPhone, which is seeing so much data usage that they couldn't even keep up, having to delay the introduction of new iPhone capabilities like MMS messaging until they were ready to handle the demand.

Mobile Ads Doing Well

Mobile-dependent markets are doing well, too, at least for the most part. A recent Gartner report states that mobile ad spending will grow 74% this year worldwide to $914.5 million. But the real growth won't happen until 2011 when advertisers are expected to fully embrace the shift to mobile. By 2013, the firm expects the mobile ad market to surpass $13 billion with the Asia-Pacific region in the lead, followed by North America and Europe. Not only is the rise of the smartphone to thank for this trend, so is the rise in flat-rate data plans which make it easier for more consumers to afford mobile web connectivity. As more consumers go online, more web publishers begin to cater to their needs with mobile-ready versions of their websites. This, in turn, "is lifting mobile web access among non-smartphone users," notes Gartner analyst Andrew Frank.

Mobile Video on the Rise

Along with basic web surfing, mobile users are also finding entertainment via their handhelds, specifically in the form of mobile video. According to Nielsen's latest three-screen report, the number of people watching mobile video increased 70% from last year. Nielsen, which specifically tracks American media habits, says this increase to 15 million viewers represents the largest annual growth to date.

M-Commerce Struggles

However, not all mobile-dependent markets are doing well. Mobile e-commerce, for example, is struggling. Despite the massive numbers of mobile users, those using their phones to make purchases are still few and far between...at least here in the U.S. According to new data from eMarketer, more than 70 million U.S. mobile phone users will access the internet from their devices this year, but the m-commerce market remains immature. In an April 2009 survey by RIS News, privacy and security concerns are still at the forefront of both shoppers' and retailers' minds. This had led companies to drag their feet when it comes to introducing their mobile commerce plans. Says Jeffrey Grau, eMarketer senior analyst, "most retailers are either standing on the sidelines or in the midst of planning their mobile commerce strategy."

Another major problem is the lack of standardization in the mobile space. With the number of platforms now available, retailers find building a plethora of mobile applications not worth the effort. As InfoWorld recently noted, the smartphone market has become a "tower of Babel for developers." This means that mobile retailers have to carefully pick-and-choose the platforms they plan to support in order to see reasonable returns on their investments in this space. Despite the slow growth, it appears that m-commerce could be successful if only there were enough mobile apps and shopping opportunities out there.

Already, mobile payments firm Billing Revolution found that on-the-go consumers seem happy to purchase small ticket items like pizza and movie tickets, for example.

And a March 2009 PriceGrabber.com survey found that early m-commerce adopters were even buying up higher priced items like consumer electronics, apparel and jewelry.

In other words, when it comes to m-commerce, "if you build it, they will come." , or so it seems. However, developing m-commerce applications is only one part of the equation. For mobile e-commerce to be successful, we'll need to adopt a number of mobile payment platforms too.

For the much-sought-after and elusive 18-24 year old segment of the market, mobile advertising has promise. In fact, according to data from a BIGresearch study, it's twice as effective among younger consumers with 14.2% of 18 to 24 year-olds saying that mobile video influenced them and 15.9% saying text messaging did.

Those number also show that text messaging isn't the only way to reach consumers via their phone. Today's phones keep advancing and many of them have become more like a little computer in our pocket...or even a TV in our pocket. Because of this, marketers' now have the ability to tap into mobile TV services like Verizon's VCAST or Sprint TV, for example (Both are U.S. services).

Beyond The Small Screen

But mobile advertising doesn't exist in a vacuum. Verizon's strategy is to use mobile ads as part of the bigger picture - something they call their "three screen" approach. Since Verizon offers mobile data services, digital FIOS TV services, and high-speed internet, the mobile device "can be used to enhance or activate other types of media," says Stephanie Bauer, who leads mobile advertising at Verizon Wireless.

As for AT&T, Jordan Berman, executive director of media innovation for AT&T Mobility is looking at a strategy that includes "mobile display ads, a direct-response element such as a bar code or text shortcode, and some form of branded content or utility, whether an m-commerce site, coupon or a contest, to which consumers are driven."

Those mobile ads may help drive real-world sales, like Verizon's three-screened promotional effort, the Burger King "Whopper Freakout" campaign, created by Crispin Porter + Bogusky. Another company offering mobile ads is the mobile coupon service, Cellfire, who offers both downloadable apps and a mobile web site  for accessing deals from your mobile phone.

Effects on M-Commerce

However, mobile ads could also help the m-commerce trend, too. Earlier this month, we looked at some ways that m-commerce was taking off and discovered that nearly half (49%) of mobile data users said they expected to participate in mobile commerce in the future.

Despite the growth, it's still obvious that the perfect formula for marrying mobile ads and mobile shopping hasn't been perfected yet, as many marketers seem to still be experimenting with various methods and gauging their effectiveness.

Photo Credits: enV courtesy of nesster