M-Commerce for Banking & Retailing

8/14/2019 M-Commerce for Banking & Retailing

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E-Business and Business Intelligence

Mobile Commerce in Banking and Retailbusiness

By Prof T.R. Vaidyanathan


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M-commerce for BankingM-commerce enables Banks offer new channels of

service to customers as well as offering them newand innovative products. The Banks are working todesign and implement new applications that willoffer mobile payment (i.e. being able to pay forgroceries) and mobile brokering.

Banks are exploring the use of m-commerce tobroaden / retain their business by allowing theircustomers to not only access account information,e.g. bank balances, stock quotes and financial

advice, from anywhere, but also the possibility tomake transactions, e.g. purchasing stocks remittingmoney, via mobile phones. This service is oftenreferred to as Mobile Banking or M-Banking


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M-commerce for Banking

Mobile Banking refers to provision andavailment of banking- and financialservices with the help of mobiletelecommunication devices. The scope of

offered services may include facilities toconduct bank and stock markettransactions, to administer accounts andto access customized information."

According to this model Mobile Bankingcan be said to consist of three inter-related concepts:

Mobile Accounting

Mobile Brokerage


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Trends in mobile banking

The advent of the Internet harevolutionized the way the financialservices industry conducts business,empowering organizations with new

business models and new ways to offer24x7 accessibility to their customers. The ability to offer financial transaction

online has also created new players in

the financial services industry, such asonline banks, online brokers and wealthmanagers who offer personalizedservices, although such players stillaccount for a tiny percentage of theindustry.


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Trends in mobilebanking

Over the last few years, the mobile and wirelessmarket has been one of the fastest growingmarkets in the world and it is still growing at arapid pace. According to the GSM Associationand Ovum, the number of mobile subscribersexceeded 2 billion in September 2005, and

now exceeds 2.5 billion (of which more than 2billion are GSM). According to a study by financial consultancy

Celent, 35% of online banking households willbe using mobile banking by 2010, up from less

than 1% today. Upwards of 70% of bank centercall volume is projected to come from mobilephones. Mobile banking will eventually allowusers to make payments at the physical pointof sale. "Mobile contactless payments willmake up 10% of the contactless market by2010.


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Many believe that mobile users have just started to fully utilize the datacapabilities in their mobile phones. In

Asian countries like India, China,Bangladesh, Indonesia and Philippines,where mobile infrastructure iscomparatively better than the fixed-

line infrastructure, and in Europeancountries, where mobile phonepenetration is very high (at least 80%of consumers use a mobile phone),

mobile banking is likely to appeal even


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This opens up huge markets for financial institutionsinterested in offering value added services. Withmobile technology, banks can offer a wide rangeof services to their customers such as doing fundstransfer while travelling, receiving online updates

of stock price or even performing stock tradingwhile being stuck in traffic. According to theGerman mobile operator Mobilcom, mobilebanking will be the "killer application" for the nextgeneration of mobile technology.

Mobile devices, especially Smartphone, are themost promising way to reach the masses and tocreate stickiness among current customers, dueto their ability to provide services anytime,anywhere, high rate of penetration and potentialto grow


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In the last 4 years, banks across the globe haveinvested billions of dollars to buildsophisticated internet banking capabilities. Asthe trend is shifting to mobile banking, thereis a challenge for CIOs and CTOs of thesebanks to decide on how to leverage theirinvestment in internet banking and offermobile banking, in the shortest possible time.[

The proliferation of the 3G (third generation of

wireless) and widespread implementationexpected for 20032007 will generate thedevelopment of more sophisticated servicessuch as multimedia and links to m-commerceservices.


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Mobile banking businessmodels A wide spectrum of Mobile/branchless banking models

is evolving. However, no matter what business

model, if mobile banking is being used to attract low-income populations in often rural locations, thebusiness model will depend on banking agents, i.e.,retail or postal outlets that process financialtransactions on behalf telcos or banks. The bankingagent is an important part of the mobile banking

business model since customer care, service quality,and cash management will depend on them. Manytelcos will work through their local airtime resellers

These models differ primarily on the question that whowill establish the relationship (account opening,deposit taking, lending etc.) to the end customer, the

Bank or the Non-Bank/Telecommunication Company(Telco). Another difference lies in the nature ofagency agreement between bank and the Non-Bank.Models of branchless banking can be classified intothree broad categories


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Services offered by M-banking

Account InformationMini-statements and checking of account

history

Alerts on account activity or passing of set

thresholdsMonitoring of term deposits

Access to loan statements

Access to card statementsMutual funds / equity statements

Insurance policy management

Pension plan management


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Status on cheque, stop payment on chequeOrdering check booksBalance checking in the accountRecent transactionsDue date of payment (functionality for

stop, change and deleting of payments)

PIN provision, Change of PIN and reminderover the InternetBlocking of (lost, stolen) cards


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Payments, Deposits, Withdrawals, andTransfers

Domestic and international fund transfers

Micro-payment handlingMobile rechargingCommercial payment processingBill payment processing Peer to Peer paymentsWithdrawal at banking agentDeposit at banking agent


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Especially for clients in remotelocations, it will be important to helpthem deposit and withdraw funds at

banking agents, i.e., retail and postaloutlets that turn cash into electronicfunds and vice versa. The feasibility of

such banking agents depends on localregulation which enables retail outletsto take deposits or not.


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A specific sequence of SMS messages willenable the system to verify if the clienthas sufficient funds in his or her walletand authorize a deposit or withdrawal

transaction at the agent. Whendepositing money, the merchant receivescash and the system credits the client'sbank account or mobile wallet. In thesame way the client can also withdrawmoney at the merchant: throughexchanging SMS to provide authorization,the merchant hands the client cash anddebits the merchant's account.


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Feedback and challenges

Based on a survey conducted by Forrester, mobilebanking will be attractive mainly to the younger,more "tech-savvy" customer segment. A third ofmobile phone users say that they may consider

performing some kind of financial transactionthrough their mobile phone. But most of the usersare interested in performing basic transactions suchas querying for account balance and making billpayment.

Challenges There is a myth that there is a challenge of

interoperability between mobile bankingapplications due to perceived lack of common

technology standards for mobile banking


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M-Commerce in Retail sector

More than 63 million people haveaccessed the Web on their mobiledevices during the month of January

2009. More than 22 millions did sodaily. The numbers are skyrocketingand daily access to web on mobile

devices more than doubled last year. Itis not surprising that mobilecommerce is attracting a great deal ofattention today.


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M-Commerce in Retail sector It was reported that out of 48 retailers

surveyed in April 09, 42.9% havemore than $1 billion annual revenue.The next largest segment has revenuebetween $50 million and $ 1

billion(20.4%). It is a clear indicationthat these retailers have sufficient size,resources and motivation to getinvolved in m-commerce whichnecessitates adoption of a corporation

strategy as the first step in theadoption process. The smartcompanies always plan for growthstrategies even in a contracting

economy, and m-commerce is one ofthe few growth channels available


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M-Commerce in Retail sector The Retailers who are able to provide

successfully Buy anywhere Fulfillanywhere commerce capabilities will bethose who are most successful inexceeding the shoppers expectation for

cross-channel flexibility and earning theirloyalty. Retail organizations can leveragethese capabilities to champion new ways tomarket their products and services to theircustomers using innovative technology

offline to drive sales in their onlinebusiness. By taking advantages ofadvancements in mobile technology andubiquitous nature of cell phones, the new

mobility features will enable consumers toshop anywhere, anytime.


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The Buy anywhere, Fulfill anywhercommerce capabilities deliver threemajor mobility benefits to the retailindustry benefits today by:

Giving the customer ultimate flexibility inhow they choose to shop (Buy anywhere)

Making the retailer easy to do business with(Fulfill any where)

Extending the brand and sales opportunitieswithout limitations, driving new source ofrevenues and reinforcing the effectivenessof multimedia marketing campaigns


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Retail sector is also looking into the possibilitiesof using mobile commerce for making thepurchase of merchandize easier. Customerswill be able to browse and order products whileusing a cheaper more secure paymentmethod. An example of this is; instead of

using paper catalogues, retailers can sendcustomers a list of products that the customerwould be interested in, directly to their mobiledevice. Additionally, retailers will also be ableto track customers at all times and notify themof discounts at all local stores in which thatcustomer would be interested in. Shoppingwill also be easier. Soon, phones will beequipped with bar-code scanners andshoppers could scan an item and find outs itspricing and availability.


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M-Commerce in Retailsector

Research shows people accessing internetthrough mobile phone is growingexponentially. Convenience is a major factorcausing consumers to shift to Mobile-

Commerce. It provides mobility for busyprofessionals. Per Juniper Research, theprojected global revenue from M-Commerce isexpected to be 88 billion USD in 2009.

The priority of retailers to improve theirbusiness using M-Commerce is to focus on thefollowing goals.

Customer loyalty

Retention


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M-Commerce in Retailsector

It has been recognized multi-channelcustomers are their best and mostloyal shoppers and M-Commerce is

seen as an effective tool to retainthese shoppers and keep them comingback.

The next two linked choices are, create

new buying opportunities for existingcustomers and create a NewChannel for marketing, advertising andbrand awareness.


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Benefits of M-commerce

The M-Commerce provides retailers anedge to targets key businessfunctions that includes promotions,

multi-channel commerce, payment,create shopping list, loyalty programs,product information, ordermanagement, catalogue management,and value add services.


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Execution Strategies

Targeted promotion This is criticalbecause most of the people view theircell phones as a part of personal spaceand opt-in permission will be requiredand as such well devised campaign is

required to gin their permission.Secure The payment security is to be

ensured by retailers to earn the trustof the customers

Coupon redemption at store POS This is booming in distressed economyas retailers have to ensure that itreaches all their customers with

proven sales tools.


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Execution Strategies

Lower customer acquisition costs: Theretailer can target his customers more

accurately with promotional activities throughmobiles. The cost per target customer forthese promotions is less than the conventionaladvertisements.

Increase in value of transactions per

customer: Customer based promotions can besent more precisely if the customer has creditcard and loyalty card integrated into his/hermobile phone. This can be done by classifyingthe customers and tailoring the promotions to

needs. Customer trust and delight: Integration of

customer's bar code reader or RFID reader(integrated in mobile phone) with the store'sitem level bar-coding or RFID tagging will add

value in consumer's perspective in terms ofreduced in-store search time.

E ti


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ExecutionStrategies

Lower cost of retaining customers:

Cost of loyalty programs reduces ascredit cards; loyalty program detailsare integrated into the consumer'smobile. The promotional activities and

news can also be sent to their mobilephones at a lower cost thanconventional mail order of promotions.

Database management: Consumerdatabase can be made morecomprehensive as the credit cardcompanies, mobile service providersand retailers tie up to provide theentire M-Commerce service spectrum.


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Obstacles in m-commerceinitiatives in retail sector

The capital constraintsConsumer privacy and PCI

compliance(need to prevent

breaches from resulting in theft ofdata)

Lack of mature trustworthy M-commerce and infrastructure

Insufficient internal skills

Documents

M-Commerce for Banking & Retailing