Haiti Donations: A Turning Point in Mobile Commerce?

Only two days after a 7.0-magnitude earthquake leveled the capital city of Port-au-Prince, Haiti, the American Red Cross raised $7 million via text messaging from more than 700,000 wireless customers. Donations poured in from every wireless network, including AT&T, Verizon, Sprint and T-Mobile.

Red Cross’ relief efforts in Haiti signaled a turning point in the history of mobile commerce. “It was a major validation about the possibilities of text and mobile commerce and what we’re going to see in the future,” says Gartner analyst Jeff Roster.

[ The iPhone is poised to be a social networking and e-commerce star this year, reports CIO.com. | Develop an iPhone app and make $500 a month, Tom Kaneshige writes. ]

Consumers have been slowly warming to the idea of zapping money through the air for years, from mobile banking to online shopping to purchasing mobile apps themselves. In fact, some analysts say that this year will be the year of the start of a mobile commerce tidal wave. Gartner predicts mobile app revenue will hit $6.7 billion this year, up from $4.2 billion last year, and the trend will continue to almost $30 billion in 2013.

Gartner’s top 10 mobile consumer app areas for 2012 are: money transfer, location-based services, mobile search, mobile browsing, mobile health monitoring, mobile payment, near-field communication services, mobile advertising, mobile instant messaging, and mobile music. Two of these top ten app areas—money transfer and mobile payment—directly relate to mobile commerce.

SMS Succeeds Where WAP Floundered

For years, analysts have been waiting for mobile commerce to take off only to see it stumble.

The first false start came in the late 1990’s when the wireless application protocol (WAP) arrived on the mobile market scene. Banks launched online banking websites as WAP sites. But WAP has been widely criticized for its lackluster capability and performance.

A few years later, banks turned to mobile applications for mobile commerce. Yet these apps were limited to a single carrier and a few phones. “It was a repeated mistake,” says Diarmuid Mallon, product marketing manager at Sybase 365 mCommerce, which provides a platform for messaging and mobile commerce. “You forced people into something that was very limited.

Recent signs point to a coming of age. In the last couple of years, banks turned to less complex solutions from the user point of view, Mallon says, namely, the short messaging service protocol as the basis for transactions and alerts. The Red Cross’ recent success through text payments illustrates the power of this model, he says.

Gartner’s Roster, though, feels mobile commerce’s troubled youth was a natural progression in the evolution of mobile commerce. Also, he says mobile apps have proven to drive mobile commerce. Last year, a rare Lamborghini and a $150,000 boat were sold over eBay’s iPhone app. “There’s no question this is the year of social media and m-commerce for retail,” Roster says.

Mobile commerce has also benefited from a boon in mobile phone sales. Consider the rapid rise in smartphone sales. The industry shipped a record-breaking 54.5 million smartphones during the fourth quarter, a nearly 40 percent increase year-over-year, reported research firm IDC.

This impressive figure doesn’t include sales of non-smartphones. “There are more mobile phones than computers, televisions and even radios on this planet,” Mallon says. Meanwhile, the iPhone has generated enormous excitement for mobile commerce despite holding only a percent of the global market, he says.

Pay Parking By Phone in Vienna

Mobile commerce has really evolved over the last few years, both in developed and developing countries. It’s taken many forms, from remittance to payments to banking.

Some of the most interesting mobile commerce cases come from Austria, among the countries, along with Japan, leading the mobile commerce charge. The phone is fast becoming a mobile wallet. Say you’re at a restaurant with friends and want to pay one of them for your share of the bill. You could do that through a simple text message (assuming your friend also uses her phone for mobile commerce).

In Vienna, a majority of people pay car parking fees using their mobile phones. Ten minutes before your allotted time is about to expire, you’ll get a text alert—and the option to extend parking minutes. “This isn’t location-based services; it’s anti-location-based services,” Mallon says. “You pay for your car parking without being near your car.”

The phone also acts as a security guard for online payments in Germany. After you pay for goods over a computer, you’ll receive a text message and a request to authorize the purchase on your mobile phone.

In developing countries, the low-hanging mobile commerce fruit is remittance and mobile payments. Migrant workers, for instance, can send funds home quickly and easily with a text message, thus skirting exorbitant transaction fees associated with traditional international money transfer methods, Mallon says.

Even in places like Nigeria, you can purchase scratch cards from street-corner vendors. Scratch the foil, text the code, and automatically create a mobile wallet. With text messaging, you can pay an individual or merchant. In turn, they’ll receive an alert that they’ve received payment, Mallon says.

Mallon is quick to point out that mobile commerce faces an array of technical and cultural challenges, largely in the form of compliance with complex regulations and anti-money laundering laws.

Another hurdle: Merchants and retailers are weary of jumping on the mobile commerce bandwagon. Yet they have little choice. “The difference with mobile commerce compared to other technology paradigm shifts is that it’s consumer driven,” says Roster.

The future of mobile commerce via texting has never been brighter, which, sadly, comes on the heels of the tragedy in Haiti. As images of devastation streamed over television and the Internet, people felt compelled to act quickly. A well-respected organization, the Red Cross, gave a clean way for people to contribute using a mobile phone. For most people, a mobile phone is within hand’s reach.

But the real “magic,” as Roster calls it, was the ease of being able to give money via a simple text message. “People are comfortable with text messaging,” he says. “Texting is the form of communication for the next generation.”

Tom Kaneshige is a senior writer for CIO.com in Silicon Valley. Send him an email at tkaneshige@cio.com. Or follow him on Twitter @kaneshige. Follow everything from CIO.com on Twitter @CIOonline.