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Mobile Commerce: Living Up To The Hype

By Jason Deign
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May 12 , 2011

The PayEx Mobil system lets shoppers pay via their phones

A tiny town in Sweden is on the cutting edge in the mobile commerce sector.

For nearly a year, shoppers in Visby, in the Swedish municipality of Gotland, have been able to walk into almost any of the locality's 60 or 70 shops and pay for goods without having to reach for a wallet or purse. Instead, a system called PayEx lets shoppers pay via their mobile phones.

Here's how it works: A retailer keys the amount to be paid into a PayEx point-of-sale device, which communicates with a server using a secure authentication service from the Swedish software developer Accumulate. The authentication service sends a message to shoppers' mobile phones, asking them to confirm the purchase. For small purchases under a few euros, shoppers press "OK" on their phones or swipe the phones over a terminal; for anything over a few euros, shoppers key in a PIN.

PayEx can also be used for online and person-to-person payments. And since last July, eco-conscious drivers in Visby have even been able to use it to pay for recharging their electric cars. PayEx works with any phone that has a data connection, including iPhones and BlackBerrys, and runs on Android, Java, Symbian or Windows operating systems. So far around 3,000 users have signed up for the service. Payments are automatically deducted from users' PayEx accounts.

Sweden seems an unlikely mobile commerce hotbed, but consider the facts: mobile phone usage is among the highest in Europe, and mobile phone searches via Google Sweden grew 500 percent in 2009 and 2010. The growth was due to shoppers searching for apparel and shoes.

Mobile commerce has been around since 1997, when two Coca-Cola vending machines were set up to take payments via SMS texts in Helsinki, Finland. But the sector only began to take off in the last year or so because smartphones have gotten more sophisticated, making mobile buying easier. Lars Aase, vice president of marketing at Accumulate concedes that mobile commerce has been "very hyped," even though it has grown slowly.

"The telephone is the perfect authentication tool."

— Lars Aase, vice president of marketing, Accumulate

ABI Research predicts mobile commerce revenues will reach $163 billion, or 12 percent, of worldwide e-commerce sales in 2015. "Mobile online shopping is reaching critical mass," notes ABI senior analyst Mark Beccue.

New services and technologies are in the works to aid mobile commerce. For instance, Cisco's Next Generation Hotspot strategy, announced at this year's Mobile World Congress, will make it easier for service providers to deliver new personalized mobile services, such as special offers or coupons.

Aase is certain mobile commerce will become commonplace in developed markets. "It will take off, absolutely," he says. "The telephone is the perfect authentication tool. Merchants and operators are understanding people really want to use it."

Jason Deign is a freelance writer based in Barcelona, Spain.

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