Opportunity Awaits, but Mobile Transactions Must Overcome Security Issues

Online shopping is growing, due to a combination of factors. Most retailers have more products available online than in their physical sites; there are many more online retailers in general; many online outlets offer discounts, thanks to lower overhead; the number of physical retail shops is diminishing; and of course, online shopping is convenient — you can do it from the comfort of your home or office without having to find time to actually visit the store (which also helped save precious gallons of gas when prices climbed above the $5 mark).

 

The mobile space may be a different case, however, despite recent predictions from Juniper Research (News - Alert) that the mobile transaction space is primed for growth — to as much as $300 billion in purchases globally by 2013. Juniper also predicts the overall mobile transaction market to exceed $587 billion by 2011 — including banking transactions.

 

Also, a study conducted by Motorola, indicated that nearly a quarter of respondents said they were unable to purchase everything they were looking for in stores during the 2008 holiday season. That factor also presents an opportunity for the mobile shopping experience, as shoppers might welcome the chance to find what they’re looking for quickly via their handsets when they are unable to locate the products in stores.

 

However, according to recent research by ABI Research, security concerns still present the single greatest barrier to widespread mobile transactions.  According to the survey, more than half the respondents have no interest in making purchases using their mobile phones.

 

“Transaction security was cited by 71% of mobile phone users as a major concern preventing wider uptake,” noted senior analyst Jeff Orr.   

 

Bucking that trend somewhat is the fact that more than half of respondents have made at least one ringtone purchase. Clearly, low-value transactions represent a lower risk to users — though equally clearly some don’t recognize purchasing a ringtone as a mobile transaction.

 

It’s likely the new generation of mobile devices, led by the iPhone, can provide a boost for the mobile goods space thanks to the more than 15,000 applications available on Apple’s (News - Alert) App Store. The mobile multimedia market should also entice users to commit to mobile transactions. Also, the browsing capabilities on smartphones, like the iPhone (News - Alert) and BlackBerry Storm, can be leveraged to promote increased mobile shopping awareness.

 

“As smartphone penetration increases, more merchants will introduce mobile shopping, spurring growth,” said ABI senior analyst Mark Beccue. “Smart merchants will focus on the advantages of mobile, such as impulse shopping and real-time auctions.”

 

Still, ABI’s study suggests that, while there will always be progressive users willing to adopt mobile shopping, the security issue must be addressed before significant growth will be seen. This holds steady with a recent study by Unisys (News - Alert), which claimed that 71 percent of respondents said they would not conduct financial transactions on their mobile devices.

 

If both sets of data are accurate, the trend appears to be toward growth of the market, but, as Tim Kelleher, vice president of enterprise security at Unisys explained, security outweighs the benefits to end users, wrote TMCnet’s Mike Dinan.

 

“There is a great deal of money to be made in mobile payments, but only when consumers believe that the security of the transaction meets or exceeds the freedom of using mobile devices,” Kelleher said.

 

The evidence is clear — the mobile transaction space has tremendous potential. That is evidenced by the number of banking institutions rolling out mobile services already. The advances in end user devices will also continue to drive the space, but the onus is on the telecom providers and financial institutions to leverage technology to provide complete security — and then to educate the market on reality versus perception and history.