Pity the poor cell phone. It has been banned from schools, courts, hospitals and speeding automobiles. Restrictions on phones in restaurants and retail establishments have prompted at least one enterprising company to revamp old school phone booths as cell phone isolation chambers for those calls you just have to take.
This anti-cell phone sentiment may soon be on the downswing, however, as large businesses and even mom-and-pop shops discover how these ubiquitous devices can provide an edge when it comes to driving customer sales and targeting wireless promotion and marketing campaigns.
Cell phones may also be used as electronic wallets to pay for products and services, although it may be years before such transactions are smooth and secure enough to convince most people to forego cash in favor of a cellular wallet, say the experts.
"Dealing with the carriers is very difficult because you are talking about a lot of legacy from the Ma Bell corporate culture and the technology infrastructure," says Nathan George, channel manager for Trio Teknologies, a developer and distributor of wide area network (WAN) solutions that work closely with the major U.S. carriers. "The carriers also do such a poor job of billing customers today that it would take months just to add a single service or new vendor to their menu."
In the meantime, most cell phone-based transactions are focused on simple products such as ringtones, games and Java applets, which can be easily transferred and installed on cell phones. Nextel, which is now part of the Sprint network, also offers a number of business applications that can be transferred over the air and installed on its cell phones. Fees for these products and services are added to the user's monthly bill, usually through a third-party billing company.
"Carriers don't really want to get into the billing area right now because there is just too much going on and no money in it for them yet," adds George.
Selling by Cell
Billing issues and serious concerns such as security haven't prevented the wireless carriers from dipping their toes in the early stages of mobile eCommerce, however. A number of enterprising third-party companies have developed mobile promotion and "couponing" technologies that allow retailers to reach out and grab potential customers by their wireless lapels.
MobileLime, a 5-year-old startup based outside Boston, Mass., has developed wireless customer-loyalty systems that retailers can use to send customers information alerts, cost-saving offers and other incentives designed to increase business and develop a closer buyer-seller relationship. The company's Mobile Rewards technology was recently adopted by Ring Brothers marketplace, a family-owned grocery chain in Cape Cod. Customers sign up for the Ring Brothers mobile program at one of the chain's stores and provide the grocer with their cell phone number. The chain then works with MobileLime to channel incentives to these customers and has even staged a weekly drawing for a $100 gift card.
"We are now able to communicate with our customers in real time, instilling and rewarding their loyalty by offering exclusive savings and information based on their interests and buying behaviors," explains Ed Ring, co-owner of the popular grocery mart.
Earlier this year, MobileLime unveiled a similar marketing and customer-loyalty system that uses Near Field Communication (NFC) technology, rather than cellular networks, as the transfer medium. NFC operates over distances of only a few centimeters, but has proven to be a reliable and secure conduit for digital content exchanges, device connections and electronic payments.
NFC is presently installed in more than 27,000 merchant locations throughout the United States and is most commonly used by gas stations for contact-less purchases and on roadways to automatically bill drivers as they zip through tollbooths. Fast food retailers such as Arby's and McDonald's are also experimenting with short-range radio frequency systems for contact-less customer payments, much like Mobile's SpeedPass system for gasoline.
NFC and other short-range communication technologies can also be applied as user authentication bridges to longer-range communications architectures such as Bluetooth and Wi-Fi--which is just one of the reasons that companies such as Visa, Microsoft, Sony and Texas Instruments decided to support the technology by sponsoring groups such as the NFC Forum.
As many as 40 million cards, mini-cards and key fobs equipped with short-range communication capabilities are expected to be in use in North America by the end of this year, according to ABI Research. This compares with about 10 million in use just a year ago.
As many as 500 million wireless handsets, or roughly half of those in use in North America, are expected to have built-in NFC capabilities by 2010, says ABI Research. Once these embedded and secure technologies are in place, cell phones as financial transaction devices will really take off.
At this point, "You will see RFID, Bluetooth and Wi-Fi standards being adapted to include the ability to do purchases," says Trio Teknologies' George. User information will not be locally stored on the wireless chip or in the mobile device but these will manage the authentication and passing of secure certificates.
Security is obviously a key concern when using any wireless device as a mobile point-of-sale system to transfer sensitive financial information. "The real issue is proper user authentication for online transactions, particularly where no smartcard or biometric reader is available," says Identrica's Brand. "In this case the mobile phone can play a valuable role as a second factor in the authentication process."
Taking a two-factor approach, a cell phone could be used to identify a user to a retailer by sending a unique and encrypted code to the user's cell phone. That code could then be automatically transferred to a retailer's terminal via NFC or some other wireless technology, or scanned from the phone's LCD screen to authenticate the transaction. In this case, the cell phone effectively takes the place of a credit card and the user's personal identification number.
"I suspect that this may remain its major function in remote-access commerce for a while," says Brand, whose company specializes in two-factor cell phone-based authentication techniques.
Chipmakers are already working to develop chips that have embedded security and are specifically designed to handle mobile transactions. Broadcom recently introduced a chip that melds a secure processor with radio frequency ID (RFID) technology. And in March, Internet security company Verisign acquired mobile marketer m-Qube in a deal that is expected to give birth to a new wave of secure mobile applications for cell phones and other wireless devices. The goal is to at least minimize the security problems that have plagued the Internet and credit card industries before they become serious roadblocks to wireless commerce. //
Tim Scannell is president of Shoreline Research, a Boston-based consultancy.