There are two things I believe very strongly about the future of mobile commerce:

• • Mobile commerce is here to stay
• • Mobile platform fragmentation will remain a serious challenge throughout the foreseeable future

Since mid-2009 we’ve built a very successful business helping nearly twenty name-brand clients in banking, retail, insurance, fast food and other verticals wrestle with these issues.

We’ve seen the questions change from “WAP vs. App” to bewilderment at the challenge of managing an exploding number mobile product lines while simultaneously managing a flood of customer adoption and increased competition.

The mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix that will be in users’ hands.

Fragmentation persists because of creative destruction. The iPhone created the industry. Then, Google eclipsed the iPhone with Android devices from a variety of OEM manufacturers. Apple did it again with the iPad. Now tablet salvos from Dell, RIM, Samsung, and others are incoming. Arguably, we’ve also already seen the rise and fall of many technologies like WAP, Palm, J2ME, Blackberry, and Symbian, just to name a few.

Organizations must support the mobile devices their customers have. As customers flock to the next great innovation, companies must reach their customers on the device they have right now — and in the way that works best for them.

The days are long gone where IT picks the technologies they’ll allow their customers to use. So, the mobile challenge is to develop a roadmap of continual product improvements without knowing the exact technology mix in users’ hands at rollout, versions 1.2, 1.3, and beyond.

Companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition

Most companies are rolling out their first mobile product and in some cases extending variations to other platforms. Few companies have had to manage complex product lifecycles for the mobile channel. As new platforms are emerging, companies are burning resources porting to new platforms instead of innovating and staying ahead of the competition.

Few companies have the resources to manually manage multiyear product lines across a number of platforms including product management, revision control and infrastructure, quality assurance, and development.

Organizations won’t be successful picking and choosing platforms either. It’s not enough to only support iPhone or Android (or SMS, mobile web, RIM, Windows Phone 7, iPad, etc.). The playing field is changing too dramatically and too often. Companies picking and choosing platforms may find themselves investing in a dead-end product with few customers after a release or two (or even at the first release). Two years ago RIM seemed to rule the world. Five years ago Palm ruled the smartphone world.

Browsers aren’t a panacea either. Major mobile innovation is happening with native and hybrid application technology. HTML5 solves some problems but will not make native applications obsolete. Exposing native resources through the browser create unacceptable security risks in many situations (along the lines of Java applets and Active X). Furthermore, variations in HTML5 implementations likely will continue the testing nightmare that exists with the mobile browser, where tens of thousands of browser permutations exist.

Every company interested in mobile commerce has to face the device fragmentation issue and I don’t see it going away any time soon. In fact, it usually just gets worse. We just have to deal with it.

I’m going to be spending a lot of my time addressing these issues in the future.

Mobile payments could use phones as a PIN authorization pads making transactions easier, cheaper, and more secure. Image credit: GigaOm

Speculation is heating up again about Apple including near-field communication (NFC) mobile payment capability in iPhone 5 next year after reports Monday by TechCruch that both Apple and Google are in talks with mobile payment company Boku.

GigaOm’s Darrell Etherington piled on in an article yesterday. The only new information is that Apple and Google are showing real interest in mobile payments capability.

But, here’s why it matters:

Boku has had decent success, by modest U.S. standards, in billing micropayments to mobile phone carrier bills.

A typical Boku purchase would be a game player wanting to buy a new weapon for 99¢. With Boku, they simply enter their phone number into the game and a text message is sent to their phone. The user responds “Yes” to the text to approve the purchase. The process provides a very frictionless checkout that encourages spur-of-the-moment sales.

One Click Checkout
U.S. carriers limit purchases to small amounts, sometimes as low as $25 per month. U.S. carriers also insist on keeping roughly half the revenue. Therefore bill-to-mobile purchases are often limited to digital goods with no physical cost-of-goods sold — like online game items.

By the carriers’ usurious standards, Apple’s 30% take of App Store revenue looks downright profitable. Apple has 160 million cards on file. That’s just a bit less than the AT&T and Verizon combined subscriber base. There’s no wonder Boku and their retail partners would be interested.

By comparison Amazon has roughly 80 million monthly purchases and owns the patent on one-click checkout. Google also competes with Amazon in the online checkout business.

Apple can take a company like Boku and provide an appealing alternative checkout option that benefits both consumers and retailers. Easier checkout means less frustration for consumers and more sales for retailers.

Plus, checkout continues to be a challenge in mobile commerce. Entering usernames, passwords and credit card numbers are challenging on small screens.

Mobile commerce sales would soar exponentially with a simple iTunes bill-to-mobile checkout option and Apple gets a cut of it all. Mobile commerce executives tell me they already see significantly higher conversion rates for iPhone users over Android and other phone users. An easy-to-use, built-in payments solution encourages even more retailer optimization for Apple products and encourages consumers to choose Apple products over other devices.

NFC Tops it Off

Adding NFC to the iPhone would complete Apple’s access to the entire payments marketplace. NFC enhances the bill-to-mobile capability with the potential to drastically reduce fraud. In theory, Apple bill-t0-mobile on an Apple NFC-enabled phone could be the equivalent to a card present EMV smartcard transaction. (EMV is the smartcard standard adopted almost everywhere but the U.S. which significantly reduces fraud (and transaction costs) using a chip-and-pin system).

Checkout would be super easy for consumers. They enter their phone number on the website, then are prompted for a PIN on their iPhone. The NFC-chip ensures that the phone is indeed the consumer’s phone and the PIN ensures the user is who they say they are and that they authorize the transaction.

This approach would simultaneously reduces merchant transaction costs while increasing sales. (Assuming Apple and merchants can convince the card companies that these more secure transactions warrant a lower interchange rate).

But the real excitement about NFC is paying at physical retail locations. NFC chips on iPhones would instantly let users pay at contactless terminals in retail stores. Terminals exist at many gas stations, fast food retailers, drug stores, and some home improvement stores.

Apple would instantly make a market for contactless payments by including NFC on the iPhone. Competitors would jump in just like we’ve seen with tablets, and additional POS terminals would be added as NFC became commonplace by the millions of iPhone users.

The technology exists, is thoroughly tested, is proven to work, and users like it. And if you’re going to get all these benefits from NFC, why not also use it in ingenious ways like logging in and storing preferences? See the Cult of Mac reports.

NFC is just waiting for a catalyst like iPhone 5.

[The following article is running on Mobile Commerce Daily today 10/11/2010.]

Mobile Commerce should get used to security breaches.  They’re a sign of mobile going mainstream. The mobile ecosystem needs to develop security strategies like the computing industry did in response to viruses and phishing.

Recently the U.S. Federal Government declared phone jailbreaking legal. Jailbreaking is the process for unlocking phones, like the iPhone, to do things Apple and the carriers restrict, such as changing to a different carrier or turning an iPhone into a WiFi hotspot.

While jailbreaking unlocks exciting additional functionality, it also increases the risk of a malicious attack. iPhone jailbreaking has become so mature that it now only requires the swipe of a finger after browsing to a particular website (http://www.jailbreakme.com).

Fortunately the iPhone Dev Team, the de facto jailbreak providers, seem to be using their skills for Good rather than Evil. However, the simplicity of the current process exposes an extremely dangerous vulnerability in the iPhone and, by extension, mobile commerce.

Mobile is growing rapidly. My firm, Mobile Strategy Partners LLC, has seen mobile banking adoption across the industry grow 20% per quarter over the last year. However, improving consumer perception of mobile security will drive future adoption.

“Respondents consistently cite security concerns a key reason for not choosing to use mobile technology,” says Tom Wills of Javelin Strategy & Research. “Studies over the last two years have held steady at about 42% to 43% citing security concerns as reasons for not using mobile.”

The latest jailbreak process opens up the possibility that bad guys could jailbreak and infect victims’ phones by simply visiting a web site. Once infected, the bad guys could potentially have ongoing access to confidential information on the phone, including how to access financial accounts.

Highly publicized damage from such an attack could stall mobile adoption across the industry in addition to inflicting significant financial losses.

Viruses, phishing attacks, and fraud in general, arose as computers and the Internet went mainstream. Now that mobile phones increasingly have our attention, fraudsters see the same economics as mobile marketers, and have turned their attention to mobile devices.

Like many readers here, my livelihood depends upon the success of mobile commerce. My firm works exclusively with mobile technology to help companies like banks, retailers, and insurance companies develop and execute their mobile strategy – especially as it relates to their customer facing mobile strategy.

I have a vested interest in the continued success of mobile commerce. Therefore, I also have a vested interest in mobile security.

The entire mobile community has a responsibility to educate customers on safe practices and keep mobile security one step ahead of the bad guys. Attacks will evolve continuously. Companies will face difficult challenges to protect themselves and customers. Security best practices developed from ecommerce experiences must be adapted for mobile, and organizations must stay vigilant for emerging threats unique to mobile.

Platform developers like Apple, Google, and the carriers, also have responsibilities to stay on top of the latest exploits and provide a malware protection framework for mobile commerce.

With the current system, application providers can’t protect themselves because platforms like the iPhone lack – and in some cases actively restrict – methods to detect and fix malware infections.

For example, there is no way to run virus protection on an unjailbroken iPhone, but the very risk to users is that a hacker could trigger the jailbreak at seemingly any time. Users need the ability to determine whether their phone has been compromised.

Similarly, the Google Android application developer identity verification lacks the strength of the Apple App process. Android needs a strong trusted identity authorization and validation system to make it more difficult for criminals to masquerade as legitimate businesses – and malware to masquerade as legitimate applications.

Strong security will ensure mobile thrives. As mobile commerce goes mainstream it becomes simply commerce. It’s already unthinkable to abandon using applications with sensitive information on our phones. We can’t go back to not using mobile banking, mobile shopping, or even viewing confidential email on our phones.

Mobile commerce must be secured.  Mobile platform vendors need to help companies protect themselves and their common customer.

Google Nexus One Android Smartphone unveiling

What is clear is that Android will play a prominent part in mobile commerce for the next few years. The Motorola Droid on Verizon appears to have sold around 1 million units in its first few months. Google has tremendous marketing power and ownership of arguably the most effective advertising platform around (the Google search engine). There’s reason to believe sales will be good especially if the economy continues to improve.

Android has made major market share gains in the last year. Increasingly Android and iPhone traffic dominate mobile commerce sites. The similarities between the devices (and their dissimilarities between the other phones they’re displacing) show us how consumers want to interact with their phone.

Organizations should plan for this type of device to dominate their mobile traffic in the near future. Consumers will expect organizations to leverage the advanced capabilities of these devices to make working with you easier.

Lowest common denominator won’t work much longer.