Ranjan B. Kini
Indiana University Northwest, USA
Subir K. Bandyopadhyay Indiana University Northwest, USA
IntroductIon
Mobile commerce (or in short, m-commerce) is currently at the stage where e-commerce was a decade ago. Many of the concerns consumers had regarding e-commerce (such as security, confidentiality, and reliability) are now directed towards m-commerce. To complicate the matter further, the lack of a standardized technology has made m-commerce grow in multiple directions in different parts of the world. Thus, the popularity of m-commerce-based services varies by country, by culture, and by individual user. For example, in Europe the most popular application is SMS (short message service) or text messaging, in Japan interactive games and picture exchange via NTT DoCoMo i-mode, and in North America e-mail via interactive pagers (such as RIM BlackBerry) and wireless application protocol-based (WAP-based) wireless data portals providing news,
stock quotes, and weather information. It is safe to predict that these applications will take on dif-ferent forms as the technologies mature, devices become more capable in form and functionality, and service providers become more innovative in their business models.
It is true that m-commerce has witnessed spectacular growth across the globe. It is also encouraging that several factors are expected to accelerate the pace of adoption of m-commerce.
Notable among these drivers is convergence in the voice/data industry, leaping improvements in related technology and standards, adoptive technology culture in many parts of the world, and governmental and regulatory initiatives.
Despite the undisputed promise of m-com-merce, there are several barriers that are slowing the pace of adoption of m-commerce. The major barriers include: (a) lack of good business models to generate revenues, (b) perception of lack of
security, (c) short product lifecycle due to rapidly changing technology, (d) non-convergence of standards, (e) usability of devices, (f) limitation of bandwidth, and (g) cost.
Many of the aforesaid were common to e-com-merce also at its introduction and growth stage.
We strongly believe it is worthwhile to investigate how e-commerce has been able to overcome these barriers so that we can incorporate some of the successful strategies to m-commerce. In our study, we will first compare and contrast e-commerce and m-commerce with respect to a set of common criteria such as: (1) hardware requirement, (2) software requirement, (3) connection or access, and (4) content. In the process, we will identify the principal barriers to the development of m-commerce as outlined in the above list.
the growth in e-commerce
Electronic commerce or e-commerce is the mode of commerce wherein the communication and transactions related to marketing, distributing, billing, communicating, and payment related to exchange of goods or services is conducted through the Internet, communication networks, and computers. Since the Department of Defense opened up the Internet for the public to access in 1991, there has been exponential growth in the number of Web sites, users on the Web, commerce through the Web, and now change of lifestyle through the Web (Pew, 2006).
The chronology of events shows that as the Internet became easier and cheaper to use, and as the applications (such as e-mail and Web interac-tion) became necessary or useful to have, the rate of adoption of the Internet accelerated. In fact, the rate of adoption of the Internet surpassed all projections that were made based on the traditional technology adoption rates that were documented for electricity, automobile, radio, telephone, and television (Pew, 2006). Unfortunately, the over-enthusiastic media hyped up the growth rate to an unsustainable level, leading to unprecedented
growth of investment in the Internet technologies and followed by a melt-down in the stock market.
This shattered the confidence in Internet technolo-gies in the investment market. Although there was a significant deceleration in IT investment, e-commerce has rebounded to a large extent since the dot.com bust. It has been growing at about 30% compound rate per year (Pew, 2006).
In the last 10 years, the adoption of e-commerce has been extensively studied both by academi-cians as well as practitioners. During this period e-commerce and the scope of its definition also went through various iterations. For example, people may not buy a car on the Internet, but it is documented that 65% of car buyers have done extensive research on the Web about the car they eventually buy. Is this e-commerce? Should we restrict the e-commerce definition to financial exchange for goods or services? We have various such examples in the marketplace where extensive research about the product or service is conducted on the Internet, but the final purchase is made in the physical environment. Hence, although the number of consumer financial transactions has not grown to the level industry projected initially, there has been a significantly high rate of adoption of the activities supporting e-commerce.
In addition, there has been a very high rate of adoption of business-to-business (B2B) com-merce both in terms of financial and supporting transactions. In this article, we are interested in business-to-consumer (B2C) commerce. Hence, the comparison and contrast is made between e-commerce and m-commerce. All our discus-sion henceforth will be on B2C commerce using desktop and/or mobile technologies.
the growth Potential of m-commerce
Mobile commerce is the model of commerce that performs transactions using a wireless device and data connection that result in the transfer of value in exchange for information, services, or
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goods. Mobile commerce is facilitated generally by mobile phones and newly developed handheld devices. It includes services such as banking, pay-ment, ticketing, and other related services (DEVX, 2006; Kini & Thanarithiporn, 2005).
Currently, most m-commerce activity is per-formed using mobile phones or handsets. This type of commerce is common in Asian countries led by Japan and South Korea. Industry observers are expecting that the United States will catch up soon, with mobile phones replacing existing devices such as ExxonMobil’s Speedpass (eMar-keter, 2005; Kini & Thanarithiporn, 2005).
Although the U.S. is lagging behind many countries in Asia and Europe in m-commerce, a UK-based research firm projects North American m-commerce users to total 12 million by 2009, with two-thirds of them using the devices to buy external items such as tickets and goods, and a third of them using it to make smaller transactions through vending machines (eMarketer, 2005).
The firm also notes that there is a large potential number of the 95 million current American teens who are already making purchases on the Web that will adopt m-commerce. However, the study also remarks that generating widespread user interest in m-commerce and addressing security fears of mobile payment technologies and m-commerce services are critical in achieving a high level of adoption (eMarketer, 2005).
While the Asia Pacific Research Group (APRG, 2006) projected in 2002 that global m-commerce would reach US$10 billion 2005, Juniper Research currently projects that the global mobile commerce market, comprising mobile entertainment down-loads, ticket purchases, and point-of-sale (POS) transactions, will grow to $88 billion by 2009, largely on the strength of micro-payments (e.g., vending machine type purchases). See eMarketer (2005) for more details.
Today, a large percentage of mobile phone us-ers use mobile phones to download ring tones and play games; hence content-based m-commerce is expected to make up a small percentage of
m-commerce. One recent study, however, projects that in the future mobile phone users will move up the value chain from purchases that are used and enjoyed on the mobile phone to external items such as tickets, snacks, public transportation, newspapers, and magazines (eMarketer, 2005).
diffusion models of technology adoption
There are many models that have been formulated and studied with regard to technology adoption, acceptance, diffusion, and continued adoption.
These theories identify factors that are necessary to support different levels of adoption of infor-mation and communication technologies (ICTs).
Notable among these models are the innova-tion-diffusion theory (Roger, 1995), technology acceptance model (or TAM) based on the theory of reasoned action (Davis, 1989; Fishbein &
Ajzen, 1975), extended TAM2 model that incor-porates social factors (Venkatesh & Davis, 2000), technology adoption model based on the theory of planned behavior (Ajzen & Fishbein, 1980), post acceptance model based on marketing and advertising concepts (Bhattacherjee, 2001), and SERVQUAL (Parasuraman, Berry, & Zeithaml, 1988) for service quality. These models have been extensively used to predict and evaluate online retail shopping and continued acceptance of ICTs.
In addition, varieties of integrated models have been developed to measure the success of infor-mation systems, ICT, and Internet adoption and diffusion. Currently, many of these models are being tested in the context of mobile technology (primarily mobile phone services).
The integration models mentioned above have been empirically tested in the e-commerce area.
The models have been authenticated and proven to be extremely useful in predicting behavior of users of ICT and e-commerce. In the case of m-com-merce, the results have been slightly inconsistent.
Primarily these inconsistencies have been found because of the differing market maturity levels or
the usage pattern of mobile devices. For example, in a South Korean study where mobile phones have been in use for quite some time, the results of testing an integrative m-commerce adoption model yielded different results for actual use than in a similar study conducted in Thailand where mobiles devices were introduced much later in the market. South Koreans were not influenced much by advertising, unlike Thai people in the initial adoption phase of m-commerce. Conversely, Thai people were not influenced by word-of-mouth to the extent South Koreans were influenced in the initial adoption (Thanarithiporn, 2005). Accord-ing to Thanarithiporn (2005), this is due to the fact South Koreans are at a more advanced level of adoption for ICTs. Furthermore, Thanarithip-orn (2005) found that, unlike in South Korea where content availability had no influence in the continued use of mobile phones, it had a strong influence in Thailand on mobile usage rate. Also, in both countries self-efficacy had no influence one way or the other in the initial adoption of the mobile phone.
key Factors that affect the adoption and diffusion of e-commerce and m-commerce
As expected, many factors influence the rate of adoption and diffusion of technological in-novations. We reviewed the extant literature, as outlined above, to identify those factors. In particular, we were interested in a set of factors that have significant influence in the adoption and diffusion of both e-commerce and m-commerce.
These include: (a) hardware requirement, (b) soft-ware requirement, (c) connection or accessibility, and (d) content. In the following paragraphs, we will outline how these factors have influenced the development of e-commerce, and are cur-rently influencing the adoption and diffusion of m-commerce.
Hardware Requirement
E-Commerce
Computer users were used to the QWERTY key-board (of typewriters), thus they easily adapted to the standardized desktop of the first personal computers (PCs) in the 1980s. The development of graphical user interface (GUI), mice, and various other multimedia-related accessories has made PCs and variations thereof easy to use. With the introduction of open architecture, the adoption and diffusion of PCs proliferated. The introduc-tion of the Internet to the common public, and the introduction of the GUI browser immediately thereafter, allowed PC users to quickly adopt the Web browsers and demand applications in a hurry.
The limitation of hardware at the user level was only restricted by the inherent rendering capability of a model based on the processors, configura-tion, and accessories that supported them. Since the Web and e-commerce server technologies that serve Internet documents or Web pages are also based on open architecture, limitations were similar to that of desktops.
M-Commerce
The hardware used for mobile devices are com-plex. The evolution of the hardware technology used in mobile devices is diverse because of the diversity in fundamental architecture. These architectures are based on diverse technology standards such as TDMA, CDMA, GPRS, GSM, CDMA/2000, WCDMA, and i-mode. In addition, these architectures have gone through multiple generations of technology such as 1G (first genera-tion – analog technology); 2G (second generagenera-tion – digital technology, including 2.5G and 2.75G);
and 3G, to meet the demands of customers in terms of bandwidth speed, network capabilities, appli-cation base, and corresponding price structures.
The lack of uniform global standards and varied sizes and user interfaces to operate the devices has further disrupted the smoother adoption process.
While the U.S. still suffers from a lack of uniform standard, Europe is moving towards uniformity through some variation of TDMA technology, and China is modifying CDMA technology to develop its own standard. Other countries are currently working towards a uniform standard based on a variation of base TDMA or CDMA technology (Keen & Mackintosh, 2001).
The innovation in the changing standards, devices, applications, and cultural temperament have constantly maintained a turbulent environ-ment in the adoption and diffusion of commerce through mobile devices. For example, if the de-vice is WAP-enabled, then Web serde-vices can be delivered using standardized WML, CHTML, or J2ME development tools. But the WAP enabling has not given scale advantages because hardware standards have not converged, at least not in the U.S. where consumers use a multitude of devices such as Palm, different Web-enabled phones, and different pocket phones.
Software Requirement
E-Commerce
The standardization and open architecture of PCs, along with the high degree of penetration of PCs in the office and home environment, allowed for standardization of client devices. This allowed for the development of text browsers, and subse-quently the development of the graphical interface through Web browsers. Apples, PCs, and other UNIX-based workstations were able to use the device-independent Web browsers, thus leading to rapid adoption and expansion in the usage of Web browsers. The low price of earlier browsers such as Mosaic and Netscape, and the distribution of Internet Explorer with the Windows Operat-ing System by Microsoft allowed the diffusion of the browsing capability in almost every client in the market.
Standardized browser software and interface, along with market dominant operating systems such as the Windows family of desktop operating
systems and server platforms, facilitated the expo-nential growth of Internet users and applications.
The availability, integration, and interoperability of application development tools, and the reliance on open systems concept and architecture, fueled further changes in the interactivity of the Web and indirectly boosted the commerce on the Web. The development of hardware-independent Java (by Sun Microsystems) and similarly featured tools allowed growth in the interactivity of the Web and application integration both at the front end and backend of the Web. The interoperability of Web applications to communicate with a wide variety of organizational systems initiated a concern for security of the data while in transit and storage.
In the early stages of e-commerce, major credit card companies did not trust the methodologies that were used, although they allowed the trans-actions. Beginning in 1999, they started protect-ing the online customers just as they protected off-line customers (namely, a customer is only responsible for $50 if she reports the card stolen within 24 hours). The technology companies and financial service organizations collabora-tively created and standardized methodologies for online secure transactions, and originated the concept of third-party certification of authority.
This certification practice further strengthened the security of online commerce and established a strong basis for consumers to trust and online commerce to grow.
M-Commerce
Software for mobile technologies is dependent on the technology standard used and type of applications suitable for the mobile device. In most nations, like in the U.S., the use of mobile devices started with the use of analog cellular phones. These required proprietary software and proprietary networks. The digitization of handheld devices started with personal digital assistants (PDAs) for personal information management. The transformation of the PDA as a digital communication tool was made possible
by private networks, operating systems, and ap-plications developed by companies such as Palm.
However, as Microsoft’s Windows CE (Compact Edition) and BlackBerry started offering e-mail, information management tools, and Web surfing using micro-browsers, the growth in the use of handheld devices for Web applications started growing. The handheld industry responded with a variety of applications and made WAP a standard for applications development.
Concurrently, the telecom industry brought out digital phones and devices that could offer voice, personal information management (PIM), and data applications. However, until now, oper-ating systems, servers, and Web applications are not standardized in the handheld market. The diversity of server software and client operating systems, and the availability of applications have not made these devices interoperable. In addition, with each player offering its own network and original content or converted content (i.e., content originally developed for the desktop computers), the interest in commerce using mobile devices has not been too enthusiastic. Furthermore, the lack of common security standards has made mobile commerce adoption very slow.
Connection or Access
E-Commerce
In the United States, where telephone wire lines have been in existence for over 100 years, it was natural for the telecom companies to focus on of-fering Internet connectivity through the existing telephone network. In the early stages of pubic offering of the Internet, it was easy for people to adopt the Internet using their modem from a private network. As the Internet evolved into the World Wide Web, and innovation brought faster modems to the market, more Internet service providers (ISPs) started providing ramps to the Internet. When the Windows98 Operating System with its integrated Internet Explorer was intro-duced to the marketplace, the Internet adoption
was growing in triple digits per year. The major infrastructural components were already in place.
The telecom sector invested heavily into building the bandwidth and router network to meet the insatiable demand for Web surfing. Worldwide Internet adoption and use was growing exponen-tially. The ICT industry responded with innova-tive technologies, software and services using standardized PCs, modems, support for (Internet protocol suite) TCP/IP protocol of Internet, and highly competitive pricing. The e-tail industry subsequently started growing rapidly, and the financial service industry introduced innovative products and services while collaboratively de-signing secure electronic payment mechanisms with ICT industry players.
The drop in pricing, availability of bandwidth, security, and quality of products and services bolstered the commerce activity on the Internet until the ‘dot.com bust’ of May 2000. Although the bust slowed the growth rate of e-commerce, in reality e-commerce continuously grew despite the bust. Support for e-commerce from the U.S.
government to fuel the e-commerce growth through moratorium on taxes by two admin-istrations considerably helped the diffusion of e-commerce. The concern about the security in e-commerce shown by laggards was eased by a variety of security and encryption tools, and the creation of the certification of authority concept by strong security services offered by companies such as Verisign, TRUSTe, and others.
Lately, the demand for highly competitive broadband service availability, and the availability and delivery of media-rich content, has brought media and entertainment industry to the Web with
Lately, the demand for highly competitive broadband service availability, and the availability and delivery of media-rich content, has brought media and entertainment industry to the Web with