Turning a Cell Phone Into a Virtual Wallet

June 8, 2004 -- With the addition of tiny camera lenses, computer chips and software, cell phones have become much more than portable communication device. But could your cell phone soon become your electronic wallet?

It's not as far fetched as you may think. Industry analysts and other insiders say mobile phone addicts — particularly in Europe and Asia — have already taken to buying things with their cell phones.

Naqi Jaffery, president of Telecom Trends International, a research firm in Falls Church, Va., says that so-called "mobile commerce" generated more than $6.8 billion in revenues worldwide last year. And a clear majority of the purchases were for "digital content" — special ring tones, games and images that can be ordered and installed on cell phones.

"Digital content is one of the fastest growing areas of mobile commerce," says Jaffrey. "And as people are becoming comfortable with the technology and concepts of buying and ordering items over their cell phone, the next step is [to get subscribers] using it for serious transactions."

Netpace, a mobile technology and marketing company in Union City, Calif., thinks it has a unique and simple way to get there. The key, says company officials, is its ReadySet platform, software designed to capitalize on another growing trend in the mobile phone market — text messaging.

"Wireless carriers have been successful with short messaging service (SMS), increasing average revenue per user" says Vajih Khan, co-CEO of Netpace. But ReadySet will help carriers build on that success by allowing for so-called "premium messaging" services.

Short Order Codes

The idea, says Khan, is that the ReadySet application allows SMS to be used for ordering items and services through special five-digit codes.

For example, an author on a late night TV talk show could announce an SMS code that would allow viewers to get a copy of the latest book. After sending an SMS with the code, the ReadySet program determines what goods or service is tied with the code. It then connects into a wireless carrier's "back-end" — the computers that track each subscriber's cell phone usage for billing purposes — to determine where the item should be sent. The cost of the book is then added to the cell phone user's monthly bill.

"We see potential in the cell phone as a transaction channel," says Khan. "The billing process goes right to phone bill and it takes just 10 to 15 seconds instead minutes with, say a [traditional] 1-800 [phone ordering] service."

And Khan notes that since the premium messaging service is based on mobile technology, it could open up new avenues of marketing for all sorts of goods. A concert promoter, for example, could sell tickets directly over a radio promotion. Anyone listening on a portable radio could then just instantly text-message for tickets, rather than wait on a box office queue.

"This up-tick is really on the impulse buy," says Khan. "We're not reinventing the wheel of electronic commerce. We're just redeveloping it — that you can be in and out of a transaction in 10 or 15 seconds."

What's more, Khan says that since no personal financial information is being sent over the airwaves, the mobile transactions are possibly safer than online ordering.

Lord of the Sales?

NetPace has been testing the waters for premium messaging services with partners such as Verizon.

Last year, for example, ReadySet was used in a "text-to-win" sweepstakes promoting the Lord of the Rings: Return of the King movie. And both companies recently announced that they will continue to explore other ReadySet opportunities this year.

"I think premium messaging will be a facilitator for some time to come," says Paul Palmieri, executive director for business development at Verizon Wireless in Bedminster, N.J. "Users respond to visual cues — a code in a Pepsi bottle cap, on a billboard, a print ad or displayed on a TV program. There's any number of opportunities we can explore."

Analysts such as Jaffery don't doubt that premium messaging and other forms of mobile commerce will grow. When, however, is still a matter of question.

Jaffery says that much of the mobile commerce market in the United States will really take off as faster wireless networks really become available everywhere. And companies will have to prove that the networks are secure against electronic fraud.

"One thing that is important is security — particularly those involving banking applications with large sums of money," says Jaffery. "Carriers have to be sure that they can back those kind of transactions that involve transfer of money."

For now, mobile commerce applications have gained ground in Europe and Asia. In Japan, for example, the Bank of Tokyo recently announced it will develop a scheme that will allow cell phone cameras to scan bar codes of items as Japanese owners shop in stores.

Could such capabilities come to the United States? Jaffery believes so.

"Mobile phones have become so ubiquitous, having all these [additional capabilities] help," says Jaffery. "And because of the uniqueness of cell phones — they're always with you — one day, you will go to a store, take it out and make a payment for something. They will become that ubiquitous some day."