MOBILE COMMERCE

• Introduction to Mobile Commerce.

• Mobile Commerce in Perspective.
• Electronic and Mobile Commerce Application.
• Advantages of Mobile Commerce.
• Challenges for M-Commerce.
• Threats to E-Commerce and M-Commerce.

Imran Matola, BA,Msc.

Introduction to Mobile Commerce
• Meaning
M-commerce is basically an extension of e-commerce having its own typical
characteristics that distinguish itself from the parent e-commerce, hence
sometimes known as mobile electronic commerce.
M-commerce is defined as any transaction with a monetary value that is
conducted via a mobile telecommunication network.
It refers to commercial transactions conducted through a variety of mobile
equipment over a wireless telecommunication network in a wireless
environment.
Introduction to Mobile Commerce
The fundamental aspect in this definition is that in conducting m-
commerce, a transaction is effected among parties with the aid of
mobile telecommunication using mobile devices.

Importantly also, the transaction in m-commerce is that which involves

value exchange and can be measured in monitory value.

Because of this fundamental feature, M-commerce transactions allow

users to interact with other users or businesses in a wireless mode
anytime/anywhere.
Mobile Commerce in Perspective
• Mobile telephony
Cellular networks were originally designed for voice-only
communication. To support m-commerce transactions which are data-
based, there has been an evolution of these networks from analogue to
digital and from circuit-switched to packet-switched networks.
Malawi has six licensed telephone operators namely, Telekom Networks
Malawi, Airtel Malawi, Malawi Telecommunications Limited, Access
Communications Limited, G-Mobile (awarded in 2008), and Celcom
(Awarded in 2011).
The first mobile operator was TNM, established in 1995 as a joint
venture between Telekom Malaysia (60%) and Malawi
Telecommunications Limited (40%).
Mobile Commerce in Perspective
TNM started operating in January 1996 and was a pioneer in southern
Africa as Malawi became the second country and third operator to
introduce mobile telephony in the region after South Africa’s Vodacom
and MTN, who launched services six months.
In April 2007 Telekom Malaysia sold its 60% majority stake in TNM to
MTL.
TNM has been a pioneer of many services in Malawi, and became the
first mobile operator in Malawi to launch 3.5G broadband services
offering cutting-edge services such as video calls, video and music
streaming, and high-speed wireless Internet access services.
Mobile Commerce in Perspective
Airtel Malawi is Malawi’s second mobile service provider. It was awarded a
mobile license in 1999 and was launched in September 2000. The company
traded as Celtel until August 2008 whereupon the name was changed to
Zain.
In 2010, Zain sold its African operations to Bharti Airtel for US$10.7 billion.
The rebranding from Zain Malawi to Airtel was officially announced on, 24
November 2010, with plans of investing over MWK14 billion (around US$100
million) to improve the telecommunications network in the country for the
next three years.
 Mobile Commerce in Perspective
o Mobile Money
Mobile money is money that can be accessed on and used via a mobile phone. It allows
for mobile payments to be possible.
In Malawi, banks, notably NBS and National bank have vibrant m-commerce services in
form of mobile banking through EazyMobile service and MO626 respectively.

Due to considerable increase of internet and mobile phone usage, Malawi has
experienced a sharp rise in internet and mobile banking.

In 2012, mobile banking services had registered an annual 429% growth in number of
subscribers (1,299% in value), whilst internet banking registered a 20% increase (538% in
value).
Mobile Commerce in Perspective
Malawi is a rural-based economy and the primary means of payment among
individuals is through cash.

The unbanked represents 81% of the population but even among the banked, cash
is the instrument used for payment. Therefore, mobile money has the potential of
complimenting the formal economy, cash held by the 81% (the unbanked).
As for MNOs, it is only TNM and Airtel Malawi offering m-commerce services,
through TNM Mpamba and Airtel Money respectively.
Both services have Agent accounts, merchant accounts, and customer accounts.
Mobile money used in these services is real money converted into e-cash, and not
‘pseudo money’.
 Mobile Commerce in Perspective
An agent starts by depositing cash via a mobile network operator (MNO) into a
pooled (or trust) account at a bank that is partnered with the mobile network
operator.
The MNO next creates for the agent an e-money account equivalent to his share of
the pooled account on deposit with the bank, which he can access via his mobile
phone. He now has a share of electronic credits with the MNO. When a customer
wants to send money to another person or deposit (converting hard cash into e-
cash), the customer can come to the agent and provide cash in the amount to be
transferred to another person.
The agent receives the cash and transfers to the customer’s mobile phone some of
his own e-money on account with the MNO.
The MNO records the transfer of e-money to the agent’s customer.
The agent can then deposit the cash in his bank account, which will top up his
supply of MNO issued e-money.
This maintains a one-to-one correspondence (equivalence) between the money on
deposit in the bank and the e-money in the system.
 Electronic and Mobile Commerce Application
• The M-commerce Value Chain
M-commerce involves a number of players in a chain of value-adding activities that
terminates with a customer.
Hence M-commerce application depend on the m-commerce value chain, which
describes all the current players in the creation of value that is ultimately enjoyed by
the customer.
The collaboration of these different players working as a value chain in consolidating
their roles yields in innovation and offering more value to the customer as a mobile
phone turns into a versatile instrument in conducting business consequently enhancing
adoption of m-commerce.
Electronic and Mobile Commerce Application
oElements of M-Commerce value chain
Stuart Barnes developed an M-commerce value chain that comprises
two components.
Electronic and Mobile Commerce Application
• INFRASTRUCTURE AND SERVICES
This component comprised of mobile transport, mobile services and delivery
support, and mobile interface and applications is aimed at rendering the
technology’s platform and enabling communication between hardware and
software.
o Mobile Transport
This mainly concerns the network technology used in transmitting content from
creators to the users. Players in mobile transport are the mobile network service
providers, offering various technologies in content transmission. Malawi currently
has fourth generation (4.5G) technology offered by TNM and Airtel’s 4G , capable of
high speed data transmission of about 1.4 gigabytes per second downlink and
130MB/s uplink, enabling video and sound streaming on mobile devices as well as
video calls.
Electronic and Mobile Commerce Application
Mobile transport has a major role to play in m-commerce value chain as it
determines the type of content that the telecommunications infrastructure is
able to handle, hence having an impact on content offered to customers. It
also has an impact on the speed of content delivery as the higher the
network technology, the more speed is content transmission over the
networks, enhancing customer satisfaction.

Players in this element are transmission technology suppliers and network

operators.
Electronic and Mobile Commerce Application
oMobile Services And Delivery Support
These are services provided by network operators that users are able
to access through their mobile devices.
Short Message Service (SMS) and multimedia message (MMS) are
popular mobile services, the former enabling bidirectional service for
short alphanumeric messages of up to 160 characters; and the later
allowing transmission of texts, graphics as well as sound.
In Malawi, an example can be cited of Zodiak Broadcasting Station
which partnered with Airtel Malawi and TNM, enabling its listeners to
subscribe and be able to receive instant breaking news through SMS on
their mobile devices.
Electronic and Mobile Commerce Application
oMobile Interface And Applications
Mobile interface and applications provide the link between the user
and the mobile device as well as the content offered by the creators.
Because of the nature of devices used in m-commerce, there are
special applications that are created in order to provide a good
interface with the user, for example micro browsers that adapt to the
smaller screens of mobile devices.
Mobile interface and applications have an impact on m-commerce
adoption as they determine the ease of access, navigation and use of
m-commerce content.
NBS has an EazyMobile application for its customers to use on their
smartphones.
Electronic and Mobile Commerce Application
• CONTENT
Content is an aggregation of m-commerce products and services offered. It
comprises of content creation, content packaging, and market making.
oContent Creation
This role is played by developers of products and services that are consumed
using m-commerce. It is a very vital role in m-commerce as it involves
creating what really a consumer would derive out of m-commerce hence
having a direct effect on a consumer’s attraction towards m-commerce.
Content developers must therefore provide a wide diversity of services to
attract more consumers to use mobile commerce.
Examples of players in content creation are news outlets (Nation Malawi,
Zodiak), entertainment industry, financial services providers, Insurance
services providers, among others.
Electronic and Mobile Commerce Application
oContent Packaging
In content packaging, value is added by the reconfiguration of data
into the most appropriate package for user consumption. Data
that is created by players in content creation is configured by
digitising it into m-commerce consumable format.

Content packaging is therefore important in the value chain as it

turns content into usable and accessible form.
Electronic and Mobile Commerce Application
oMarket Making
In market making, the major players are mobile portals,
which are websites that are more adaptive to handheld
mobile devices.
These consumer mobile portals aggregate content from
many sources and may offer personalized services and
content to mobile users, for example automatic
personalised texts by service providers.
Advantages of Mobile Commerce
• Easy eligibility
Because of availability of lower cost mobile devices and the simple
mobile services used in m-commerce provision (SMS), it is much easier
for wide populous to be able to use the service.
Also, in most of the times, especially in the developing countries, most
mobile services are prepaid using stored value cards. This mitigates
post-paid subscription problems of creditworthiness, such that one’s
financial worthiness does not matter in m-commerce eligibility.
Advantages of Mobile Commerce
• Convenience
Consumers are constantly moving, working, commuting, travelling,
socializing and shopping. M-commerce lets them buy goods and
services as soon as the need arises.
• Localization
With the deployment of positioning technologies, such as the global
positioning system (GPS), companies can know users’ whereabouts and
will be able to offer goods and services specific to their location.
Advantages of Mobile Commerce
• Reduction of money printing costs
One of major expenses of the Reserve Bank of Malawi is the cost of
printing money.
Although mobile money value has to be in equivalence of the real cash,
use/handling of the cash is greatly reduced. This enhances the life cycle
of the hard cash in circulation hence less frequency of money printing.
• Security
M-commerce guarantees security of money as it is kept and transacted
in a cashless manner, hence chances of theft are enormously
decreased.
Challenges for Mobile commerce

While m-commerce has been implemented in many countries in both

the developed and developing world, it remains an unexploited area in
some African countries, including Malawi.
This is because of the challenges most countries face in the
implementation of M-commerce.
Basically, M-commerce challenges are categorised into three:
Challenges for Mobile commerce
• Technical problems
oAuthentication problem
A secure M-commerce system has to be able to identify its users such
that they can be easily traced. In most developing countries including
Malawi, there are no proper location addressing systems for easy
traceability of users.
Also, one of the ways of identifying and authenticating users is through
the Subscriber Identity Module (SIM), which in most developing
countries is easy to obtain without proper security clearances and
registrations.
Challenges for Mobile commerce
oInadequate telecommunication infrastructure
The vast majority of the m-commerce services and applications can
ideally be deployed over 2G networks, which most developing
countries are well advanced on.
However, advanced as the technologies may seem, developing
countries still face problems due to other factors e.g. bandwidth,
electricity problems, etc., which hamper the smooth implementation of
M-commerce services due to slower or intermittent networks.
These network problems erode one of important concepts in mobile
transactions known as atomicity; which entails that a transaction is
either executed in its entirety or is cancelled completely, so that there
is no scenario in which one party receives instructions of a debit in an
account, yet the other party’s account has not been credited (hanging
transactions).
Challenges for Mobile commerce
oMobile handset limitations
Ideally, Mobile commerce ought to serve even the rural unbanked
population. However, due to customers’ financial constraints, most of
the handsets available in the rural as well as urban populace have
limited processing power, slow Central Processing Units (CPUs), smaller
screens, low battery power and limited input capabilities.
All these humper the implementation of M-commerce services that
require handsets that have advanced capabilities.
Challenges for Mobile commerce
• Business Problems
oHuge capital investments
This is one of the drawbacks in the implementation of M-commerce
services as it is expensive for operators to invest in more advanced
technologies that are capable of handling advanced M-commerce
services that require high bandwidths e.g. M-entertainment (that
require fast music and video streaming and downloads).
These expenses ultimately are borne by the customers in form of
transaction rates thereby making m-commerce services unattractive
and repulsive.
Challenges for Mobile commerce
oLow levels of user adoption
Research on m-commerce user adoption (Khalifa & Cheng, 2002; Sarker, et
al., 2003; Jarvenpaa, et al., 2003; Carlsson, et al., 2005; Harris, et al., 2005;
Karjaluoto, et al., 2006; Ayo, et al., 2007; Bouwman, et al., 2007; Saidi, 2009;
Matola, 2016) signifies the existence of adoption problems in m-commerce
applications.
Mostly, those that have adopted use M-commerce for minor transactions
e.g. convenient purchasing of airtime.
Ensuring high levels of user adoption in m-commerce is the responsibility of
both service providers and policymakers.
Organizations should not just introduce m-commerce applications for the
sake of it; these applications must add value to consumers.
There is therefore need for marketing M-commerce services to both
customers and merchants.
Challenges for Mobile commerce
oLow levels of literacy amongst users
Even though there is an increase in the number of people who own
handsets, high illiteracy levels can hinder the adoption of M-commerce
services.
This is because although m-commerce services are user-friendly even
to the illiterate consumer, the use of SMS-based services can not be so
straightforward to some consumers.
In SMS-based m-commerce applications, users are required to type in
commands to request a service or effect a payment which can prove to
be difficult to some customers.
Challenges for Mobile commerce
oLack of inter-operability
In most of the countries, M-commerce services are based on the within
service providers such that it is not possible to transact in
internetworks.
This limits the usability of M-commerce services consequently reducing
adoption levels.
Challenges for Mobile commerce
• Policy problems
oRegulatory overlap
Mobile money is a hybrid service; as a result, there is usually an overlap
of several regulatory authorities.
Typically, there will be a regulator for the banking sector, another
regulator for the telecommunications sector, as well as a number of
agencies (in the form of financial intelligence units (FIUs)) dealing with
anti-money laundering.
This overlap raises the risk of coordination failure.
Challenges for Mobile commerce
oLack of policy clarity
As M-commerce is a new phenomenon world wide, there is lack of
either policies that guide implementation of M-commerce services, or
clarity in the available M-commerce guidelines.
For example in Malawi, much as it is a requirement that the balance on
trust accounts must at all times be equal to the outstanding balance of
all holders of the e-money, there is no clarity as to how interests the
trust account may accumulate could be used for.