4/9/2010 Mobile Commerce from the Consumers Perspective Evidence - - PDF document

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www.centris.com

Mobile Commerce from the Consumer’s Perspective Evidence from the United States

Aniruddha Banerjee, CENTRIS Paul Rappoport, Temple University

The Macroeconomics of Mobile Money Conference Organized by Columbia University April 2, 2010

Mobile Platform for Financial Transactions

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Facts and Trends

276+ million mobile phone subscribers in the US in mid-2009 (89% penetration rate) (1) Nearly half of the phones have the ability to surf the net (2) Nearly 10 million users of mobile banking in 2008, up from 1.1 million in 2007 (3) Remote mobile payment market in North America was $5.8 billion in 2008, expected to grow 10-fold by 2013 (4) Globally, 600 million users of electronic wallet expected in 2010 (5) Alternative payments, such as PayPal today accounting for 9% of global and 15% of e-commerce transactions, growing rapidly (6)

1 CTIA Semi-Annual Wireless Industry Survey, 2009 2 Future of Wireless, Centris, 2009 3 TowerGroup, Mobile Banking, 2009 4 Juniper Research, 2009 5 Outlook for Mobile Wallets & Mobile Financial Services, Edgar, Dunn & Company, 2008 6 PayPal.com, 2008

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Use of the mobile phone (or other capable wireless device) to make

• r participate in financial and

commercial transactions Use of the Internet (“going online”) to make or participate in financial and commercial transactions

E-Commerce M-Commerce

Definition of Key Terms

Financial/Commercial Transactions

Making purchases and shopping Making bill (and other forms of) payments Accessing and managing bank and other financial accounts Transferring funds Managing investments

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Use survey data Key questions

Use of mobile phones for m-commerce Risks of using mobile phones for m-commerce

Draw analogies from e-commerce Evaluate m-commerce attitudes by demographics Identify consumer profiles of most and least likely m-commerce adopters Determine prospects for m-commerce (use of mobile phones instead of credit and debit cards, cash, or other methods of payment for financial transactions)

Willingness to engage in m-commerce Readiness to engage in m-commerce Perceived risks with m-commerce Most likely target group for m-commerce

Goals Investigative Strategy Goals and Investigative Strategy of Study

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Centris Wireless Survey

2009 Internet panel 4,743 total respondents; 2,584 unique households Questions on:

Household structure Household inventory of mobile phone service plans, providers, and equipment Usage and satisfaction/switching behavior for mobile phone services Inventory and usage of wireline, Internet, TV, and other communications/entertainment services Consumer preferences for advanced and prospective mobile phone services Mobile and electronic commerce

Survey Approach Mobile Commerce: Setting the Stage

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Preferred payment methods Online transactions Potential for electronic wallet Types of mobile phones in use

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Preferred Methods of Payment

18% 22% 30% 1% 11% 12% 6%

Cash Credit card Debit card Gift/prepaid card Paper check Online payment None/No transaction

More than half of consumers prefer to use debit or credit cards for making payments Cash is preferred by about one in five consumers Checks and

• nline payments

are each favored by just over one in ten consumers

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Frequency of Online Payments and Fund Transfers

E-commerce experience may help to predict potential for m-commerce

43% 28% 29%

Routine or regular Occasional or infrequent Never

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Mobile Commerce: Findings (1)

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Preferences for m-commerce applications Risks of m-commerce

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Potential Use of Electronic Wallet in Mobile Phone

Electronic Wallet is software (containing credit and debit card numbers) that enables use of the mobile phone to make purchases and bill payments. Types of accounts that can be loaded may be restricted.

49% 11% 18% 15% 7% 22%

Consumers likely to have electronic wallet signal willingness to engage in m-commerce Mobile phone use for m-commerce shows promise with up to 22% of consumers in favor

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Ownership of Smartphones

Converged platform-based competition

19% 68% 13% Smartphone/PDA Neither Don't know/Unavailable

Over a fifth of mobile phone users have Smartphones and PDAs and are ready for m-commerce

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Preferences for M-Commerce Applications (Very/Somewhat Likely to Use)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Manage personal finances Bill payment Purchases, no cash Purchases, no credit cards Browse merchants

• nline

Transfer/wire money Send M2M gifts Manage investments

All respondents Respondents preferring cards and online payments Smartphone users with electronic wallet

Although under 10% of consumers, Smartphone users with electronic wallets have a very high likelihood of participating in most m-commerce applications

Most Least Desirability of m-commerce application

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0% 10% 20% 30% 40% 50% 60% 70% Card number stolen Unprotected financial information Accidental charges Insecure cell phone Improperly charged cell phone Lose cell phone often

All respondents Respondents preferring cards and online payments Smartphone users with electronic wallet Top three perceived risks

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Risks of Using Mobile Phones for M-Commerce (Very/Somewhat Likely to Experience)

Smartphone users with electronic wallets perceive greater risks with m-commerce, particularly with making charges accidentally

Mobile Commerce: Findings (2)

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Effects of geo-demographics on

Potential uses of m-commerce Risks of m-commerce

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Use of Mobile Phones for M-Commerce: Effect of Gender

Male Female

Purchases, not using cards Purchases, not using cash Transfer/wire money Manage investments Men are more inclined than women to use mobile phones for purchases, in place of cash or cards

Larger circles signify higher probabilities; not drawn to scale

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Use of Mobile Phones for M-Commerce: Effect of Age

19-30 31-50 13-18 51+ 19-30 13-18 31-50 51+ 19-30 31-50 13-18 51+

Bill payment Manage personal finances Purchases, not using cards Purchases, not using cash Browse merchants online Send M2M gifts Transfer/wire money Manage investments

The elderly are the least inclined to try m-commerce, followed by teenagers (who have less of a need to pay bills or manage personal finances)

Larger circles signify higher probabilities; not drawn to scale

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Use of Mobile Phones for M-Commerce: Effect of Household Status

Head Member

Bill payments Manage personal finances

Household heads favor paying bills and managing their money by mobile phone more than

• ther household

members

Larger circles signify higher probabilities; not drawn to scale

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Use of Mobile Phones for M-Commerce: Effect of Race/Ethnicity

AfAm Hisp Asian White Hisp Asian AfAm White Hisp AfAm Asian White

Bill payment Transfer/wire money Manage investments Purchases, not using cards Purchases, not using cash Browse merchants Manage finances

AfAm Asian Hisp White

Send M2M gift

Ethnic consumers embrace m-commerce more than White consumers

Larger circles signify higher probabilities; not drawn to scale

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Use of Mobile Phones for M-Commerce: Effect of Smartphone/PDA

Smartphone/ PDA Neither Bill payment Browse merchants online Purchases, not using cards Purchases, not using cash Transfer/wire money Send M2M gifts Manage personal finances Manage investments Owners of Smartphones or PDAs are more inclined to embrace all forms of m-commerce

Larger circles signify higher probabilities; not drawn to scale

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Risks with Mobile Phones for M-Commerce: Effect of Gender

Female Male

Accidental charges Card number stolen from mobile phone Unprotected financial information Mobile phone improperly charged

Women perceive greater risks with using mobile phones for m-commerce than men

Larger circles signify higher probabilities; not drawn to scale

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Risks with Mobile Phones for M-Commerce: Effect of Age

13-18 19-30 31-50 51+ 19-30 13-18 31-50 51+ 19-30 31-50 13-18 51+

Mobile phone improperly charged Accidental charges Card number stolen from mobile phone Unprotected financial information Lose mobile phone often Insecure mobile phone

Fewer older consumers see risk in using mobile phones for m-commerce, perhaps because they are more careful or engage relatively less in m-commerce

Larger circles signify higher probabilities; not drawn to scale

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Risks with Mobile Phones for M-Commerce: Effect of Household Status

Member Head

Lose mobile phone often Mobile phone improperly charged

Members of households are more likely than heads of households to lose their mobile phones

• r fail to charge

them

Larger circles signify higher probabilities; not drawn to scale

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Risks with Mobile Phones for M-Commerce: Effect of Race/Ethnicity

Asian Afr-Amer Hispanic White

Accidental charges

Asian Hispanic Afr-Amer White

Lose mobile phone often Mobile phone improperly charged

Asians see more of certain risks with using mobile phones for m-commerce than Whites and African- Americans

Larger circles signify higher probabilities; not drawn to scale

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Risks with Mobile Phones for M-Commerce: Effect of Smartphone/PDA

Smartphone/ PDA Neither Accidental charges Card number stolen from mobile phone Smartphone/PDA users may be most inclined to try m-commerce but they also acknowledge risks

• f careless use of

mobile phones

Larger circles signify higher probabilities; not drawn to scale

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Mobile Commerce: Findings (3)

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Predicted probabilities by consumer profile for

Potential uses of m-commerce Risks of m-commerce

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Female White Age 51+ Member of household Income $25,000-$50,000 Region East Does not use Smartphone/PDA Predicted probability = 7% Male Hispanic Age 19-30 Head of household Income $100,000-$200,000 Region West Uses Smartphone/PDA Predicted probability = 56%

Highest Lowest

Predicted Probability of Using Mobile Phone for M-Commerce (Example)

Purchases, No Cash

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Female White Age 51+ Member of household Income $0-$25,000 Region East Does not use Smartphone/PDA Predicted probability = 25% Female Hispanic Age 19-30 Member of household Income $50,000-$100,000 Region East Uses Smartphone/PDA Predicted probability = 68%

Highest Lowest

Predicted Probability of Risk Experience with Mobile Phone for M-Commerce (Example)

Accidental charges

Conclusions

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Just under a quarter of respondents are ready to use an “electronic wallet” About one-fifth of respondents have Smartphones/PDAs capable of m-commerce However, between only 11% and 27% of respondents are ready to make use of mobile phones for any specific form of m-commerce (most popular are paying bills, managing personal finances, and making purchases without using cards/cash) Conclusion: A key group of well-equipped and willing consumers already exists for m-commerce targeting Willingness to engage in m-commerce increases in certain target groups

between 12% and 34% for credit and debit card users and online payers (62%

• f all)

between 48% and 85% for Smartphone users ready for electronic wallet (6%

• f all)

Conclusion: Highest or earliest likely m-commerce adoption group is presently at least 5% of consumers Willingness to use mobile phones for m-commerce varies strongly by

age (most for 19-30 group, followed by 31-50 group) gender (men more than women) and household status (household heads more than household members) for certain forms of m-commerce race (non-Whites more than Whites) type of phone (Smartphones/PDAs more than phones that are neither)

Conclusion: Most viable demographic for m-commerce targeting is: young male, non-White, household head, Smartphone/PDA user (this contrasts with e-commerce)

Conclusions: Using Mobile Phones for M-Commerce

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About half of respondents find using mobile phones for m-commerce risky in various ways (less for losing mobile phone and failing to keep mobile phone properly charged) Greatest concern is with card number being stolen from mobile phone, followed by mobile phone itself being stolen Conclusion: As with e-commerce, there are significant risks, even potential barriers to acceptance, of using mobile phones for m-commerce Risks associated with using mobile phones for m-commerce are actually higher for Smartphone/PDA users that are willing to adopt the electronic wallet Conclusion: Despite admitting higher risks with m-commerce, Smartphone/PDA users with the electronic wallet appear to be leading adopters of m-commerce Risks associated with using mobile phones for m-commerce vary by

age (most for 19-30 group, followed by 31-50 group) gender (women more than men) and household status (household members more than household heads) for certain types of risk race (Asians more than others), especially charging accidentally or losing mobile phone type of phone (Smartphones/PDAs more than phones that are neither)

Conclusion: younger Asian women users of Smartphones/PDAs may experience greater risk, but like their male counterparts may still be in favor of m-commerce

Conclusions: Risks of M-Commerce

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Some parallels exist between the e-commerce experience and the potential adoption of m-commerce

12% of respondents prefer online payments and 40% make online payments routinely 11% to 27% of respondents are willing to engage in some form of m-commerce

However, there are also some important differences

While e-commerce is most favored by older and affluent White consumers, younger and less affluent ethnic consumers view m-commerce most favorably, perhaps because the Smartphone is the affordable broadband alternative to wireline high- speed Internet access for the latter group of consumers While online payers are uniformly more likely than credit and debit card users to engage in e-commerce, it is more of a mixed bag with m-commerce (online payers more likely to engage in m-commerce only to pay bills and manage personal finances, but not for purchases, money transfers, managing investments, or gifting)

Conclusions: M-Commerce vs. E-Commerce