COMP327

Mobile Computing
Lecture Set 10 - M-Commerce

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In this Lecture Set

• M-Commerce
• E-Commerce on a mobile device
• Challenges and Opportunities

• Payment Systems
• Payment mechanisms
• Apple’s In-App Purchasing

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 E-Commerce
• Traditionally concerned with allowing users to buy goods over the
web
• Emerged in the late 90ies, with significant market uptake in the earlier
noughties
• Saw significant market growth year on year (aprox 20-25%) compared to
traditional retail (~5% growth)
• Emerging as a convenient means of managing services and discovering
alternate providers
• Price comparison sites allow users to evaluate the market, rather than having
to “collect fliers from the high street”
• Has allowed niche retailers to emerge and gain exposure
• Augments traditional services with new capabilities
• E-Government services (paying bills, filing tax returns)
• Banking and Utilities management

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 Different Types of
Business
• Provides the sole outlet for some businesses
• Amazon, iTunes, Egg
• Often providing digital services that previously had no high street presence

• Complements traditional business model

• Provides additional, value-added services
• Convenience of at-home or on-the-go usage

• Exploits coverage of the internet

• Auction sites such as e-Bay, reaching more users than classified ads

• Enhanced use of community feedback

• Review sites, price comparison sites
• Empowers the user to get opinions from others, and include reviews

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 First Generation E-
Commerce
• Human-centric with little automation
• Users browse through catalogue of well defined
commodities, make (fixed price) purchases by
means of credit card

• On-line catalogue
• Provider’s catalogue more widely available and
accessible

• Greater convenience and speed for

consumer
• Greater dynamism and accuracy for producer

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 Second Generation E-
Commerce
• Increased degree of automation for
both buyers and sellers
• More efficient
• Long tail effect - e.g. for niche market goods

• More dynamic
• Prices can rapidly change in response to current
demand and availability

• More personalised
• Recommendations based on user’s purchase
history

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Product Brokering: What
to Buy?
• Helping users work out what to buy
• Feature-Based Filtering
• System processes information from various sources and tries to
extract useful features about its content

• Collaborative Filtering
• Gives personalised recommendations based on similarities
among different users’ preference profiles

• Constraint-Based Filtering
• Customer specifies constraints that must be satisfied by product
• Narrows down space of products

• Price comparison sites

• Find the prices of different online sites
• E.g. Kelkoo

• Provides rating and advice

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 Mobile Commerce: evolving
the E-Commerce Model
The Desktop Experience The Mobile Experience
• Large screen facilitates browsing of large • Context aware
catalogues
• Knowledge of the user
• Requires significant user attention
• Knowledge of the environment
• Goods can be organised conceptually and • Requires more autonomy due to restricted
displayed graphically user attention

• Significant real estate that can simultaneously • Capable of interacting with local services and
support: devices
• User context • Can scan physical goods
• Recommendations to related goods and user • Can communicate with local services
feedback
• Advertising for related goods
• Always available and (more increasingly) always
connected to the internet
• Multi-column tabular data
• Existing service agreements through bearer
• Easy user interaction network
• Facilitates payment through credit card, and • Can support payment
providing user details
• Unique identification through SIM and IMEI
• Relatively Secure

Mobile Devices better suited to some tasks more than others

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M-Commerce Scenarios
• Augmenting brick-and-mortar commerce
• Use of RFID or NFC to detect goods
• Can acquire additional information about the good
• E.g. product information, price, reviews
• Additional services such as preview (e.g. for music)

• Use of images to identify, obtain or provide information

• Quicker than URLs; can be captured from billboards or printed media
• Can display, as well as acquire visual codes
• Airlines are increasingly using e-ticketing for boarding cards
• Can use optical scanners to read barcodes from a mobile device
• Deployments include Spanair, Air France, Lufthansa

• Advantages
• Informed choice when purchasing goods

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M-Commerce Scenarios
• Electronic Banking, Payment and e-ticketing
• WAP Solo
• Provides a means of payment to services via WAP for identified ticketing sites
• Payments either from your bank account or via credit cards - including 3rd parties

• iMode Felicia
• Wireless payment scheme
• Similar to use of Oyster card
• Used for shopping, transportation, ticketing, membership card, etc

• SMS payment and alerts

• Warnings when bank limits are approached or new payments are instructed

• Advantages
• Shorter queues with lower operating costs
• Relax need for on-the-spot revenue collection technologies
• e.g. coin-operated parking meters

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M-Commerce Scenarios
• Killing “dead-time”
• Provide access to media on-demand
• Video access such as TV subscription
• Available in Japan and Korea since 2005
• More than 20m TV phones in Japan and 8m in Korea
• News Media Access
• Increasing number of Publishers are charging for access to online variants of print news
• In App Purchasing
• Music Stores such as iTunes allow access to new content
• “Free” applications can provide basic functionality, with extended
functionality for additional cost
• E.g. new levels for games, or upgrading to the “Pro” version

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 Case Study:
Amazon Kindle
• E-Ink book sold by Amazon
• Released Nov 19th 2007
• USA
• Runs on top of Sprint cmda2000 EVDO network (“Whispernet”) in the US
• Includes unlimited data plan!

• International version
• Runs over HSDPA with GPRS/EDGE capability
• Functionality of the Browser limited

• Book delivered in “under 1 minute”

• Typical price in the US - $9.99

• Also provides browsing capability

• Although no WiFi support

• Kindle-based iPhone App also available

• US Only
• Delivers content to an e-Book reader App

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 Noreda’s WAP Solo
• WAP based payment and banking system from Noreda Bank
• Launched in Scandinavia in October, 1999; >2M users within first 24 months
• Payments either from users bank account or via credit cards - including 3rd parties
• Services:
• Traditional banking services
• Check balance, pay bills, news, check credit card activity, stock trading
• But also shopping mall (>600 merchants) , e-salary, loans, insurance, etc.

Bank --Solo Services--

--Merchants--
Dataflora
Merchant Kinopalatsi
Accounts Kinopalatsi Theatre Theatre
Transfer --Solo-- Uusi Vaasalainen Choose a movie:
--Accounts-- New Payments Customer number WapStore American Beauty
14.03: 53,00 + Investments [...] >> Continue
--Merita Bank--
13.03: 1.700,00 - Visa Inquiry Solo Code << Back
13.03: 3,243,23 + Solo Market [...] Options Back
11.03: 72,00 - Options Back In English
To Accept --Fri 22.9.2000-- Options Back
Pa Svenska
08.03: 133,22 + Suomeksi Seats Reserved:
Options Back Row 2, seats 7-9
Options Back -- Screen --
--Solo Transfer-- ...
From account --Solo-- >> Buy e-payment
[853926-903] From account [3467] --Solo Bank-- Kinopalatsi
Options Back
To account To account [876319] Theatre
[8452773-790043] Amount[8.60] Thank you for your
Amount Reference [73245] order! Reservation
To Accept Paid number is 737534
Options Back
Back to Merchant Back to Solo Market
Options Back
Options Back Options Back

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Mobile Payment: General
Considerations
• User Interface Constraints:
• Tiny keypads make credit card details much more difficult to
enter
• Less of an issue with more modern smart phones, though still time consuming

• Secure end-to-end TLS connection is not always available

• Problematic in early WAP scenarios

• Opportunities:
• Mobile phone can be used as a Personal Trusted Device that
replaces your wallet
• Can also pay non-physical services, e.g. charitable donations via
SMS

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 Mobile Payment
Mechanisms
• Four primary models for mobile payment:
• Premium SMS based transactional payments
• Direct Mobile Billing
• Mobile Web Payments
• Contact-less Payment (Near Field Communication)

• Variants of these also exist

• TextPayMe, mPark, stored value systems

• Increasing adoption
• Mainly in Europe and Asia
• Estimated market of $60B by 2013

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 Premium SMS based
transactional payments
• Payment via an SMS message to a short code
• Premium charge applied to mobile phone bill
• Phone-based goods are often delivered through MMS
• e.g. Music, Ringtones, Wallpapers, but also 2D Barcodes for e-ticketing

• Challenges:
• Poor Reliability - messages may get lost (no delivery guarantee)
• Slow Speed - SMS delivery can be slow, making the consumer wait
• High Setup and Running Costs - includes delivery of goods via MMS
• Low Payout Rates - After running costs, payout to merchant as low as 30%
• Low Follow-on Sales - limited mechanism, with little user support

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 Direct Mobile Billing
• Payment is made through the Mobile Network
supplier
• Set up using a two-factor authentication based on a PIN and
one-time password
• Future payments are automatically charged to the network
• Prevalent in Asia

• Advantages
• Doesn’t require new software
• Quick (< 10s) once the authentication has been established
• Secure

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Mobile Web Payments
• Payment made via a web site or via embedded code
within the app
• Uses WAP to support communications
• A variety of implemented payment systems exist to simplify
transactions, though require setting up accounts
• PayPal, obopay, TextPayMe, Google Checkout etc

• Three primary payment mechanisms can be used

• Direct Operator Billing
• Credit Card
• Online

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Mobile Web Payments
• Several Advantages to using Mobile Web Payments
• Follow-on sales
• Web or App can return user to the store, other services or related goods.
• Access to re-usable URLs encourages repeated visits

• High Customer Satisfaction

• Confidence in using a widely adopted and brand-familiar approach

• Ease Of Use
• Familiarity with a previously used mechanism
• Requires information known a-priori, or accounts are set up that require
little further input

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Direct Operator Billing
• An existing account already exists with the operator
• Payment occurs “behind the scenes”
• User first establishes account, which may then bill periodically
• Prior to payment, user needs to authenticate
• Supports several modes of operation
• Single click-to-buy
• Payments made immediately, and content downloaded when possible

• Subscriptions to new content as it becomes available

• Allows access to premium content, or new content is downloaded when available

• Examples include
• Apple’s iTunes Store, Print Media Subscriptions

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Direct Operator Billing:
Advantages
• Simplicity • Best conversion rates
• the operators already have a • from a single click-to-buy and
billing relationship with the no need to enter any further
consumers payment details.

• Instantaneous payments • Reliability

• giving the highest customer • that builds confidence
satisfaction

• Accurate responses
• Reduced customer
support costs
• showing success and reasons
• for merchants and operators
for failure (no money for
example)
• Higher payout rates
• Security • with operators such as
Vodafone in the UK delivering
• to protect payment details and up to 86% in some cases
consumer identity

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 Credit Card
• User can provide credit card details for one-off payments
• Familiar payment mechanism, used by most e-Commerce stores
• User enters card details, billing address, and (if different) a
delivery address
• Many banks also require 3rd party authentication

• Can be tedious and error prone from a small device

• leading to lower success or conversion rates
• By having the retailer retain card details, payments can be
simplified
• increases conversion (i.e successfully completed transaction) rate
• experience becomes similar to Direct Operator Billing

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Online Payment Systems
• Online payment systems allow online transactions, and act as a
proxy
• Online account is paired to a 3rd party bank account
• Credit may be held by the payment system, but can be “topped up” from the bank account
• Excess credit can be paid back to the bank

• Authentication performed using an account id and password/pin

• Augments existing banking services
• New payment systems can be adopted without uptake from high-street
banks
• Flourished with the advent of Auction Marketplaces such as eBay

• Examples:
• PayPal, Amazon Payments and Google Checkout

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 MicroPayments
• Financial transactions involving very small sums of money
• From a few pennies to a small number of pounds
• Often used for purchasing online content, or making regular payments
• music, video, toll-payments, etc

• Standard payment systems problematic for small payments

• Typically every payment incurs a transaction fees
• Transaction fee for small payments becomes significant

• Require some billing mechanism to support payments over several

transactions:
• Pre-paid accounts
• Accumulated Balance Payment Systems

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 MicroPayments
• Pre-paid accounts
• MicroPayments can be drawn from this pre-paid account
• NetBill research project at CMU explored this approach in 1997

• Still used for systems such as Skype, etc

• Accumulated Balance Payment Systems

• Accumulate small charges, then bill periodically
• Familiar to utility users (e.g. phone bills)

• Assumes Direct Operator Billing, as user needs account

• Example: Apple Store
• Payments accrue over a fixed period of time, and then are billed as a single transaction
• Supports the retail of music tracks (e.g. at 79p), apps (from 59p), rentals, etc

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 Contactless Payment
Systems
• Uses Near Field Communication (NFC) mechanisms
such as RFID to communicate with receivers
• Device is “passed” near to receiver, to perform transaction
• May require some authentication using a PIN

• Payment is then made via a pre-paid account, or billed

directly

• Main adoption within mass-transit networks

• Edy/Suica enabled phones used on Japanese Rail Network
• Oyster Cards used on London Transport Network

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 i-mode FeliCa
• Contactless RFID smart card system
• Primarily for ‘elctronic money”
• Mobile FeliCa developed for mobile phones by NTT DoCoMo
• Other systems, such as Suica and Edy can also be accessed by a single device

• Uses include:
• mass-transport payment and ticketing
• electronic money and mobile payment
• Access to services
• e.g. electronic door locks, membership, etc

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Other payment systems
• Other payment forms have been used
• Pre-paid accounts
• User sets up an account and deposits credit
• Payments are drawn from account
• User notified when account is low, or automatic re-deposit method
used
• Often used with contact-less payment systems
• Example: M6 Toll charges use from a pre-paid user account. When credit is
low, a single transfer is made to bank account to top up user account

• SMS-supported payment systems

• Uses SMS to instruct payment
• May involve “gluing” another payment system to a user

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Examples of SMS-supported
payment systems
• mPark (mobile Parking)
• Parking Meter Payment System using SMS
• Deployed in Edinburgh, Newbury and Glasgow so far

• User activates the parking meter, which displays a unique code

• This code is then sent via an SMS message identifying the user
• User is then billed through a registered account, but can also be notified of reminders,
etc

• Amazon’s Mobile Payments

• Amazon TextBuyIt
• An SMS service to find items, check prices, or purchase simply by sending a text message

• Amazon WebPay
• Send or receive money using an email address or mobile telephone number.

• Amazon TextPayMe
• Similar to PayPay, except that it uses SMS messages to complete the transaction.

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Apple’s In-App Payments
• Store Kit framework provides a payment system for use
within an App
• Supports the collection of payments
• Uses include:
• Upgrade or unlock pro features on free Apps
• Ability to purchase additional content, e.g. e-books
• Possibility to purchase digital goods via an app
• e.g. buying virtual goods within online games
• The framework manages communication with the iTunes
App Store, managing:
• Information about goods provided through the App
• Payment and charging for the goods
• App is responsible for implementing a store GUI

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Apple’s In-App Payments
• Non-consumable products
• Purchased once, but then available to all devices associated with the account. Goods
can be restored onto a device
• Content - includes digital content that can be rendered by the app, such as digital book, print content
(magazines and newspapers), game levels and characters, etc
• Functionality - features that exist within the app, but are otherwise locked

• Consumable products
• Purchased each time it is needed, goods are “one-off” or transient
• Services - charging users for a one-time service, such as voice transcription. Each use is considered as a
single purchase

• Subscription products
• Available to all devices (like non-consumable), but may be purchased many times
(consumable)
• Subscriptions - covers access to content or services on an extended basis. E.g. access to financial
information (stocks) or online media

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 Apple’s In-App Payments
• Products are registered with the App
Store
• Includes details on the name, description,
pricing and other metadata
• Two models for maintaining product
identifiers
• Built-in Product Model
• Mainly non-consumable
• Delivers goods already within the app bundle
• e.g. unlocking new functionality

• Server Product Model

• A server delivers content to the app
• Good for subscriptions, services and content
• Server provides both list of products to App Store via
iPhone, and acknowledges receipt data for the store
to guarantee audit trail, before delivering goods
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 Exercises...
• The Desktop and Mobile E-Commerce experience can differ wildly. Describe
one limitation and one advantage of using a mobile device for e-commerce.
• Network costs for 2G communications can seriously hamper the use of credit-
card payments, especially when using mobile devices with numeric keypads
• Describe a scenario whereby communication costs can be reduced when paying for
goods, and give details of how the payment could be made
• In-App purchasing is a mechanism whereby applications can sell additional
services directly from the application.
• Discuss why micropayments may be desirable in such applications, and by means of an
example, give a brief explanation of how micropayments work.
• How does a mobile device augment traditional commerce? Speculate on how
RFID sensors could be used to transform a mobile device into a “self-pay”
point-of-sales device?
• How could a store differentiate between legitimate purchases and shoplifted goods?

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 To Recap...
• In this lecture set, we covered:
• An introduction to E-Commerce
• Evolution of the B2C e-commerce site
• Comparison of the Desktop and Mobile experience

• M-Commerce Scenarios
• Case Studies

• Payment Systems
• SMS, Credit Card, Pre-payment, Micropayment, and Web-based
• Contact-less payment systems

• Apple’s In-App Payment Framework

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 Further Reading

• M-Commerce
Norman Sadeh (Wiley, 2002)
• Chapters 1 and 6

• Apple’s Development Site

• Wikipedia !!!

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