A secret of making big returns on an investment is being aware of the latest trends and getting involved in companies that are first movers with hot new products or services. M-Commerce is a fairly unknown sector that deserves some attention. Investing in the companies that are first to market and involved in M-Commerce has the potential of huge gains.

“As technology has advanced so have customer expectations and networks, and these factors are setting the stage for expanded micro payments growth across the mobile, Internet and physical channels,” – Edward Kountz, TowerGroup Analyst

What exactly is M-Commerce? It is the buying and selling of products and services via mobile phones. Basically, it is e-commerce transactions online or at a point of sales where buyers use their mobile phones as the payment gateway. This market is enormous.

According to a recent TowerGroup research report, by 2009 the total market for Internet and mobile micro-payments in the U.S. will increase 23 percent (at a compound annual growth rate) to $11.5 billion in revenues, up from just over $2 billion in 2003. The total international revenues have not even been considered in this projection. Online merchants with a vision of capturing a part of this revenue stream should take note seriously.

E-commerce and online retailing have matured, but many online merchants have encountered two huge obstacles. The high costs in having a merchant account for services and products consisting of micro-payments and a second obstacle of not being able to make sales to an inaccessible group of people that do not have a conventional way of purchasing. Today, merchants can rejoice that both issues can be resolved.

Online merchants and retailers have spent millions in marketing and advertising to get buyers to their sites in hopes of making sales. In all their successes, there is a large base of potential customers that are lost. This is e-commerce’s “Last Mile”; a demographic group of underserved buyers that if targeted will increase their bottom line. These potential buyers are all ready visiting the marketer’s sites, so the targeting is not by more advertising but providing an alternative purchasing option.

Who are these potential buyers? These are people that have no credit, no credit cards, no banking or checking accounts and in extreme cases, motivated buyers with no cash on hand that would buy if the payment was deferred. This same group of potential buyers includes many people that feel insecure about buying online because they have to give out personal information or just prefer not to use credit cards online if they have them for fear of identity theft.

“Since e-commerce began, credit cards have been the primary online payment method, consistently holding an 85% or larger share of e-commerce activity. But a variety of forces have combined to create growing demand for additional Internet payment options, including expansion in the demographic mix of online shoppers to include consumers who do not have or do not wish to use credit cards, an increase in the number and types of merchants offering products and services, and merchants’ desire to build sales volume.” – Jennifer Roth, TowerGroup

In the U.S. alone, there are over 28 million people without a banking account and according to the Federal Reserve, about one in 12 families (8.7 percent) do not have one. Add in the additional number of people without credit, credit cards and fear of online use; this group of consumers is massive when looking from a worldwide perspective.

How does a merchant capture this large untapped market? A solution in catering to this demographic group is through what they most consumers have in common – their mobile phones. Welcome to the birth of M-Commerce.

The number of cell phone users worldwide is approaching 3 billion. Today, there are more cell phone users than there are credit cards and in some countries, the mobile phone usage has reached 99.9% penetration. Merchants can now capture new sales from this market by accepting payments online through a mobile phone. The consumer does not need to have a bank account or credit card to make a purchase online.

How does it work? There are only a handful of mobile phone merchant accounts available, but each differs in the way they are set up and how the payment transactions are processed. One simple way that a payment is processed once it is integrated into a website is as follows. The customer enters their mobile phone number on the payment page and is presented with the total amount payable on screen, inclusive of transaction charges in their local currency. On proceeding, the customer is sent a message to their mobile phone confirming the amount that is to be charged to their phone bill or account. The customer simply replies to this SMS message and the billing process is initiated.

For the millions of merchants out on the web that deals with micro-payments, this is the solution they have been waiting for. A mobile phone merchant account can be opened up at no cost. Any transaction costs can be passed on to the motivated consumers in marked up pricing for the product or service. It has been proven that the buyers are willing to absorb the extra costs because they are now able to buy without cash, credit, credit cards, a banking account or giving up any private information. The consumer is also able to “defer” their payment because the charge does not have to be paid until their phone bill arrives; often a 30 -45 days grace period.

Paying by mobile phone is a Win-Win situation for both the micro-payment merchants and the millions of consumers that were not able to make online payments. Merchants will see an increase in sales to their bottom line; consumers will have a secure and fast new way to purchase what they want.

What does this mean for entrepreneurs and investors? The number of businesses providing the products and services for M-Commerce is still small. A company that provides the killer app in this sector can become the market leader. Investors that can see the potential in M-Commerce and want to get on the ground floor should consider aligning with startups in this area or keep it on the radar for emerging public companies that are involved in M-Commerce.

To learn more about M-Commerce and additional information in this explosive new market, visit the following companies that have taken the lead in this sector

www.mobilecashcow.com
www.smskambi.com
www.paycashmobile.com
www.onebip.com
www.epay.vg
www.txtnation.com
www.luup.com
www.paypay.com
www.123ticket.com
www.nocreditcard.com

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