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Mobile commerce rings up no sale

People are not using their cell phones and other handheld devices to make purchases or transactions, leaving companies to rethink their m-commerce plans.

Wireless commerce is wavering.
Read more about global commerce

Despite the much-touted benefits of "m-commerce"--such as buying goods or completing financial transactions via cell phones or other handheld devices--several large companies are quietly shutting down their wireless services, and more are expected to follow, analysts say.

"I think a lot of companies made the blithe assumption that the wireless Web would be an automatic success, but lo and behold consumers are a lot more skeptical of it than they thought," said Joe Laszlo, a wireless analyst with Jupiter Research.

In the last month, two major banks have closed their wireless services, although many thought banking would be a good fit with wireless access: People could check their balance, view their transaction history and get e-mail notification if a check was going to bounce. Wells Fargo ended its mobile banking service a few weeks ago because of lack of customer interest. The Bank of Montreal shuttered its mobile banking and brokerage services a few weeks earlier.

Some high-profile companies may rethink their m-commerce strategies "now that two big banks have made it OK to do so," Laszlo said.

Experts say cultural and technology issues are holding back mobile commerce in the United States.

A large factor is that people in the United States generally just use their cell phones for phone calls, unlike people in other parts of the world, who heavily use their mobile devices to send text messages or conduct transactions. Fewer than 2 million of the United States' 140 million cell phone users access the Web on their phones, analysts say. Instead, Americans use personal computers to shop online.

But in Europe and Asia, cell phones outnumber computers in some areas by a five-to-one margin. That makes for a different mindset. Going online to shop or send an e-mail in Europe and Asia means reaching for your cell phone, not firing up a personal computer. Some carriers in Europe make more money hosting SMS (Short Message Service), brief notes exchanged between cell phones, than they do from phone calls.

Some companies with an international reach have adjusted their mobile services accordingly.

Pepsico and Coca-Cola, for example, have teamed up with mobile phone makers for trials in Japan and Scandinavia that let people point their phones at a vending machine, press a few buttons and charge a soda to their phone bills.

Last year, scaled back its wireless commerce efforts in the United States to focus more on serving mobile users in Japan, said Robert Frederick, manager of Amazon Anywhere, the company's wireless commerce project.

"We're focused primarily on the Japanese market. That's where the market is," Frederick said. Less than 10 percent of the company's wireless commerce effort is being put into the U.S. market, he said.

Another major factor holding back m-commerce in the United States is that little bitty screen on cell phones. Going online just isn't the same when Web sites appear as little more than a list of text links, and searching for an item on Amazon or eBay can involve the painstaking process of entering words using a dial pad, where each number represents three or more letters.

"The interface is crucial," said IDC wireless analyst Keith Waryas. "How you view the network is going to dictate your satisfaction with it."

It's also expensive. As with the traditional Web, consumers typically have to pay a monthly access charges. But wireless Web customers often have to pay a per-minute fee for data transmissions, as well, something that U.S. customers don't typically face on the traditional Web.

Even if the interface improves and the fees go down, mobile commerce will have to overcome a stubborn obstacle that has long plagued Web sellers: security concerns. When people are asked about why they don't shop on the wireless Web, one of the top reasons they give is that they don't trust it, Laszlo said.

"It's easy to blame the technology for the problem so far, but consumers haven't been sold on the idea. They haven't been sold that it's completely safe yet," he said.

Unlocking the potential
To be sure, some U.S.-based companies are still investing in the technology. Citigroup earlier this year said that one of its key technology investments in the near future will be in wireless.

Meanwhile, eBay launched a new service this summer that lets customers bid on its auctions more easily from their wireless devices. Through the service, eBay customers who receive a wireless e-mail notifying them that they've been outbid can up their bids by responding directly to the e-mail over their wireless device.

eBay did not return calls regarding how many customers are using the new mobile service.

But at Wells Fargo, only 2,500 people signed up for wireless banking, though 3.2 million people actively use the company's online banking service.

"This service was primarily adopted by a narrow segment of early adopters," company spokeswoman Wendy Grover said. Few have complained that it's ending, she said.

That's not surprising, considering how expectations for mobile commerce have waned. Research firm IDC has significantly downgraded its outlook: Last year, the firm said mobile commerce sales would amount to $2 billion this year and $39 billion in 2005. Today IDC predicts this year's m-commerce sales at about $500 million, and $27 billion in 2005.

Customers are also showing less enthusiasm for mobile commerce, according to biannual surveys by A.T. Kearney, the consulting unit of Electronic Data Systems. Consumers' intent to make purchases using cell phones fell by about two-thirds in the last two years. In June 2000, 32 percent of cell phone users planned to make purchases; by January 2002, that number was down to just 1 percent. A.T. Kearney surveyed 5,600 cell phone users in Asia, the United States and Europe.

"There's not going to be that huge jump in mobile commerce that you saw in e-commerce in 1997 and 1998," IDC analyst Waryas said. "I think there is definitely a market for it, but it's much, much different than what we thought it was going to be two to three years ago."

As Laszlo, the Jupiter analyst, sees it, "there is real potential in the wireless world, but unlocking it is proving more difficult than the early entrants might have thought."