Chapter 14

Mobile Commerce: Introduction,

Framework and Models

ELECTRONIC COMMERCE- Framework,

Technologies and Applications Tata McGrawHill

Presented By:
Divya Goyal
Nitesh Goel
Preeti Devi

Learning Objectives

Introduction to Mobile Universe

What is Mobile Commerce?

Benefits of Mobile Commerce

Impediments in Mobile Commerce

Wireless Security Issues

Mobile Commerce payment systems

Mobile commerce applications

Introduction
Mobile Device refer to:

Cellular phones

Hand-held computers such as palmtop, tablet PC

etc.

Messaging/Pager devices

Laptop computers

Personal Digital Assistants (PDAs)

What is Mobile Commerce?

Mobile commerce means:

Mobile Commerce can be defined as any electronic

commerce activity conducted over the wireless network
through mobile devices.
According to Tarasewich, Nickerson, and Warkentin:

Mobile Commerce includes all activities related to a

(potential) commercial transaction conducted through
communications networks that interface with wireless (or
mobile) devices

It is exchange of information, goods and services through

the use of mobile technology.
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What is Mobile Commerce?

It is concerned and influenced by the evolution in the
following aspects :

Availability of Information, Goods and Services

Mobile Devices and applications capable of effective

and efficient interaction and rendering of goods and
services

The movement of information goods over reliable

network or bandwidth issues

What is Mobile Commerce?

The mobile commerce in essence utilizes mobile

devices connected through the wireless network to
simplify and implement daily economic activities
such as product searching, price determination,
negotiations, contracts, settlement, payment and
delivery/shipments.

What is Mobile Commerce?

The very nature of mobile devices has made possible a variety of alert
and information services such as:
Paying for and downloading ring tones, mp3 music, news or information
services
Receiving parking meter about to expire alert on handheld devices and
paying for additional parking time.
Enquiring the Airlines, Train or dynamic bus arrival schedule
Enquiry, reservation and finally purchase of the airlines ticket through
the mobile wireless device.
Enquiring the stock market conditions and placing a stock purchase or
sales order through the mobile device
Receiving the location specific information regarding restaurant,
entertainment complexes over the mobile device
Receiving location specific advertisement and product discount coupons
in the current neighborhood

Benefits of Mobile Commerce

Much of the benefits offered by electronic commerce are offered by the

mobile commerce as well. Since the consumer using the handheld device
comes through a specific wireless network through which the location
can be identified. The location identifiable connectivity offered by
mobile commerce not only enhances the benefits made available by the
electronic commerce but additionally helps in providing more relevant
content.
The handheld device user, connected to wireless network, can also meet
the information access and transactions need round the clock from any
place, even while on the move. The mobile commerce extends the
Anytime Access paradigm offered by the electronic commerce to that
of Anytime and from Anywhere Access.

Benefits of Mobile Commerce

Due to knowledge of physical location of the mobile service

users, he/she can receive customized alerts, pointing them
to the stores, friends, and restaurant in the vicinity of the
user. A mobile user trying to locate a ATM teller can contact
the banking service provider which in turn can download the
location of the nearby ATM center.
The timely information such as flight availability, flight
schedule, can be obtained at the last minute as well.
The last minute on-the-move access offered by the mobile
commerce extends the electronic markets further as the last
minute availability information often leads to immediate
purchase.
It can deliver time critical, emergency information using
SMS based notification and alert services.

Benefits of Mobile Commerce

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Improved personalization of the content as mobile user can

receive customized information based on current interest
profiles and location of the user. For example, the
advertisers can deliver the discount coupons that can be
cashed in and around the location of the mobile user on the
wireless handheld device.
If user request the information regarding certain products,
the advertiser can deliver the wireless coupons of stores that
stock the targeted products. Advertisers can deliver time
sensitive, geographical region specific information along
with the promotional discount coupon any time anywhere.

Benefits of Mobile Commerce

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The electronic commerce payment models require the third

party mechanism such as credit cards. The mobile commerce
on the other can utilize the mobile device itself for the
payment purposes, the payments made on the device can
appear as part of phone bills.

The users can thus pay for parking meters, taxis, petrol etc.
through the mobile device. The Pepsi and Coke has already
experimented in Japan by letting people charge the cost of
drinks to the phone bills.

Impediments in Mobile Commerce

Mobile Device

The handheld devices commonly used today include phones, palmsized computers. The very nature and purpose of these devices
offers a limited screen size. Although, the handheld devices provide
a great deal of flexibility and mobility in accessing the information but
they have far lesser convenient user interface when compared to
personal computers.
Additionally the mobile devices also have limited computing power.
Memory and storage capacity, as a result they are unable to run and
support complex applications.

Incompatible Networks

The cellular networks evolution in past decade has created multiple

competing protocol standards.

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United States- Time TDMA and CDMA

Europe, Asia Pacific region- GSM
India GSM, CDMA (Reliance) for the wireless networks.
Heterogeneity of the network protocols requires protocol aware
application.

Impediments in Mobile Commerce

Bandwidth Access

The wireless networks use the frequency spectrum for exchanging

the information. In order to promote a healthy competition amongst
the wireless operators and judicious use of limited spectrum the
regulatory bodies control the spectrum. In India, the frequency
spectrums were initially allocated by the Department of
Telecommunication (DoT) and are regulated.

Security Concerns

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The mobile commerce operates over wireless network making it

more vulnerable to intruders. Intruder can be anyone with ability to
receive the signal on their wireless intrusion devices.
Limited computing power, memory and storage capacity, it is difficult
to deploy 256-bit and higher key encryption schemes

Impediments in Mobile Commerce

Security Concerns (contd.)

The atmospheric interference and fading of the signal in

wireless channel causes frequent data errors and
sometimes disconnection. A disconnection in middle of a
financial transaction can leave user unsure and distrustful.

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Impediments in Mobile Commerce

Security Concerns (contd.)

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The authentication of mobile devices prior to carrying out

any transaction is a major issue. In case of GSM, the
Subscriber Identity Module (SIM) is used for storing the
cryptographic keys, unique identity called International
Mobile Subscriber Identity (IMSI). The authentication
server of the wireless GSM network stores the matching
key and the IMSI of the subscriber as well. The calls and
short messages in the GSM are handled by the SIM rather
than the mobile station holding the SIM card. The wireless
network thus can authenticate the SIM card. This
mechanism of authentication is one way where network is
capable of authenticating the SIM but a SIM user can not
authenticate the network. The sound commerce
environment requires that both sides should be able to
authenticate each other.

Impediments in Mobile Commerce

Competing Web Language

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The mobile devices can not handle full-fledged HyperText

Markup Language (HTML) documents. In order to offer web
access and offer similar services two competing but
incompatible standards have emerged. The mobile devices
that adopt Wireless Access Protocol use Wireless Markup
Language (WML) for mobile commerce applications, while the
NTT DoCoMOs iMode devices use a condensed version
HTML (cHTML). In order to enable the voice access and
interface for displaying the web content, the VoiceXML, a new
markup language, has also emerged. The incompatible
standards make the task of mobile commerce application and
service providers even more complex.

Wireless Security Issues

Two imp issues need to be addressed : (1) protection

of the source of the information that is being made
available online, (2) protection of the transaction that
travels over the network.

In the mobile commerce environment, since the

information is made available through the WAP
Gateway or through the iMode the information source
security depends upon the security provided by the
appropriate Gateway protocols.
In case of WAP gateways, the Wireless Transport
Layer Security (WTLS) implements the information
source security to block the unauthorized access and
modification of the information content.
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Wireless Security Issues

In order to build trust amongst mobile device users to
carry business transactions through the mobile devices
in an open, wireless, universally accessible
environment, it is important that the security of the
transaction is ensured.
The four fundamental issues that need to be addressed
to create a trustworthy business environment are the
following:

Authentication

Non-repudiation

Integrity

Confidentiality
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Wireless Security Issues

Impact on Authentication:
In the mobile environment, during the transaction itself the mobile
device user may change its location, resulting in change of IP
address in case of IP based network or handling base-station
identity change in case of phone based connection. In case of the
phone based connection the mobile user location change in
addition to resulting the handling base-station identity change may
also result in loss of connection as the use may move out of the
coverage area. Thus the authentication in the mobile commerce
require more involved protocols that address the issues raised
here.
The Wi-Fi Protection Access (WPA) Security specification has
been developed. There are several Extensible Authentication
Protocols (EAP), such as Transport Layer Security (TLS),
Tunneled Transport Layer Security (TTLS), Protected Extensible
Authentication Protocol (PEAP) and Extensible Authentication
Protocol- Flexible Authentication via Secure Tunneling (EAPFAST) for the mobile networks which prevent the unauthenticated
and unauthorized access, rogue access point creation in wireless
network and (wo)man-in-the middle-attacks.
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Wireless Security Issues

Impact on Integrity and Reliability:
The loss of content (integrity) due to fading of the signal in a
radio-based transmission and interference from the other
transmission sources and noise are the common phenomenon.
Frequent location changes of the client, will result in the
messages arriving from the different location and the problem may
further be compounded due to dropped calls.
In case of dropped calls, the mobile user is left in lurch about the
status of the transaction as he/she may not know the commitment
status of the transaction.
The call hand-offs from one handling station to another also may
lead to unreliable state at times. The mobile commerce
environment had to address these issues as well in order to
establish a trustworthy business environment.
The Temporal Key Integrity Protocol (TKIP) and Message Integrity
Check (MIC) protocols have been developed for ensuring the
integrity and validation of the data
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Wireless Security Issues

Impact on Confidentiality:

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On Air transmission of the radio signal is susceptible to

interception.
Encryption of all the transmission becomes of
paramount importance not only for the actual
transaction but also for the common information
exchange in order to ensure the privacy.
The encryption and decryption is a computation
intensive process. The mobile devices have limited
computing, processing and memory power. Based on
power of the currently available devices, it is not
possible to support the encryption standards higher
than the 256 bits.

Mobile Commerce Payment Systems

Some of the factors that are essential for the adoption
of the newer payment system over the existing one
are:

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Simplicity and Usability

Universality
Interoperability
Security, Trust, and Privacy
Cross-Border Payments
Cost
Speed

Mobile Commerce Payment Systems

The mobile payment systems are still in the nascent state and as
a result several models are in existence

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Acquirer-Centric Models: In the acquirer-centric model all the

interactions with the mobile devices are handled by the merchant
or his/her agent. The models require a specific protocols and
certain minimum level of capabilities in the mobile devices of the
users. The dual chip or dual slot based payment systems typically
fall in this category.
Issuer-Centric Models: In the issuer-centric models the issuer and
customer who is using the mobile device interact directly or
through agents and handle the whole process. Essentially, the
interaction between the customer and the issuer uses the mobile
payment mechanism. The customer operating the mobile device
drives the interaction processes. Examples of this model include
the mobile payment systems that use callback methods or a WIMbased digital signature validated by wallet server.

Mobile Commerce Payment Systems

Mobile Network Operator Centric:

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The Mobile Network Operators have the billing system to manage

the customers phone accounts with them.
With the introduction of data services where the content may be
offered by the third party, the billing systems of the mobile network
operators have become more sophisticated in order to take care of
billings related to the data services utilization,
The introduction of Pre-Paid accounts required the mobile network
operators to enhance the billing systems to keep track of the Prepaid money and its expiry period. In case of Pre-Paid account, the
charges for the services are deducted from the Pre-Paid accounts.

Mobile Commerce Applications

Some of the important revenue streams that are
possible in the mobile commerce value chain are as
follows:
Mobile Connect-time communications

The subscription to the mobile basic connectivity services, Short

Messaging Services and other Add-ons come for a charge. Also,
the charges accrue with the usage of the particular service as well.

Mobile Equipment and device providers

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The mobile infrastructure builder and equipment providers for

operating the network and the handheld devices are major source
of revenue generation in the mobile commerce economy. As more
and more digital applications grow on the network, the
corresponding equipment and device market also grows
sophisticated and grows with more users and traffic coming in.

Mobile Commerce Applications

Value Added Services
Subscriptions to specific services such as headline news, sports score,
entertainments, downloading of ring-tones, bill payments, Stock Market
Ticker information, Notification services are some the services that are
often provided through the mobile service. These service themselves can
come for a charge and also they increase the network traffic, thus
increase operators revenue.
Mobile Application Developers
These are Generic Mobile Applications. The IBM, Microsoft and Oracle
already provide Mobile Applications software. Many other Applications for
the vertical markets have also emerged, for example, United Airlines
offers a air travel bookings information system for Wireless devices.
Mobile Commerce Applications Service Providers (MASP)

MASPs are the new intermediaries that quickly enable the mobile
commerce in other businesses. The MASP free up the corporate clients
by hosting the content using own infrastructure and offer anytime
anywhere access. The corporate clients by outsourcing the mobile
commerce strategy are freed from the hassles of technology
obsolescence as well.
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Mobile Commerce Applications

Portals

The portals aggregate a large number of users and content

providers. In the context of mobile commerce, a portal is also the
entry point that has been optimized for mobile access. The Mobile
portal act as gateway to the content and transaction-based
services. The value chain of the mobile portals consists of the
following components,

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Content Creation These players develop new content such as

News, Stock databases, Analysis Reports. For example CNN
Content Aggregation These players aggregate, package and bundle
the content, as the case may be, for distribution. The examples
include Syndicated content sites, Value Added such as comparison
sites such as Infospace.
Content Distribution These players take the packaged content and
deliver it to the buyers and offer fulfillment under secure and assured
environment, the examples include Rediff Mobile, IndiaTimes etc.
Access Portal The players in this category offer the transactional
services. The Fidelity Mobile Access etc fall in this category

Mobile CommerceFunctional Classification

Informational

News, stock
quotes, weather
etc.

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Messaging/
Collaboration
e-mail, chatting,
mobile
conferencing

Transactional

Stock/Fund
trading, Person to
Person money
transfer, Bill
payments etc.

Mobile CommerceFurther Classification

Pull /
Device
Initiated*
Location News, stock
Independent quotes
Location Lodging/
Dependent restaurants
close by,
local maps

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Push/
Server
Initiated**
Stock alerts,
calendar
reminders
Weather
warnings,
merchandise
sales close by

Mobile Commerce
Prominent Application Domains

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Mobile Advertising:
Mobile Auctions:
Mobile Entertainment:
Mobile Financial Services:
Location and Search Service:

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