M-Commerce

M-commerce, better known as m-commerce, is the subject of e-commerce that includes all e-commerce transactions that are carried out using a wireless handset (mobile). The paper will attempt to figure out the impact of m-commerce on both developed and developing economies in the world. The capabilities of accessing, delivering information and conducting business in digital forms vary greatly across different economies around the world. There are various initiatives using a mobile phone to provide financial services especially to the people without access to traditional banks. The paper thus will call attention to the use of m-commerce and its impact in the global economies especially in the developing economies.

M-commerce is used to refer to the practice of using wireless handheld devices to conducting business and other promotional activities. The mobile revolution has in many strides had unprecedented impact in the global economy. Development of mobile phones and related handheld devices has increased not only information but also ways in which it has advanced commerce and economic activities in different ways. The aim of this paper is to evaluate the impact of m-commerce on both the developed and developing economies.

How mobile phones have changed our lives

Over the past decade, mobile phones have altered the way that that we live and work. Mobile phones have been ideal devices to be used for making payments and other transactions. There are wide ranges of transactions that have transformed mobile phones into electronic wallets that are used to make payments. Introduction of the internet and ecommerce in the 1990s reshaped the way that businesses conduct business and the way that consumers interacted with business. Business then took the initiative of automating many business transactions that were previously handled manually. An example is how spending in the advertising business has shifted from the traditional offline media to online media. According to forecasts by the IBM, there will be a 22 percent growth in mobile and digital formats between 2006 and 23010 against a 4 percent growth in the traditional advertising formats. M-commerce builds on the electronic advances making interactions available to a wider section of people and in a personalized way (A GS1 mobile com white paper).    

The m-commerce is known to eliminate challenges of e-commerce by providing a widely available electronic network and a payment mechanism. It is now possible to use mobile banking to buy goods and services. M-commerce in Rwanda for example is used in microfinance rebuilding. There is implementation of the Microfinance Industry MFI) in Rwanda by use of m-commerce whereby subscribers are informed of their transactions through the mobile phone (Kumaran and Kumar)

Uptake of M-Commerce

A number of different types of businesses of e-commerce that have emerged are B2B, B2C and C2C.  Developed countries to developing countries have embraced m-commerce and in its present state, m-commerce can be viewed as an extension of conventional internet based transactions. Predictions are that the m-commerce industry will dominate the industry in future.

M-Banking and payments in the Developing World

Across the developing world, the spread and use of mobile phones has been one of the most remarkable technologies. Millions of mobile users around the world make voice calls or text each other daily. However, many of the users in developing economies live in informal economies where they are unable to access financial services. There are various initiatives that use mobile phones to provide financial services especially to the unbanked. The mobile banking services are increasingly popular in such countries like in Kenya, South Africa, Philippines and other countries across the globe (Donner and Tellez, 2008).

M-banking include the applications that enable people to use their mobile phones to maneuver their bank accounts, transfer money, access insurance or store valued information in their handsets. The applications were first targeted the developed, and complimentary services world such as the ATMs, smart cards and POS in the looking for ways of managing cash without handling cash. M-banking enables users to: store currency in their accounts that can be accessed via handsets, convert cash in the stored currency and transfer stored value by use of a set of SMS texts. Countries like Kenya had more than 2 million users with Safaricom’s M-pesa in its first year of rollout, South Africa’s Wizzit with more than 450,000 and Philippine’s with 3 million customers in the year 2007 (Donner and Tellez, 2008).

According to Donner and Tellez, studies on the impact of m-banking are scarce because these are new systems but information available by Patterson suggests that development of m-commerce has not only increased information but has also resulted in increased commerce and spurred economic activities by lowering transportation and transaction costs. By expanding the distance between buyer and seller and the shortening the connection speed, m-commerce lowers transaction costs. M-commerce transactions are done even if the two transacting parties are not in the same city or even the same continent for them to complete their order. Thus m-commerce is seen to reduce menu cost by allowing the buyers and sellers to transact their businesses by using a phone even if they are miles apart and no need to physically travel to meet each other. This can be seen during disasters or some relief that could be easily distributed to areas where it is needed by just using a phone to send required monetary assistance (Patterson).  

M-commerce has had tremendous benefits beyond the internet. An example is the GCASH in Philippines. GCASH is an innovative cell phone payment system that has replaced pyhiscal currency in many transactions. The method limits use of cash as well as reducing transaction costs thus encouraging more activity. The GCASH methods are cheaper to use, reliable to make payments and can be used to make several purchases in a day. The method is used to pay school fees by the touch of a button and thus lowers the cost of printing and demand of receipts in schools. The method is more portable, saves time to make a change and cannot be stolen. In this way, both the buyer and seller have increased benefits translating to increased demand for the product. In this method, there is no need to have a computer or be connected into the internet to enable transactions. This obviously encourages economic growth while lowering many transaction costs. Lowered transaction bills encourage more transactions thus stimulating economic growth. Saving time in the many transactions translates to increased demand and customer will demand more technology to simplify their lives while allowing them to have a higher standard of living (Patterson).

The case of Philippines shows that m-commerce has the capability of bringing advantages not only to its users but also to all stakeholders involved. Banks have increased their customer reach while adding their float significantly, retailers have seen a boom in their businesses, microfinance institutions have seen the ability to advance funds to very remote areas spurring economic growth in some neglected areas, phone operators have seen increase in their transactions resulting to more profits while service industries have the ability to get payments electronically from a large section of the population.

Another turning point for m-commerce was during the 7.0 magnitude earthquake in 2011.  Kaneshige reports that only two days after the quake, American Red Cross raised more than $7 million via text messages from more than 700,000 wireless customers. This was a major validation that showcased the possibilities of m-commerce and what it can be used in the future (Kaneshige).  

Kenya’s M-pesa is anther classic example of the m-commerce which has had a tremendous effect on its populace. Like many people in developing countries, Kenyans are not used to making electronic payments. A survey by ICT Africa found out that up to 80 percent of Africa’s SMEs use cash to transact business. A leading phone operator in Kenya, Safaricom, launched an M-pesa services in 2007 that could allow registered subscribers to send, receive money or pay utilities using a cell phone. By April 2008, Mpesa had about 2 million registered subscribers who had transacted about $1.5 million a day. M-pesa is particularly popular in Kenya due to its low transaction costs and being able to reach a majority of Kenyans. M-pesa is now used to pay school fees, send pocket money to rural folks, pay utilities like electricity or water bills, safely keeping money in virtual account, employment of M-pesa agents throughout the country and many more other informal payments (Omwansa).

The economic impacts of M-pesa studied by Morawczynski and Pickens (2009) suggested that it serves as a form of banking for the unbanked. Earlier research had shown that African countries lagged behind in financial access. They also found out that M-pesa has changed people’s saving behavior while increasing rural livelihoods. Or spur economic growth directly by increasing accessing to funds within a short time. Statistics also indicate that m-commerce has resulted to Kenya’s rapid growth of GDP in the last few years (Morawczynski, 2009).

Developed countries like the U.S. have also discovered many benefits for m-commerce. American Idol is one such example. Americans were allowed to pick their favorite contestant by using their phones to vote (but not from the internet). This demonstrates how use of cell phones has surpassed the use of internet in some cases. This greatly benefits the GDP of a country while being influenced by advertising and commercials payments (Patterson). The U.S. also launched several new mobile payment services that have opened up the idea of using their phones to make payments.

Another impact of m-commerce is its ability to reduce global warming. Many people who could be travelling make their transactions with the use of their phones avoiding the hustles of an air ticket or taking a bus or due to paperless transactions. In this way, the environment is spared by using m-commerce to transact business.    

One of the most important impacts of m-commerce is that it is setting pace for our future. Continued development and use of cell-phones have encouraged people in the society to conveniently and at a quicker pace exchange possessions or do many transactions at the touch of a button from anywhere in the world. This clearly shows that the rate at which a country develops does not only depend on its natural resources but from working smarter. Countries that have recognized the potential that is the use of m-commerce have seen their GDP grow significantly.

Countries that have recognized m-commerce have seen faster growth rates. Millions of domestic and international transactions happen daily contributing to lower costs of transactions while increasing value of exports at the same time. Exports thus become cheaper because they are produced at minimum cost through use of best information available while enabling the consumer to give instant feedback (Patterson). Generally speaking, m-commerce seems to be the future of business in very many countries.