VisionMobile - The Evolving State of Mobile Commerce Report

TITLE:
The evolving state of mobile commerce

SUB-TITLE:
What mobile developers are looking for from an ever
changing industry
URL: vmob.me/MobileCommerce
About VisionMobile
Contents
VisionMobile are the analysts of the developer economy. We survey 30,000+ mobile, IoT, cloud, and desktop
developers each year via our Developer Economics program and bring you actionable insights and competitive
intelligence.
About this report
Our mantra: We help the world understand developers and developers understand the world
CHAPTER 1: The State of M-Commerce
VisionMobile Ltd.
90 Long Acre, Covent Garden,
London WC2E 9RZ
+44 845 003 8742
CHAPTER 2: Friction-free payments remain the overriding objective
www.visionmobile.com/blog
Follow us on twitter: @visionmobile
CHAPTER 4: What matters most to developers?
Terms of re-use
CHAPTER 6: The evolving state of m-commerce, June 2016
TM
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Key Messages
CHAPTER 3: The right payment platform for the right target

audience
CHAPTER 5: Who is collecting the money for what?
Methodology
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3. Representations, Warranties and Disclaimer

VisionMobile believes the statements contained in this publication to be based upon information that we consider
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Copyright VisionMobile 2016 - v.1.1
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ABOUT THE AUTHORS
Bill Ray
Senior Analyst
Stijn Schuermans
Senior Business
Analyst
Christina Voskoglou
Director of Research
and Operations
Bill wrote his first mobile app in 1988, and has

been failing to make money out of them ever
since. He architected set-top boxes at Swisscom
and Cable & Wireless, and was Head of Enabling
Technology (responsible for on-device software)
at UK mobile network O2. He then spent eight
years as a journalist at tech publication The
Register, before joining VisionMobile as a senior
analyst.
Stijn has been the lead Internet of Things

researcher in the VisionMobile team since 2012.
He has authored over 20 reports and research
notes on mobile and the Internet of Things. He
focuses on understanding how technology
becomes value-creating innovation, how business
models affect market dynamics, and the
consequences of this for corporate strategy.
Christina leads the analyst team and oversees all

VisionMobile research and data projects (big or
small!), from design to methodology, to analysis
and insights generation. She is also behind
VisionMobiles outcome-based developer
segmentation model, as well as the Developer
Economics reports and DataBoard subscription
services. While at VisionMobile, Christina has led
data analysis, survey design and methodology for
the ongoing Developer Economics research
program, as well as several other primary research
projects.
You can reach Bill at:

bill@visionmobile.com
@bill4000
Stijn has a Master's degree in engineering and an

MBA. He has over 10 years experience as an
engineer, product manager, strategist and business
analyst.
You can reach Stijn at:
stijn@visionmobile.com
@stijnschuermans
You can reach Christina at:

christina@visionmobile.com
@ChristinaVoskog
TABLE OF CONTENTS
About this report ............................................................. 4
What matters most to developers? .................................... 19
Key Messages .................................................................. 5
Developer segments and payment processors ............................ 20
The State of M-Commerce ................................................ 6
Who is collecting the money for what? .............................. 23
Friction-free payments remain the overriding objective ........ 8
The evolving state of m-commerce, June 2016 .................... 25
Whatever happened to operator billing? ...................................... 9
The demise of CurrentC .......................................................... 25
Cryptocurrencies ahoy? ............................................................ 11
Uber as a payment platform ..................................................... 27
The right payment platform for the right target audience

Population .................................................................... 13
Mobile authentication for every payment .................................. 28

Methodology ................................................................. 30
How much money is too much? ............................................... 14

A lot of small transactions can make for a big revenue ............... 16
ABOUT THIS REPORT

This report looks at how developers are embracing the fast-evolving
world of m-commerce, the technologies being used by different
segments within the mobile developer community, and the types of
applications to which they are being applied. Recent developments,
highlighted in the report, demonstrate just how quickly this market is
evolving. Even the dominant players find themselves fighting to keep
up, and every business model is under attack. The world of mcommerce is changing fast, and it is far from clear when it might
settle down, but in the meantime developers need all the information
they can get, which is what this report sets out to provide.
Stijn, Mark, Christina, Michael, Christos, Sofia, Matos, Chris and

the rest of the VisionMobile team.
KEY MESSAGES
M-commerce is fast evolving, with new technologies, and

applications for old technologies, arriving in rapid
succession.
App store billing is the most prevalent form of m-commerce

among developers, used by 53%.
Operator billing, which should be able to provide simplicity

for users everywhere, is only popular in the Middle East and
Africa (used by 33% of local developers), countries where
credit cards arent ubiquitous.
App store payments are often great for collecting small

amounts of money, but transaction costs become
unsustainable when the payment amounts rise.
The majority of all m-commerce is aimed at collecting

money from consumers rather than businesses or
professionals.
Bitcoin billing for m-commerce is real, but the largest

proportion of developers using it (27%) are in North
America.
The aim is always frictionless payments; ease of integration is

more important to developers than cost (66% rated
integration as important, 53% cost).
THE STATE OF M-COMMERCE

M-commerce, the process of using a mobile phone to make payments, is growing very
rapidly. Most of us have noticed were paying for more things with a mobile phone than
ever before, and gathered statistics back up that anecdotal evidence.
Data gathered by Mary Meeker shows that 10% of all retail in the US
is e-commerce, an increasing proportion of which is mobile. The
same data reports that 55% of Pinterest users have used the mobile
app to browse for purchases, and numerous other services are looking
to cash in on the booming market for peer-recommended shopping.
Digi-Capital reckons that mobile commerce will grow over twice as
fast as e-commerce, inflating by $100 billion annually to reach
$600bn in 2018. Some of that will be driven by overall retail growth,
but e-commerce (and m-commerce) will take an increasing share.
For developers, there have never been more ways to collect money
from customers, and the range of options is increasing. Despite the
inherent complexity of the process, collecting credit card details is
still a popular option, used by 34% of developers engaged in mcommerce. App stores and platform wallets are both enhancing their
offerings, in terms of available APIs and deals on offer, to attract
developers to their platform.
Emerging competitors are proving that payments arent just about

transferring money. In China, the Tencent-owned WeChat Pay has
taken advantage of its dominant messaging platform to build a
customer base, requiring that anyone joining a WeChat (messaging)
group bigger than 100 people register a payment card with the
service, preventing WeChat from carrying URLs representing
payments from competitors, and providing support to developers
who want to integrate the service. These initiatives have seen 200
million customers registering with WeChat Pay, resulting in $46m to
Tencent from bank transfer fees alone, and the company has only
just opened the platform up to foreign merchants.
Tencent used its existing portfolio to build a business around mobile
payments, but not every initiative has been so successful. In the last
six months we have seen the decline of CurrentC, the US project
designed to take mobile payments out of the Visa/MasterCard
duopoly, and it wont be the last standard to fall in the battle for
control of mobile wallets.
Central to this battle are the mobile developers, as they make the
decisions on which platform they should support and how it should
be integrated. Platforms that appeal to developers, like WeChat Pay,
will prosper, while those that focus only on the payment mechanism,
like CurrentC, will become footnotes in the evolution of the industry.
At VisionMobile, we believe that understanding what developers

want is vitally important to many businesses, but perhaps none more
so than mobile commerce. In that context, we asked m-commerce
developers to tell us what they value, what they use, and what they
use it for, and the results are presented here.
FRICTION-FREE PAYMENTS REMAIN THE OVERRIDING OBJECTIVE

Getting users to pay for things remains the biggest challenge for app developers. More than
half of mobile developers are living in app poverty -- making less than $500 a month from
their apps -- so any stumbling block for users on the way towards making a payment means
lost revenue.
Introducing a complex process, such as typing in a credit card
number, will put off a certain percentage of customers, and the more
complex the process is, the more potential customers are lost.
This is true of anyone trying to do business over the Internet, but for
mobile developers the situation is particularly acute. The interface of
a mobile phone does not lend itself to entering complex details, and a
user with a phone in one hand will struggle to hold a credit card
while typing in the identifying details. Browsers, such as Google
Chrome, and retailers, such as Amazon, have gone a long way
towards simplifying the credit card process (by storing details locally
or remotely respectively); however, mobile app developers (and
users) still prefer a more-integrated approach.
53% of mobile developers who are using mobile billing are using an
App store to process payments. That may be one option amongst
many, but more than half of the community has embraced it. App
stores offer a familiar user experience and use stored credentials
(generally a credit card number, though sometimes a connection to
the network operators billing platform) to provide a
very seamless experience. They arent, however, cheap, with the store
generally collecting a 30% processing fee.
Developers are often pushed into using a specific payment system,
such as an app store, by the nature of the content they are selling and
the rules imposed by the platform owner. Apple is most restrictive,
requiring the use of the app store payment system for in-app content.
Google also restricts alternative payment mechanisms, but it can only
control those used by applications distributed through its Play store.
Applications downloaded from other stores, or sideloaded, are
generally a minority -- except in China, where the Play store does not
function, so alternatives have proliferated so, in many cases, the
platform-owned app store is the only billing mechanism available.
Digital Wallets offer a similar level of simplicity, storing credit card
details locally (or in the cloud, or both) so they can be presented
without the user having to manually type in the details. Some Digital
Wallets (such as Googles Android Pay) can also be linked to a
handsets NFC connection to make payments in physical stores by
tapping the handset on the NFC terminal; while not important for
developers, this increases the utility of the platform for the end users.
For app developers, the Digital Wallets provide a simple integration
API with a recognisable logo, making for a very simple user
experience without involving the platform app store. It isnt
surprising to see that 43% of developers are using Digital Wallets.
Whatever happened to operator billing?

Operator billing should be able to provide a competitive experience
to the app store or Digital Wallet. The operator already has a billing
relationship with the customer, and will have real-time credit
checking as part of its billing system, so it should be able to extend
that to support other transactions. For a long time, network operators
assumed that they would be the eventual bankers for mobile
commerce, culminating in a 2007 statement from the then-CEO of
Vodafone Arun Sarin:
"The simple fact that we have the customer and billing
relationship is a hugely powerful thing that nobody can take
away from us Whoever comes into the marketplace is going
to have to work through us.
But the network operators repeatedly underestimated their
competitors, and despite several attempts to create cross-network
payment platforms, we can see that only 16% of mobile developers
doing m-commerce are using the billing systems provided by network
operators.
Thats a global average, and there are regional disparities. In highly
developed markets of the US and Europe, the use of operator billing
drops to around 10%, while in the Middle East and Africa it hits
33%.
10
Credit card ownership is much lower in those regions; in the Middle

East cash-on-delivery (COD) is still the preferred option for the
majority of consumers. Research from PAYFORT puts the UAE at
the top of credit card use in the region, at 39% of online transactions,
while in Egypt COD accounted for 72% of e-commerce payments.
Developers looking to do business in the region clearly need to think
about alternative options. However, the acceptance of credit card
payments by mobile app developers isnt unusual, either because
their customer base has credit cards, or they are targeting other
national markets.
28% of m-commerce developers working in the Middle East and
Africa are taking credit card payments, only a little lower than the
34% global average. The real losers in the region seem to be app
stores, which are only used by 33% of local developers, compared to
a global average of 53%, which rises to 66% in Europe.
Platform app stores are widely available in the Middle East, but do
not operate in all African countries. In some countries, such as
Nigeria, Google does operate a store but sets the default currency as
US dollars. For developers, this presents an additional level of
complexity and an additional cost of doing business, which pushes
many of them to use billing platforms provided by local mobile
operators.
However, currency does not seem to be an issue in Eastern Europe
and Russia, where Google Play also defaults to US Dollars. 69% of
m-commerce developers in the region are using the app store billing
platform, obviously considering the cost to be worthwhile or creating
applications for deployment outside their home market.
Cryptocurrencies ahoy?
For developers looking to radically reduce transaction costs there is
Bitcoin, accepted by 4% of developers globally. The cryptocurrency
is highly unstable, varying widely in value from day to day, or even
11
hour-by-hour, and while it has generated enormous amounts of press

coverage and field-tested some very interesting cryptographic
techniques, neither of these can explain why 4% of developers choose
to accept Bitcoin payments.
A proportion of Bitcoin users will be developers excited by the idea of
a cryptocurrency and wanting to be part of a possible future. Adding
a Bitcoin button to a payment gateway isnt difficult, and makes the
app look like its at the cutting edge of technology, which might be
motivation enough. Bitcoin also has the advantage of being truly
international, and incurring no mandatory transaction fees at all. The
value of a Bitcoin might fluctuate, but that fluctuation will often be

less than the transaction fee which would have been payable on a
more traditional currency.
If transaction and exchange costs were indeed the driving force
behind Bitcoin adoption, then we would expect to see it used in
developing markets, perhaps where the app stores didnt operate.
Instead we see a higher percentage of Bitcoin users in North
America, where the high-tech image may be more of a driver.
Bitcoin is still a minority player in the m-commerce space, but the
fact that it appears at all is significant.
12
THE RIGHT PAYMENT PLATFORM FOR THE RIGHT TARGET AUDIENCE POPULATION
Some platforms lend themselves to specific applications or target audiences, and developers
have to take several factors into account when considering which platform to adopt.
Consumers are the largest target market by a considerable margin -almost three quarters of developers polled, are primarily targeting
consumers. 15% of developers using m-commerce are aiming at
enterprise customers, while 8% are mostly looking to make money
out of professional users and only 3% want to bill internal customers.
Within those blocks there is some variation in the billing platforms
used, though perhaps not as much as we might expect.
App store billing is most appropriate when the buyers are consumers
(56%) or professionals (53%). For enterprise customers, the number
drops to 46% and for those targeting internal employees to 32%. The
opposite is true for bank service billing: although much less used
overall, this option is more popular among developers primarily
targeting enterprises and employees.
Enterprise-targeting developers are much more likely than others to
use credit cards as a payment mechanism: 45% of them do so,
compared to an average of 31% of developers who target other
audiences. Meanwhile, direct debit is much cheaper, for the
developer, than accepting credit card payments, and the platform is
heavily promoted by banks who prefer to keep their transactions in

house. It is also used more in a professional context than as a way for
consumers to pay, but with three times fewer developers using it, it is
unlikely to replace credit card payments in companies anytime soon.
For developers primarily targeting employees inside companies,
Digital Wallets (47%) are the most popular option, far outstripping
app store billing and credit card processing.
Enterprises have close billing relationships with their mobile
operators, making operating billing a sensible channel for additional
services and a valuable option for developers supplying enterprise
customers. Indeed, it is professional users and employees who are
most likely to be able to pay through the operator as 19% of
developers targeting those markets accept operator payments.
Interestingly Bitcoin, is used by 4% of developers across the other
targeted markets, jumps to 8% for developers targeting internal
employees, which suggests that the cryptocurrency is being used for
cross-charging within some companies.
13
14
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TITLE:

The evolving state of mobile commerce

About this report

CHAPTER 1: The State of M-Commerce

CHAPTER 2: Friction-free payments remain the overriding objective

CHAPTER 4: What matters most to developers?

CHAPTER 6: The evolving state of m-commerce, June 2016

CHAPTER 3: The right payment platform for the right target

3. Representations, Warranties and Disclaimer

Copyright VisionMobile 2016 - v.1.1

Want access to all Premium reports?

ABOUT THE AUTHORS

Bill wrote his first mobile app in 1988, and has

Stijn has been the lead Internet of Things

Christina leads the analyst team and oversees all

You can reach Bill at:

Stijn has a Master's degree in engineering and an

You can reach Christina at:

About this report ............................................................. 4

What matters most to developers? .................................... 19

Key Messages .................................................................. 5

Developer segments and payment processors ............................ 20

The State of M-Commerce ................................................ 6

Who is collecting the money for what? .............................. 23

Friction-free payments remain the overriding objective ........ 8

The evolving state of m-commerce, June 2016 .................... 25

Whatever happened to operator billing? ...................................... 9

The demise of CurrentC .......................................................... 25

Cryptocurrencies ahoy? ............................................................ 11

Uber as a payment platform ..................................................... 27

The right payment platform for the right target audience

Mobile authentication for every payment .................................. 28

How much money is too much? ............................................... 14

ABOUT THIS REPORT

Stijn, Mark, Christina, Michael, Christos, Sofia, Matos, Chris and

M-commerce is fast evolving, with new technologies, and

App store billing is the most prevalent form of m-commerce

Operator billing, which should be able to provide simplicity

App store payments are often great for collecting small

The majority of all m-commerce is aimed at collecting

Bitcoin billing for m-commerce is real, but the largest

The aim is always frictionless payments; ease of integration is

THE STATE OF M-COMMERCE

Emerging competitors are proving that payments arent just about

At VisionMobile, we believe that understanding what developers

FRICTION-FREE PAYMENTS REMAIN THE OVERRIDING OBJECTIVE

Whatever happened to operator billing?

Credit card ownership is much lower in those regions; in the Middle

hour-by-hour, and while it has generated enormous amounts of press

value of a Bitcoin might fluctuate, but that fluctuation will often be

heavily promoted by banks who prefer to keep their transactions in

THIS IS A TEASER FROM THE EVOLVING STATE OF MOBILE COMMERCE REPORT.

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