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The mobile commerce, or m-commerce, market is still immature, says Robin Hearn, analyst with London-based telecoms consultancy Ovuum and co-author of the report Data Over Cellular. Despite this, he believes things are about to change. At the moment, it is mobile banking that is blazing the trail. While Dresdner struggled with its implementation, based on messaging rather than Internet access, other banks are storming ahead and providing the first working examples of m-commerce. Two Scandinavian banks, MeritaNord and Leonia, which both already offer Internet banking, are locked in a race to recruit mobile banking users. Katrina Bond, an analyst with UK-based Analysys, believes the type of transactions carried out over wireless networks is changing. Larger transactions over public networks is involving the transfer of sensitive details, requiring greater security. Version 1.2 of WAP will incorporate public key infrastructure technology to provide end-to-end security and the WAP forum is looking at other security features.

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Whenever talk turns to the rapid pace of technological development, it's usually the Internet that becomes the focus of the conversation. It has, after all, achieved an unrivalled pace of development and use, and will undoubtedly affect everyone's day-to-day lives within a matter of years.

But the mobile communications sector is not far behind it, and the rapid acceleration of developments in the cellular world can partly be attributed to the on-line phenomenon. When Communications International looked at mobile Internet access in May 1997 ('Growing Pains', page 49) even potential applications were thin on the ground. The only service actually up and running was a facility which enabled maps of London to be downloaded into a Nokia 9000 handset. The following year most wireless data applications were still being hosted on dedicated networks ('Uncertainty in an unwired world', June 1998, page 43). RAM Mobile Data was offering a service that integrated parcel delivery with Web-based tracking. But this was not mobile commerce: the clients were custom made and did not handle transactions using the public Internet.

However, there were signs that some Web-- based commerce applications might translate, in a reduced format, onto mobile networks. Mobile users could download share prices which were then displayed as small, text-based Web pages, and Dresdner Bank was trialing a system which gave mobile users access to their accounts.

Even today, according to Robin Hearn, analyst with London-based telecomms consultancy Ovum, and co-author of the report Data Over Cellular, the mobile commerce, or m-commerce, market is immature.

Despite this he believes things are about to change. "Although e-commerce is currently one of the least used wireless data applications areas, it will be the fastest growing over the next couple of years," says Hearn.

At the moment it is mobile banking that is blazing the trail. While Dresdner struggled with its implementation - based on messaging rather than Internet access - other banks are storming ahead and providing the first working examples of m-commerce.

Perhaps, with mobile penetration rates so high, it is natural that the first working m-commerce applications would appear in Finland. Two Scandinavian banks, MeritaNord and Leonia - which both already offer Internet banking - are locked in a race to recruit mobile banking users.

"Mobile data minutes are expensive," explains Bo Harald, executive vice president of Helsinki, Finland-based MeritaNordbanken Group. "On-line banking is good business for the mobile operator." Merita provide Internetbased banking marketed under the 'Solo' brand. The bank has now extended this service - making it accessible via WAP phones. Customers log into the service using the same access codes as they would if seated at their PCs. Solo is being offered free for an introductory period, after which a nominal monthly charge will be levied.

Apart from feeling envious of the revenue being generated for the telco by his customers, Harald has no worries about his business slipping into the hands of the bank's supplier, Nokia. "We have been adding access devices to our Net banking solution since 1982 - first the PC, then television and now the WAP phone," explains Harald. "We do not feel, [with WAP] that we have outsourced more then usual - the servers are all on the bank's premises," he adds.

Keen to get into the market alongside MeritaNord is another Finnish bank, Leonia. In November 1999 Leonia announced what it claimed was the first secure banking service for WAP phones. The security of the network was provided by fellow Finnish company Sonera SmartTrust and by US security specialist CyberTrust. Sonera already claims to be a leading supplier of secure wireless e-commerce solutions.

The security model used for the Leonia service involves the management of digital certificates (see Welcome to the world of e-business', Jan 2000, page 32). The certificates are deployed to a subscriber identification module (SIM) which is embedded in the mobile handset. Sonera claims that the use of digital certificates, which securely identify each user, enables legally binding transactions. Non-repudiation assurance is important if higher value transactions are carried out over wireless networks.

Katrina Bond, an analyst with UK-based Analysys, and co-author of a report on mobile e-commerce, believes the type of transactions carried out over wireless networks is changing. "For the earliest e-commerce services, billing took place on the basis of which terminal was used," says Bond. "If you requested information such as sports results the charge would be added to the phone bill for the mobile handset that was used to request the information."

This is now changing, as Bond explains. "For larger transactions over public networks involving the transfer of sensitive details, such as credit card details, greater security is desirable." Bond believes this is why public key infrastructure (PKI) is gaining momentum as an encryption method for m-commerce implementations.

Juha Snellman, director of services with Sonera, claims that its SmartTrust technology does not impede the performance of the Leonia service or make it difficult to use. "Performance is not an issue - it is about the same as for messaging," claims Snellman. "As for ease of use, it is very convenient as all the user needs to remember is their PIN code."

If the connection is interrupted the session will be restarted when the user logs into the network again. And to counter the remote possibility that someone will steal the user's handset while it is logged in, the PIN needs to be entered each time a transaction is made.

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Version 1.2 of WAP will incorporate PKI technology to provide end-to-end security and the WAP forum is looking at other security features. Malcolm Bird, European head of Phone.com, the California-based mobile software vendor and leading WAP forum member, points out, "There are working groups in WAP looking at specific technology extensions such as links to SIM toolkits."

A year ago, when CI asked Dresdner what its users thought of mobile banking, the bank felt there was not a great deal of enthusiasm for the technology. Even those managing the project were not clear why anyone would send a text message to order a bank statement. It was felt the user would rather use a voice service. MeritaNorden only started trialing the mobile Solo service in May 1999 and was ready to launch in September of the same year, although the bank had to wait for another month for WAP phones to become available. By December the number of user log-- ins each day could be measured in hundreds.

There are a number of reasons for the varying degrees of success experienced by the two banks. As Harald explains, "We only offered the mobile service to users who were already familiar with Web-based banking." Even then he admits there are some tasks, such as financial planning, that are better carried out using a PC, and sees the two technologies as being complimentary rather than the mobile replacing PC banking.

There is one major advantage that Scandinavian financial institutions hold when it comes to launching mobile banking services, and that is the mobile penetration level in the region: 64.1% of people in Finland have a mobile phone, while the rate in Sweden currently stands at 55.2%. Merita already has 840,000 Internet users with identification codes that will also enable access via a WAP phone. The bank also boasts an access rate of 200,000 per month via GSM text messages. In some respects Merita's starting point for its own trial was beyond the end point of Dresdner's efforts.

Harald intends to evolve the Solo mobile service into a full m-commerce solution. He also sees it as a means of expanding the bank's existing intranet. "It will be an e-bank with limited access and will form part of a wider picture," he enthuses. "Then we will move away from e-banking in particular to e-business in general. At the moment we are not doing this using the mobile network, but there are plans."

Such plans would take the bank, and WAP, into an area Microsoft regards as its own territory. But the trials Microsoft is running do not extend beyond simplistic applications such as messaging and running a calendar. "Our initial focus is corporate messaging," explains Chip Wood, group manager for wireless strategy at Microsoft. "Banking is a very important application, but we have not included it in this trial."

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However, Microsoft, along with Oracle, is responsible for much of the hype surrounding the mobile Internet market. Oracle's chief executive Larry Ellison gave most of his keynote address at Inter@ctive 99 (which ran alongside Telecom 99 in Geneva last October) with a mobile phone in his hand. His presentation followed a similar address given by Microsoft's Bill Gates. Both men gave their audiences, and the assembled world's press, graphic accounts of how m-commerce in general - and their own software in particular - would bring about a second industrial revolution.

The computing industry is ready to believe that Microsoft is merely biding its time, and that, when the market is ready, the experience gleaned from trials and arm's length relationships will be turned into industry dominating operating systems and products. IBM had much the same view of the personal computer. The computing giant created a device which, in its heart, it felt was too small to be of any practical use. It then marketed PC technology to developers around the world, even though it could not shoe-horn its own applications into it. Watching IBM attack the PC market was like watching a scorpion being eaten alive in an ants nest. Microsoft's assault on the mobile industry may present a similar spectacle.

Chip Wood acknowledges that security is a limitation to the scope of Microsoft's current trial with BT. "You can set up Web interface to a database today, but security is an issue," explains Wood. "WAP is still evolving its security model and we are supporting WAP throughout our products - for example, in our mobile explorer," he adds.

Phone.com's Bird confirms Microsoft's involvement in the WAP Forum. "Microsoft needs to tap into wireless expertise. At present it is backing WAP as part of its approach and it will come to see that the server concept in WAP does hold some vital benefits - at least for the next few years."

The worry for traditional software vendors, such as Microsoft and Oracle, is that handheld devices will become as easy to use for e-commerce applications as desktop and laptop PCs. And according to Bond at Analysys such improvements are underway. "User interfaces are improving," says Bond. "While there is an obvious trade off between small terminals and large screens, equipment manufacturers are making better use of the space they do have available."

Particular advances include the Nokia 7110 which, while not having a screen as large as the Ericsson R380, does have scroll bars. And at Telecom 99 Ericsson launched its Chatboard -- a mini keypad which plugs into a handset.

Software advances also help the m-commerce user. There are predictive text entry features which reduce the number of key presses. "Analysts thought person-to-person SMS would be too clumsy for people to adopt," explains Bond. "But we are seeing a rapid growth of SMS throughout Europe."

Now that MeritaNordbank has its mobile banking service up and running, and the security technology in place, extending it to cover more general m-commerce should be relatively simple. Harald's next target is share trading and retail applications. He is looking forward to the introduction of dual chip phones. "We will issue special cards with the customer's ID residing on a chip, and we will use BlueTooth technology for close communication. We are building the concept now and a trial should start this Summer," says Harald.

On the surface advances in technology and the resolution of security issues are driving m-- commerce in the same direction as conventional e-commerce. However, differences are emerging: e-commerce has evolved into e-business, as business-to-business applications become more common than business-to-consumer applications. Bond believes that this trend will not be followed in the m-commerce market. Applications such as banking, share trading and purchasing of tickets - for travel and events - will drive the market.

"Most business-to-business e-commerce applications will continue to be conducted using fixed networks," continues Bond. "This is because fixed networks are faster, cheaper and many of the staff who purchase within companies are desk-bound."

This said there are a small number of business-to-business applications. One example is Mercedes Benz, where the company's sales staff use Nokia Communicator handsets to access the company's database to obtain leasing and finance data when negotiating with clients at the customer's premises.

But as m-commerce applications spread beyond the banking industry and mobile networks become more robust so cellular networks will become a more attractive proposition. "We are seeing a number of operators around the world talking of closing down dedicated data networks and migrating customers over to the cellular networks," says Ovum's Hearn.

But it may be the computing industry which finds itself under the greatest pressure. Java became popular because the computing industry needed a software technology that was light enough on its feet do drive complex e-business applications. It also convinced carriers that, if they put their minds to it, the computing industry could squeeze its technology into a telephone handset.

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The Finnish banking industry has demonstrated that, despite claims to the contrary, mobile users are interested in accessing their accounts using data as well as voice. The interest has been great enough for mobile carriers, attracted by the revenues from data minutes and added services, to ask the computing industry to give its technology one more squeeze.

Peter Kruger can be reached at pkruger@steinkrug.co.uk