Mobile payment

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Mobile payment (also referred to as mobile web payment or WAP billing) is the collection of money from a consumer via a mobile device such as their mobile phone, SmartPhone, Personal Digital Assistant (PDA) or other such device.

Mobile payment can be used to purchase any number of digital or hard goods, such as:

  • Music, videos, ringtones, games, wallpapers and other digital goods.
  • Books, magazines, tickets and other hard goods.

There are two primary models for mobile payments:

  • Premium SMS based transactional payments
  • Mobile web payments (WAP)

Mobile payment solutions have been widely adopted by a wide range of leading companies, for example World Wrestling Entertainment for the sale of audio and video wrestling content.

Mobile payment systems are also used in developing countries for micropayments. [1]

Contents

[edit] Premium SMS based transactional payments

This is where the consumer sends a payment request via an SMS text message to a shortcode and a premium charge is applied to their phone bill. The merchant involved is informed of the payment success and can then release the paid for goods.

Since a trusted delivery address has typically not been given these goods are most frequently digital with the merchant replying using a Multimedia Messaging Service to deliver tbe purchased music, ringtones, wallpapers etc.

A Multimedia Messaging Service can also deliver barcodes which can then be scanned for confirmation of payment by a merchant. This is used as an electronic ticket for access to cinemas and events or to collect hard goods.

Transactional payments have been popular in Asia and Europe but are now being overtaken by mobile web payments (WAP) for a number of reasons:

  1. Poor reliability - transactional payments can easily fail as messages get lost
  2. Slow speed - sending messages can be slow and it can take hours for a merchant to get receipt of payment. Consumers do not want to be kept waiting more than a few seconds.
  3. High cost - There are many high costs associated with this method of payment. The cost of setting up shortcodes and paying for the delivery of media via a Multimedia Messaging Service and the resulting customer support costs to account for the number of messages that get lost or are delayed.
  4. Low payout rates - operators also see high costs in running and supporting transactional payments which results in payout rates to the merchant being as low as 30%.
  5. Low follow-on sales - once the payment message has been sent and the goods received there is little else the consumer can do. It is difficult for them to remember where something was purchased or how to buy it again. This also makes it difficult to tell a friend.

[edit] Mobile web payments (WAP)

This is where the consumer uses web pages displayed on their mobile phone to make a payment. This process is quickly replacing premium SMS based transactional payments for digital content and also enables the sale of physical goods. Using a familiar web payment model gives a number of proven benefits:

  1. Follow-on sales where the mobile web payment can lead back to a store or to other goods the consumer may like. These pages have a URL and can be bookmarked making it easy to re-visit or share with friends.
  2. High customer satisfaction from quick and predictable payments
  3. Ease of use from a familiar set of online payment pages

Mobile web payment methods are now being mandated by a number of mobile network operators.

A number of different actual payment mechanisms can be used behind a consistent set of web pages.

[edit] Direct operator billing

A direct connection between the operator billing platform provides a number of benefits:

  1. Simplicity - the operators already have a billing relationship with the consumers
  2. Instantaneous payments giving the highest customer satisfaction
  3. Accurate responses showing success and reasons for failure (no money for example)
  4. Security to protect payment details and consumer identity
  5. Best conversion rates from a single click-to-buy and no need to enter any further payment details.
  6. Reliability that builds confidence
  7. Reduced customer support costs for merchants and operators
  8. Higher payout rates with operators such as Vodafone in the UK delivering up to 80% in some cases

[edit] Credit Card

A simple mobile web payment system can also include a credit card payment flow allowing a consumer to enter their card details to make purchases. This process is familiar but any entry of details on a mobile phone is known to reduce the success rate (conversion) of payments.

In addition, if the payment vendor can automatically and securely identify customers then card details can be recalled for future purchases turning credit card payments into simple single click-to-buy giving higher conversion rates for additional purchases.

[edit] Online (such as PayPal)

Online companies like PayPal and Google Checkout also have mobile options. These require customer to register with a personal pin before making payments. Subsequent payments also require a pin code to be used. This is known to lower the success rate (conversion) for payments.

Companies like PayPal and Google Checkout can be integrated with directly or can be combined with operator and credit card payments through a unified mobile web payment platform such as Bango plc.

[edit] Juggling payment methods, operators and countries

All operators and countries have different rules and regulations for mobile payments. Content classified as "U" (universal) rated in Europe may be classified as "R" (Restricted) in the USA. These rules affect which payment methods can be used for any given transaction.

[edit] Integrating

Premium SMS payments require the creation of shortcodes and different keywords to be allocated and approved for each piece of content being sold. Content approval must be done by the payment provider or operator and is a time consuming process

Mobile web payments are typically faster to set up with some companies claiming minutes. Integration with mobile web payment platforms can provide global coverage and a complete range of expanding operator, credit card and online (PayPal etc) payment solutions all for a single one-time integration. Alternatively the same setup time can be used to integrate directly with one provider such as Bango plc

[edit] Consumer versus merchant initiated

Payments can be initiated by both the consumer or the merchant, although consumer payment is becoming the most common since it suits the personal nature of mobile devices.

  1. Consumer focused - the consumer chooses to make a mobile payment. They interact with the payment server using their mobile device to authenticate and authorize the payment. They are subsequently presented with status showing confirmation of the successful transaction or failure with a reason. Extensions to this include Near Field Communications or Contactless Payment options using additional hardware built into the mobile phone.
  2. Merchant focused This is similar to the consumer focused scenario, however the transaction is entered and completed by the merchant (or their representative). This is similar to Mobile EFTPOS except it is processed via a mobile phone/device.

[edit] Mobile payment providers

International mobile payment vendors offer services and applications that range from the recharge of prepaid accounts via SMS, to electronic bill payment and presentment, to billing for mobile content.

Premium SMS payment can be provided by a large list of SMS aggregators including mBlox and MX Telecom.

Mobile web payment for digital goods such as music, videos, ringtones, games and wallpapers is provided by Bango plc, mBlox and Tanla Mobile.

Payment for goods and services via mobile is provided by Upaid Systems and Black Lab Mobile, Verrus Mobile Technologies, RingGo, Easy Park, NOW! Innovations, Park-Line, mPark and ParkMagic use contactless payment over mobile phones to pay for on- and off-street parking in specially demarcated areas. Parking wardens may enforce the parkings by license plate, transponder tags or barcode stickers. First conceptualized in the 1990s, the technology has seen commercial use in this century in both Scandinavia and Estonia. End users benefit from the convenience of being able to pay for parking from the comfort of their car with their mobile phone, and parking operators are not obliged to invest in either existing or new street-based parking infrastructures. Parking wardens maintain order in these systems by license plate, transponder tags or barcode stickers or in the case of the ParkMagic system which is used in Ireland and the USA they read a digital display with their eyes in the same way as they read a pay and display receipt.

Other vendors are deeply related to mass-transit networks, like the Mobile Suica used on the JR East rail network. Osaifu-Keitai system, used for Mobile Suica and many others including Edy and nanaco, has become the de-facto standard method for mobile payments in Japan. Its core technology, Mobile FeliCa IC, is partially owned by Sony, NTT DoCoMo and JR East. Mobile FeliCa utilize Sony's FeliCa technology, which itself is the de-facto standard for contactless smart cards in the country.

Applications not related to transport or parking include project such as m-banxafe, in Belgium, where all mobile operators and banks have agreed on a common secure signature application, hosted on the handset's SIM card, which is already used for prepaid top-up and face-to-face payments.

November 2006 saw the launch in of the electronic payment service pago, pronounced "paygo". pago allows anyone with a New Zealand bank account to send cleared funds via mobile phone or the internet to another person or participating retailer in real-time.

The company Global Technologies Investment, Inc. setup several operations in Latinamerica asociated with local banks. The purpose is to serve unbanked and underbanked population, and penetrate within the grey economy with enhanced services. They have operations in Costa Rica, Ecuador and Mexico. They are developing new relationships in other countries and enhancing the services to offer m-Remittances, m-POS, m-Payments and m-Transactions.

[edit] Further reading

  • The real digital divide, The Economist, Mar 10, 2005 [2]

[edit] Notes

  1. ^ Micro-payment systems and their application to mobile networks, InfoDev report, Jan 2006 accessed at [1]

[edit] See also

[edit] External links

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