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2008 will be make or break for Payforit, as lack of a consistent service to consumers, the rise of ad-funded models and the threat from other payment mechanics on mobile all come together to put the newly introduced m-payment mechanism under pressure. That was the sobering outcome of a recently held NOC M-Payments roundtable in London hosted by MIG and chaired by NOC director of communications Andrew Darling.
While the industry has broadly welcomed the introduction of the proto-WAP billing service to the mobile market — with Bango recently reporting that, of the first million Payforit transactions it has completed 92 per cent of transactions were successfully with an error rate of less than one per cent — content companies, service providers and other payment services all question whether it is the long term solution to the demands of the content and retail communities.
MIG, which has invested around £1million in supporting Payforit, expressed its disappointment that there is no consistent approach to Payforit across all operators. Barry Houlihan, MD of MIG, told the seminar that “Incompatibility between MNOs is a huge problem. I like the stance that O2 have taken with it, but we have to get the other operators to do it too.”
Part of the problem, suggested Sham Careem , MD of MoMac, is that the idea behind Payforit was to create a trusted brand for consumers following the problems with PSMS-based scams and subscription issues. “And I don’t think that has happened,” he said. “[Payforit] means nothing to consumers. The MNOs need to send out the message to consumers that it is there and it is safe to use.”
MIG’s Houlihan agreed. “[MIG] wants to see Payforit branded all over the place as a brand to build a marketplace around. I want to see it adopted as a payment mechanism for anything, not just digital content.”
But until all MNOs are actively involved along the lines of how O2 run Payforit, O2’s head of interactive messaging, Iain McCullum, told the panel, then he is not prepared to do that.
“In my view, other operators are not playing ball with me,” he said. “We have been bedding the process in and it’s not been an easy ride: it is complex and involves new layers of payment intermediaries. It now looks good and works well, but are we going to really push it before its ready? No.”
One of the teething troubles surrounding where Payforit now goes is that increasingly aggregators, service providers and billing intermediaries are all demanding greater flexibility of tariffs offered by network operators. “We have put in a lot of effort in to getting MNOs to add new tariffs: it should be the other way around,” said Houlihan, “We need to look at how it works in other regions. In Singapore you can go up to S$200 ( £60 ) on mobile, it is very flexible and that encourages use.”
And this is backed up by studies by Juniper Research, that people want to use their phones to buy more than just cheap content for the phone.
“My research shows that people even in the US are starting to use their mobiles to buy things such as jackets worth $200 via mobile,” said Alan Goode, analyst at Juniper Research. “Now that the iPhone and top end mobiles allow hook up to wi-fi this becomes more attractive. Let’s not forget, it takes time to boot up a PC, log out, find the site and buy goods. The mobile, typically, is already on and connected. It is ideal for impulse purchasing of anything.”
Malcolm Vernon, director, global strategic business development at PayPal agrees, “People need choice as what they use to buy goods: credit card, bank account or phone bill, it needs to be flexible. The advantage of something like PayPal is that we hold the users address so that step of the process is covered and it gives the merchant valuable CRM.”
MoMac’s Careem pointed out that it isn’t really a question of either/or, but rather that “none of these things are mutually exclusive. Payforit and PayPal will both have a role to play. A simple £2.50 click will be a Payforit transaction. Buying something for £15 will be a PayPal one. The real issue,” he believes, “is that merchants not used to using mobile will not put up with giving 20 to 30 per cent of the transaction to the operator: operators are going to have to shift how they do this.”
This beggars the question as to whether MNOs have a role to play in payments at all for all but the smallest digital content transactions. Visa, for instance, charges two per cent for using its services, but carries £7 trillion in revenues, and can afford to do so. MNOs can’t really afford to drop the cut they take from mobile transactions and thus leave the industry at a cross roads.
So does mobile banking hold the key to developing mobile payments and will it see operators fulfill on the long held belief that they will in effect become banks?
“Mobile banking is seeing something of an renaissance at the moment, with banks starting to offer financial data over mobile and soon financial services such as funds transfers and payments,” answered Juniper’s Goode. “MNOs and banks are starting to co-operate and these trasnsactional mobile banking services will lead to mobile payments.”
And there is a lot at stake. Mobile payments is tipped by Juniper to be worth $22billion by 2011. Compared to the $1.96 trillion generated by MasterCard alone it is small, but it is a valuable market nonetheless. Yet how can network operators, handset makers and banks work together to develop mobile payments services?
“We decided not to become a bank: it is a huge risk and a step change to our core business,” said O2’s McCullum. “FSA regulations [which, as a bank MNOs would be subject to] are very stringent and we don’t know enough to operate in that space. Do we want to encourage banks to substitute some of our existing business? No.”
“MNOs don’t want to be banks, but they have to introduce more tariffs and be more flexible to get more people to use mobile payments,” stressed MIG’s Houlihan.
The whole question of flexibility overshadows the m-payments space. Many consumers and merchants want to see a multitude of payment mechanisms on offer to consumers to encourage them to use the mobile to buy goods and services of all price points. The rise of near field communications ( NFC ) muddies the waters further
As MoMac’s Careem summed up: “NFC brings a lot of new opportunities and banking will really shake things up. In next 12 months we have to put PayPal on mobile. It is up to the MNOs to now educate users that Payforit is safe and useful if it is to have a future.”
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