payforit on your mobile
October 2007

There are myriad of hindrances to any small company wanting to offer service or content on mobile or cell phones. These include the real challenge of how to develop applications that run on multiple phones (Mobile apps: Java just doesn�t cut the mustard?), the challenge of getting appropriate bandwidth and low latency in the data connection that would make using a mobile business or entertainment service a pleasure to use (WAP, GPRS, HSDPA on the move!) and the arcane menu structure on most phones.The new iPod and iPhone bring a real breath of fresh air to this becalmed area of user interface development.

One of the other big hindrances is payment mechanisms.

Current methods can hardly be said to be easy to implement or available in every country. One of the principle mechanisms is to send a Premium SMS (often known as a Reverse Billed SMS) to a customer's mobile or cell phone. The problem is that not all operators around the world support this mechanism so for any company wanting to offer a mobile web service to anyone around the world, as is the want for an Internet service, this approach provides only limited usability.

There are quite a few companies that focus on simplifying the task of managing this patchwork service. Two that come to mind are Bango and MXtelecom. PSMS paying is also quite error prone and I have seen reports quoting error rates as high as 30%!

It has always seemed rather strange to me that SMS based billing is used for mobile Internet billing as it looked like a desperate clinging-to-straws tactic because there was no other way of doing it. We should remember that no mobile operator foresaw the success of SMS and it looks like the industry also failed to see the need for a simple to use mechanism for 3rd party service provider billing. SMS should be used for communication and not as an awkward-to-use and only-available-in-some-countries mechanism for mobile content payment. How can a small company really rely solely on this approach when it represents their sole mechanism for obtaining worldwide revenue?

None SMS billing is called WAP billing in the industry, but this approach is also rather confused as each operator / country takes a different view. In some countries there is a clearly accepted role for 3rd party merchants who manage transactions by consumers and pass revenue onto the service provider after deducting their margin and maybe the mobile operator's margin. In other countries consumers are passed on to the particular operator's portal for payment.

For an Internet company who need to offer service on a mobile phone there is an 'easy' way around this issue and that is to create a subscription based model where monthly or annual fees are prepaid via an internet payment page using PayPal or WorldPay. This can be used to buy 'credits'. Pre-paid credits are then spent on the mobile until they run out. This approach is particularly appropriate for buying content such as ring tones or videos on a mobile phone. Again, this is often a workaround solution because the global mobile operator community has failed to come up with a ubiquitous easy to use solution.

The UK is as challenging a country as any other in regard to mobile payments although it has always been in the vanguard of providing solutions. Indeed, one of the mostly widely read of my posts was of a payment merchant services company going into receivership earlier this year (Velocity Pay in receivership). So it is good to hear that at long last the industry has launched a solution that works - Payforit announced earlier this year. According to the BBC - Mobiles to become digital payment wallets

Payforit is a cross-network mobile payment scheme. It is also called 'trusted' (but this needs to be demonstrated rather than claimed up front) because it has been set up as a collective initiative by all of the UK's largest mobile operators - Vodafone, Orange, 3, O2 and T-Mobile.

What I really like about the offering is that it the consumer experience is as simple as it can be:

  • Select the product, content or service

  • Transfer t to the Payforit page and select Pay now

  • Download content if appropriate

  • The transaction will placed on your mobile phone bill

You can see a customer experience demo here and download the scheme rules

From a mobile industry perspective the following claims are being made for the initiative:

  • Payforit will accelerate consumer confidence in mobile payment

  • Payforit will increase your retail opportunities, and

  • Payforit improves the billing success rate s of mobile services

The promise is that all transactions are recorded and auditable and backed up by details logs that cover two years of transactions and there should be no need for 3rd parties to allocate resources to chase payments.

If Payforit achieves these goals then it will be really good for the industry and, with the brands that lie behind it, there is no reason it shouldn't. However, as a service provider you need to work through on of the Accredited Payment Intermediaries such as Tanya, 2ergo, Netsize, Bango, Tanla or WIN and they will take a margin in addition to mobile operators.

To my mind however there are two flies in the ointment which have much more to do with the nature, culture and attitudes of the global mobile phone operator industry:

  1. My main interest as an technologist and an entrepreneur is the Internet world. One of real breakthroughs with that world is that any individual anywhere in the world is able to offer a service to any individual anywhere in the world - and get payment - with ease. In Web 2.0 speak, the 'long tail' or millions of individuals can be targeted directly significantly reducing start-up risk and maximising the opportunity for early revenue.

    There is much talk these days in the mobile world of Mobile Internet and of how a mobile or cell phone is the natural inheritor of the Internet platform over and above the personal computer (That Book! Mobile Web 2.0!). Unless the global mobile industry get their billing act together to make the billing of an individual user - anywhere in the world - of a mobile service as simple as on the Internet, then 3rd party service or content providers will continue to be held back from achieving significant success.

  2. I have also read in some of the promotional material for payforit: "The final advantage is revenue share. WAP billing isn't on an i-mode level yet but 80% of merchant revenue share starts to be acceptable for the industry..."

    I wouldn't say revenue sharing is an advantage! For a small company focused on delivering their service or application on a mobile phone, accepting that maybe 20% of their revenue going out of the door as a margin to an accredited payment intermediary and mobile operator does not look to be a first step on the path to success. A possible combined margin of 20% looks rapacious to me compared to settlement costs on the Internet. I hope it turns out to be less than that!

Payforit is a big step forward for the UK mobile industry. If the global industry bodies would push similar initiatives around the world that could be accessed through a single global gateway and at sub 5% charges, the industry could really stand up and be proud. We could then really foresee the day that Mobile Internet would really equal the Internet in enabled revenue terms.

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