Opening up the operator innovations in payment

Mobile commerce is at a turning point, but then industry players and analysts have been predicting new turning points for years. The real news is that the next step in market evolution will happen largely outside of the operators’ control, says Ashley Ward.

Network providers in Europe are waking up from their dream of a full service offer paired with full ownership of the customer. Conventional digital content revenues have reached a plateau. Ringtones have peaked and revenues have plummeted since 2004 as new players have taken to the stage of mobile commerce, driving innovation in a new open market environment.

Take the PayPal Mobile service. Not only is it operator-independent, but it has access to 100m users worldwide.

The ability to use the mobile as a channel for payment of all kinds of goods, by all types of merchants is a development operators will not be able to ignore. Instead we hope they will start to see it for what it is: a huge revenue opportunity and a chance to promote loyalty – and not as a threat to their existing customer relationship.

Choice is key to customer loyalty. It needs to go beyond content selection and must extend right through to different payment models. It’s all very well having ringtones and wallpapers billed to the monthly account; but for subscription-based services such as mobile TV or adult entertainment, operators offer customers very little choice in terms of payment.

Payment options
They can either be paid for by ordering online or by having the value deducted from the phone account or pre-paid balance, which poses several problems for all involved in the process. Operators run the risk of losing out on voice revenues to content; customers have the inconvenience of using up valuable airtime in the purchase of content – or having it billed to their account – and merchants selling the content tend to make very poor returns.

The operator has a responsibility to encourage choice, by introducing new and alternative payment methods that eliminate the ambiguity in payment for subscription services.
It is all too easy for users to forget they are being billed in the first place. A business user for example, wouldn’t want there to be any trace that adult content has been purchased on a monthly bill.

The payment solution needs to provide greater transparency for the end user, to allow them to be charged directly for content rather than as an addition to the monthly phone
bill. In doing so, new market opportunities are created.

So where is the evidence? Already, companies like Visa, Eposs and PayNowSMS are pioneering solutions to manage mobile phone bills and the payment of content. Mobile operators across Central and Eastern Europe, Middle East and Africa last year signed up to Visa’s Mobile Service VMS. This innovative mobile payment solution helped to create new market opportunities using the mobile phone, by encouraging operators across the region to sign up to Visa’s m-commerce service. It allows mobile phone users to pay phone bills or top-up prepaid mobile phones from the handset, with funds debited from any registered Visa credit or debit card.

For the end-user the service is simple; after assigning a Visa card to their phone number, users can recharge airtime, settle a mobile bill or conduct other bill payment functions anytime, anywhere, even when abroad, simply by sending a message from the handset.
In the UK, payment provider Eposs is leading the way in innovative payment options for mobile users. Its service for over-the-air prepaid top-up and funds transfer is directed at mobile operators, retailers and card issuers alike. Other types of bill payment and content purchases by mobile phone will be included in the package – evidence that the mobile phone can drive new market opportunities.

Catalyst
Providers of adult content have also moved into offering the payment options on top of their content offer. The service, an alternative to billing through the operator, enables merchants to accept card payments for content. Merchants joining the new scheme can benefit from lower cash collection costs compared to premium SMS and reverse billing, where operators typically charge higher fees. End-users register their details just once with PayNowSMS and have the freedom to purchase content from any merchant displaying the PayNowSMS logo.

We predict that services like will act as a catalyst in the mobile content industry, enabling more merchants to sell their products at an affordable commission rate.

Upaid conducted a survey amongst industry insiders at a recent industry event, which revealed that the current system of billing to the mobile phone account is the main inhibitor of higher value m-commerce. The research also showed that three in four of these industry insiders expect higher value m-commerce to take off within the next two years. Examples of independent payment models like those highlighted here can only result in more choice for consumers and an unprecedented growth in the content market.
As the industry is getting ready for the next phase in mobile commerce, perhaps it is the operators who are holding us back?

Ashley Ward is CEO of Upaid, a specialist in mobile payments applications and services