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Fast fact:
'The European prepaid mobile market is worth €35bn Euros in revenues to mobile operators'

Making mobile payments work

Mobile Commerce World logo (01 September 2003)

One of the hottest issues in the payment industry amongst all the payment technologies is how mobile payments can be facilitated in a useable and practical way.

With chip and PIN-based services being introduced and the launch of Simpay (the brand chosen for the Mobile Payments Services Association), one of the hottest issues in the payment industry amongst all the payment technologies is how mobile payments can be facilitated in a useable and practical way.

Based on the debate ensuing among the industry's leading companies, it is clear that service providers must find ways to entice consumers into more than just the idea of paying for goods and services using their handsets. Apart from making the service available ubiquitously, the biggest obstacle is going to be the level of user uptake in these new payments services. To achieve mass adoption services must be simple for users and make life easier (essentially to accomplish what are normally boring and laborious payments tasks), it has to be quicker, easier than writing a cheque or doing an internet banking transaction and most of all, done on the move...or on the beach!

Consumers are often apprehensive about adopting new technologies into their everyday lives, as the findings of a recent OMD Snapshot survey recently highlighted. When participants in the survey were asked whether they would contemplate signing up for a mobile payment service, nearly two-thirds (64%) of respondents said they would not, hardly surprising when you consider how the industry has historically produced cumbersome and complicated new applications that don’t actually improve the lot of their customers. It is clear that there is still considerable work to be done and that operators and financial services organisations need to ensure that the services they offer are simple and attractive enough that consumers will want to use them.

SMS holds the key

SMS, because of its simplicity, popularity and most importantly its availability, is a key medium that can be leveraged to usher in the new era of mobile payments. SMS has already become an accepted method of communication for both personal and business use and is widely used by a variety of age groups. The Mobile Data Association predicts that the total number of SMS messages that will be sent in the UK this year will reach 20 billion. Also, SMS has been widely accepted by many users for a number of limited services. A great example is that SMS is the preferred payment means for paying for the London Congestion Charge with users inputting a simple PIN into an SMS to pay their £5 fee anywhere, easy, quick – done, and all you had to do was fill in a simple registration document on the Web.

Unlike Internet terminals, shops or ATMs, SMS offers an easier and more readily available payment channel and is available anywhere a mobile user may go. By using SMS as the method for authenticating and authorising mobile payments, users benefit from the simplicity and immediacy of being able to make payments anytime and anywhere. With SMS-based top-up of pre-paid mobile phones from credit/debit cards or bank accounts, users can recharge their pre-paid mobile accounts whenever and wherever they want and avoid the inconvenience of having to find an ATM machine, a shop that sells vouchers or keying in long, cumbersome account numbers on IVR systems. Early-stage applications such as this will drive adoption of mobile payments and will help to convince users of the benefits of using their handsets as transaction authorisation devices.

Pre-paid top-up from credit/debit cards and bank accounts is a good place to start establishing the mobile phone as a payment tool as this application is a simple and practical way for m-payment service providers to train users to be at ease with the concept of mobile payments. Once users become accustomed to using their handsets for more than making phone calls, more sophisticated applications such as PIN authorisation of high value transactions (where the user is there at the point of sale, on the end of a phone or online) can be introduced. PIN authorisation of all card transactions via SMS can be achieved way ahead of the global roll out of PIN authorisation devises at point of sale. Beyond that general bill payments via SMS for things such as utility and ticketing services can be offered, all making boring and laborious administrative tasks something you can do in a second whilst waiting for a bus.

This extra security, which can be further reinforced with interactive SMS communication with the user during the transaction process for additional purchase confirmation, can help to promote the adoption of new mobile payment channels. As payments advance in the future and we see more and more outlets demanding PIN authorisation (as currently seen on the Continent), we could well be using our mobile phones to enter the PIN at the Point of Sale as well as for mobile payments.

The challenges currently facing the launch of mobile payments are similar to those tackled during the launch of e-commerce in the late 1990s – who to involve and how, which technology to choose, where to start, how to maximise its potential, how to get users to register and how to ensure uptake far and wide.

In addition to successful user adoption through the use of SMS, fundamental to the success of organisations like Simpay and any other such mobile payment initiative is the degree to which operators work in tandem with card associations and financial institutions and the level of co-operation achieved to meet common objectives. And both parties should be actively involved not only in designing services, but should also be able to enjoy immediate benefits from these schemes.

The goal is to offer a coherent, practical and easy-to-use mobile payment system which has a clearly defined business case for each of the parties involved and ultimately, which end users will actually want to use. Not only does this entail simple, practical services which facilitate users' payment tasks, but also a system that sits in an 'independent zone' designed specially to enable operators and financial services organisations to come together to offer m-payment services to their collective customer bases, offering clear advantages and benefits for all participants. Collaboration between the mobile and financial services sectors will accelerate the speed of initiatives and facilitate a wider reach, possibly even making m-payments viable on a global scale...(cont.)

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