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Fast fact:
'90% of people would be willing to pay extra for the convenience of making m-commerce purchases.' - MORI research poll

Laying the foundations
Source : Mobile Commerce World

Mobile Commerce World logo (2 June 2003)

Ashley Ward, Upaid, discusses why successful mobile payment initiatives will require payment schemes that work for both operators and financial services organisations.

There are a number of initiatives which are attempting to define the standards and unite the parties required to enable mobile payments. The recent formation of the MPSA has fuelled debate in the industry on how to further this common objective. Critics of the association have said that the MPSA is just one of many bodies of 'its kind', set up by the telecommunications industry, and that the degree to which it will be able to further m-payment services remains to be seen. Analysts, financial services organisations and even many operators themselves are expressing a certain degree of scepticism about the mobile industry's ability to orchestrate wide-scale m-payment initiatives.

The formation of the MPSA is, however, a pioneering move by some of the industry's largest operators, and interested party discussions following its foundation have further highlighted what must be done to make wide-scale mobile payments a reality. There are fundamental issues which must be addressed to ensure that these services become a reality sooner rather than later.

Uniting Operators and Financial Services Organisations

Successful mobile payment initiatives will require payment schemes that work for both operators and financial services organisations. Mobile operators are continually looking for new revenue streams and improved bottom line performance; banks are evaluating new and innovative ways of attracting and retaining customers as well as ways of converting cash transactions into card-based transactions in order to increase processing volumes and revenue streams. Card associations naturally see an opportunity to increase transaction volumes by entering the potentially lucrative mobile space, and one of their first objectives will be to attract prepaid customers as potential new cardholders. Key to the success of the MPSA and any other mobile payment initiative is the degree to which operators work in tandem with card associations and financial institutions to deliver a coherent, practical and easy-to-use payment scheme which has a clearly defined business case for each of the participants involved in enabling m-payments. Services must also demonstrate clear benefits for all parties and offer a compelling consumer proposition for mobile users. Cooperation between the mobile and financial services worlds will accelerate the pace of initiatives and enable a greater reach, potentially enabling m-payments on a global scale.

Training the user

A prerequisite and perhaps the most important of all to make m-payments a reality is for users to view their handsets as more than just a phone. Consumers have many choices for completing everyday payment tasks, and simplifying those tasks using mobile technology while minimising changes to consumer purchasing behaviour is essential. The benefits of m-payments will only be realised with applications that require neither radical changes in the way consumers make payments or highly sophisticated skills to use their handsets. Today's bill payment approach using SMS is ideal to give users experience in making mobile payment and to train them in the advantages they will experience from new applications later on when using next-generation mobiles.

Simple, low-risk services such as SMS-based payments will help consumers become accustomed to using their mobile phones as transaction authorisation devices. Security mechanisms that users can understand, such as PIN authentication on handsets for m-payments, can help facilitate this evolution so that users grow to view their handsets as portable transaction initiation and authorisation devices. Basic, simple, and practical applications requiring simple response messages with PIN authorisation to make payments, such as SMS-based top-up of prepaid phones from credit or debit card accounts, are an ideal starting point. This 'education' of the consumer to use his handset to authorise payments is essential, starting with prepaid top-up and working towards more general bill payments, and will give users more confidence in mobile technology as a payment channel, ensuring rapid adoption of mobile payment services.

Successful mobile payments initiatives mean capitalising on current infrastructure and mobile phone technology. Today's 2G handsets can be used for simple payment services which will increase data traffic across networks. The obvious way to do this is to encourage m-payments through the use of SMS. The question is, is this increase in traffic flow across networks enough for mobile operators in terms of earning additional revenue? Or will they want to get some of the bank or card association action as users are able to use their mobile data device at will for smoothing out the hassles of making payments?

Enabling Technology Choosing Wisely

Another key to ensuring successful mobile payments initiatives is the underlying technology which powers these services. As banks, mobile operators and card associations examine the ways in which current and future generation mobile handsets may be used as a means to authenticate and authorise payments, one of the main problems facing these organisations is how to implement the wide variety of connections required to support the diverse range of applications currently being presented to the market.

To date, the mobile payment solutions which have been made available have been restricted typically to one bank, one operator and a limited number of merchants. Thus, a huge gap exists between designing a payment solution and actually delivering a solution that is widely usable and practical.

Essentially, a central and ubiquitous payment advice and clearing service that enables all parties to simply 'plug in' must support multiple connectivity, enabling banks, mobile operators, card associations and merchants to offer end-to-end payment authentication and authorisation advice for mobile payment services. Such a service should incorporate the necessary security and audit trail requirements necessary for a viable m-payment service, enabling end-to-end mobile payment processing...

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