M-PAYMENTS COVER FEATURE
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onceptually the mobile phone and topping up one another’s prepaid accounts,
the act of payment seem a natural waiters are tipped in the same way. Finnish
match—their combination a good idea. drivers have been paying for parking with
But, as is the case with many of the good ideas their mobile phones for years and ever more
this industry has had, material success on a users are buying content for their phones,
grand scale remains elusive. The problems from their phones.
are familiar: the use case is difficult to define, But certainly the m-payments space has
there are various technological solutions, not developed at the pace or in the manner
which generally lead the demand, and the that might have been envisaged nine or ten
industry is reaching beyond the bounds of years ago. Then, all the talk centred on mobile
its natural habitat. operators essentially becoming banks or credit
The sector is fragmented, geographically, companies. We’d all be using our phones to
technically and in terms of the complex value buy televisions or white goods, the charge
chain that needs to link up in order to make would go on our mobile ‘bill’ and operators
things happen. It is so fragmented, in fact, would cream in the interest as we paid off
that it’s almost difficult to define it as a sec- the sums over a period of months. The banks
tor at all. Like almost every application, save didn’t like this idea at all, and were often on
voice, messaging and internet access, mobile hand to talk it down. Popular opinion is that
payments will be all about taking a particular the banks were right.
flavour of product to a particular flavour of “We know from our experience that op-
market—there is no universal service. erators don’t understand payments and
There are some challenges which are they don’t understand risk management,
peculiar to mobile payments. The history which is a critical factor in terms of dealing
of financial transaction varies enormously with fraud, chargebacks, things like that,”
from country to country. In Japan, credit card says Simon Cavill, chief technology officer
ownership is comparatively low for example. at Mi-pay. “In the West, we have two very
The Japanese have a history of using cash for grown up industries, with their own rules
big ticket items. In the West, card payment is and regulations, their own controllers and
widespread and cash is on the wane. In certain their own tight government intervention on
Middle Eastern markets the same people own a number of levels,” he continues. “In Europe
the banks and the mobile operators, removing the EU has drawn a line in the sand and said
barriers to co-operation. In some developing to the mobile operators that they will not be
countries many people are ‘unbanked’ and banks. If a bank goes down, the government
have little or no familiarity with the concept guarantees your money. If the mobile operator
of electronic payment. Crucially, people take goes down, there are no guarantees.”
an awfully long time to modify their pay- It is perhaps because operators’ ambitions
ment habits. in this direction have been effectively thwarted
Terry Trench, senior vice president for com- that m-payment has been so slow to develop
mercial operations at m-payment solutions in the West. As banking or credit institutions,
provider U-Paid: “When ATMs (automatic the revenue streams would be clear and pos-
teller machines) came out 40 years ago, they sibly rich. As just one part of the m-payment
couldn’t get more than 30 per cent penetra- chain, these streams are not so apparent for
tion.” Despite the simplicity of the service, and the carriers. “The operators are used to high
the increased ease of use that the machines margins,” says Alan Goode, an analyst at
offered, people still preferred to queue up in a Juniper Research and author of the report
bank to access cash and account information. Mobile Payment Strategies & Markets 2007
“What had to happen was that we had to wait - 2011. “With m-payments, it’s a case of ‘why
15 years,” says Trench. “During that time you should we do it? What’s in it for us?’”
had a demographic shift. A lot of people died You only have to look at how the value of the
and a lot of young people grew up understand- m-payment market is forecast. Not, as with
ing that ATMs were the norm. These things mobile TV, or location based services, in terms
take time to bed down and mature.” of operator revenue. Rather it is expressed in
So, does the industry have no option but terms of consumer spend. Juniper puts that
to sit around, waiting for a generation of spend at £22bn in transactions by 2011.
consumers to die? The banks do have some motivation, though.
It’s not that bleak, of course, and there are Cash is very expensive to distribute, handle
positive stories. Most readers will be familiar and insure. In markets with high penetration
with the widespread use of prepaid mobile of credit and debit cards, banks are doing all
credit as a new currency in markets like the they can to wean their customers off their
Philippines. Friends settle small debts by trusty banknotes. So they’re downsizing »
Mobile Communications International | First for news, best for business 33
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