It was reading ‘Being Digital’ many years ago that first alerted me to the idea of micro payments. Rather than paying a subscription to a magazine, for example, why can’t we pay a few pence to access an article that we are interested in?
I was interested to see someone from the mobile aggergator, Oxygen8, writting about the problem with mobile micro payments.
Arguably we have a good mobile micro payment system already in the form of Permium SMS (PSMS). It is, in many ways, the idea format – simple, secure and universal. Not only that, but PSMS has age verification built in. PSMS really took off with the ring-tone market, quickly followed by text voting and charity donations. However there is one big problem with PSMS. The mobile networks take around 66% of the value of the transaction. On a credit card transaction, only 4% of the cost is paid for the transaction. There are othe problems too. When it comes to goods and services, PSMS can only be used for mobile products: ringtones, games or apps. There are some PSMS shortcodes that can be used for website access, but you couldn’t use it to buy a newspaper for example. Added to that, VAT is charged on the full value of the SMS. If you are using PSMS as a payment system for services that already include VAT, then technically VAT should only be charged on the transaction cost itself.
I think many of us are waiting for a mobile micro payment system. I would love to hope on a bus, get out a taxi or pop into the newsagents and wave my mobile phone to pay for things. Then there all the remote services from articles on the internet to booking tickets that would be so much simpler if I could just pay directly through my phone. Taking the concept a bit further, why shouldn’t I be able to pay for everyting through my phone where my monthly bill look something similar to my credit card bill?
A few years ago the mobile networks attempted to address the micropayments issue by introducing something called PayForIt. This was a mobile web, one click payment system for transaction values up to £10. I doubt that many people outside the mobile industry have heard of pay for it. The networks have invested very little money in promoting this system. And at the same time, they are still taking massive transaction fees for each payment, so from the merchant’s point of view, even though there is potentially a higher uptake with PayForIt than credit cards, the cost per transaction doesn’t make it viable.
Cashless and online payment systems have had something of a chequered past. Does anyone remember CyberBanx? Or Mondex, a cashless card invented by HSBC? Or the more recent attempt by banks at mobile payments called mpay? In fact, the only online payment system to have become universal is PayPal thanks intially to the online porn industry and more recently to ebay. But even PayPal mobile has stummbled at the first hurdle. Does anyone actually use it?
So what is the future for mobile micro payments? The short answer is, it will be a difficult one. Whilst it would seem that the mobile networks could get their act together with lower transaction fees, it’s unlikely they will. Apart from the fact that there is no unity amongst the networks to make such an agreement, there appears to be no interest for them to do it. It’s possible that PayPal will get their act together with mobile payments, as they are doing with the Blackberry App Store, but at this stage I don’t see it going much beyond this limited scope.
Probably the best opportunity for mobile micro payments comes from NFC, near field communications and RFID chips. These are secure chips that are used in payment systems such as The Oyster Card, used for London’s Transport. In fact, Oyster could be the UK’s best bet for a cashless micro payment system. All they need to do is stick the RFID chip into mobile phones. We already have readers on public transport and many newsagents in London. All the needs to happen is that it is extended to other outlets, and voila! In terms of paying for online or mobile though, there is still considerable work to be done with the mobile networks. There are many examples worldwide of NFC payment systems, and mobie NFC working succesfully, so maybe there is some hope for the UK.
I would love to see a universal mobile micro payment system. By universal, I mean one that everyone can use without difficulty. Many people do not have or use their credit cards. This is particularly so in developing economies such as China. Given the current state of affairs, I think a universal mobile micro payment system is a long way off.