HomeInsightsOperator priorities all wrong on m-payments

    Operator priorities all wrong on m-payments


    Language gets a little heated

    Ashley Ward, ceo of payment services company uPaid, has launched a strong attack on mobile operators’ strategies on mobile payments and commerce, including the X-Pay initiative supported by Orange and Vodafone.

    Responding to the results of an informal survey carried out on behalf of Upaid at a recent trade conference about the are, Ward berated operators’ apparent inclination to retain control of systems even where they add no value, make limited margin and have even stated they have no intention of playing.

    Upaid asked a mix of operator representatives and industry specialists if they thought customers shoul be offered a choice in how they are billed for mobile content. Unanimously the survey sample agreed they should. But when they were asked who was in the best position to do this — payment providers (such as Upaid or Paypal) or operators, there was a fundamental and exactly equal split.

    “I was gobsmacked that a group of people like that were split right down the middle. But on the other hand every single person asked said, ‘Yes, there should be choice’.

    “So why is it that operators haven’t figured out that consumers should have a choice. If we are going to advance mobile commerce, they haven’t figured out that an off-operator billing model would work as well.”

    An original mobile industry initiative to manage off-operator billing, Simpay, foundered last year. Towards the end of 2005 Orange and Vodafone committed to a new joint approach on billing, called X-Pay.

    “X-Pay is a great idea to have a method by which merchants can clean up there act, and a way of getting merchants to adhere to a methodology. So it’s nice from that point of view, but also there’s a kind of ‘do something that will work after Simpay didn’t’ feel about it.

    “It has failed to address the issue of how operators are not going to become providers of consumer credit as people want to use their mobile for buying more and more different items. The thinking in operators is that they are still trying to own and control it themselves. When they’ve got such big issues elsewhere to deal with.”

    Ward said that in his view on average only around 5% of operator billings are for content. And the margin is a quarter to a third of a margin on their SMS and voice services.

    “So the contribution is only 1% of gross turnover. Operators are dealing with prepaid churn, bad debt ratios of 5% for contract customers, the cost of recruiting a customer at a year’s revenue and the threat of mobile VoIP. So why are they so hell bent a talking about needing to own all this [m-payments] stuff? I’ve heard they’re even talking about withholding MSISDN numbers from merchants or selling the MSISDN numbers.

    “Quite frankly, and excuse my French, but what the **** are they thinking about? ”

    A counter argument would run that by providing the means to access a ticket or piece of content, the operator has added value to the transaction and deserves a cut.

    “If they decided to acquire a payment platform, and do the payment processes, then the operators could take a fee for the transaction processing. If they have nothing to do with it, the operator gets the same value as they add, which is the message itself.”

    As far as he is concerned, direct to the mobile bill systems may work for smaller ticket items, but for larger spends, consumers would prefer to have a choice to pay by credit card or debit card. Also, anyone who has their bill paid for them cannot access the premium text numbers to pay for content. In the UK that could mean precluding 5-10% of users from the market.

    Anil Malhotra, vp marketing at Bango, which supports both operator billing models and PayPal, said of Ward’s comments, “That’s Ashley.”

    “Not unreasonably, he thinks commercial billing terms for operators are unattractive. I like Ashley and respect his company but he has become a bit genetically anti-operator.”

    Malhotra agrees that consumers need a choice, which is why Bango supports both methods, but he thinks a 1-2% point cut for providing access is not unreasonable.
    “A key part of their value-add is enabling consumers to buy content,” he said. “We use operator billing because the data shows consumers are more likely to pay on their phone bill than by any other means.”

    X-Pay, which Bango supports, Malhotra describes as “almost business as usual for us. Customers have a better idea of what’s being billed by using WAP, but we do it already.”

    As for Ward, Malhotra thinks he should “focus on the higher ticket items where he has a good service. Get as many merchants as possible and use the power of that to get financial incentives for operators.”