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Mobile payment processing: Can the various players work together?

LAS VEGAS – A mobile payment processing panel at CTIA debated whether carriers, credit/debit card issuers, banks, aggregators and mobile vendors can play nice and figure out a way to work together.

Payments transacting digitally over the mobile phone differs from payments over the Internet, and the ecosystem is complicated. The panel, moderated by Nick MacIlveen, principal consultant at Tsentro Group, San Francisco, discussed the benefits of mobile payments and the fragmentation holding it back.

“There is a standoff between operators and the entrenched payments ecosystem, in particular the credit card issuers that want to hold onto this rev share,” said Mary Clark, vice president of financial clearing at Syniverse. “How do I make it so I’m easier to deal with as an operator, make my back end easier to access so we can deliver payments in a secure, convenient manner?

“Carriers are recognizing they have a fantastic revenue opportunity to provide financial services to their subscribers,” she said. “We’re at a pivotal point as operators want to garner more of this revenue share and start providing more of these services.

“How can they convince consumers that this is a reliable, secure billing channel?”

The necessary technology is out there, and trials have consistently shown that consumers react positively to mobile payments. So why has mobile payments taken longer than expected to reach the mass market?

“Barriers to mobile payments in the U.S. include the prevalence of existing payment mechanisms,” said Cameron Franks, senior director of mobile commerce at Sybase 365. “In the U.S. market, carriers are so big they can do something to move payments forward, but it is a long and hard road for them to cooperate with payments ecosystem.

“The benefits of carrier billing include ease of conversion and ubiquity, and that’s good for $10 transactions, but what about $50 tickets you want to buy online?” he said. “For under-$10 transactions there is no registration required, so how can we achieve that same one- or two-click process to buy $50 tickets?

“The carriers could help with that process.”

NFC and RFID technology enables contactless mobile payments at the point of sale and a multitude of marketing applications such as smart posters.

However, many entrenched players do not want to share revenue or jeopardize existing revenue streams, even if it means missing out on new revenue streams.

“NFC is being held back by the business rule and friction between banks and carriers, issues which they’ll still be debating in five years time,” said Conrad Sheehan, CEO of mPayy.

“NFC can also be used as a trigger for payments happening on a server-side wallet—an NFC swipe to trigger that transaction but not storing any financial data on the phone,” he said.

“If it’s just a remote transaction, NFC can be a trigger in the same way SMS, mobile Web and apps can be.”

Mobile payments for virtual goods
Zong is one of the three main ways you can buy virtual goods on Facebook.

The company straddles the fence by offering both carrier billing and credit/debit card billing, although carrier billing is the primary mechanism.

“Mobile has the highest conversion rates in terms of clicking and then paying,” said Richard Borenstein, senior vice president of worldwide sales at Zong. “There is enormous revenue acceleration based on something that is so convenient, tapping into the mobile device connected to a carrier that has an existing billing relationship with customers.

“We’re seeing high revenue growth for mobile payments, especially for digital and virtual goods,” he said. “Facebook is an incredible growth story—they realized they have the ability to capitalize on some of this growth and generate revenue from that huge user base.

“It is a platform of distribution with more than 400 million people, and they’re adding more than a million users every day—I wouldn’t be surprised if they get a billion users by the end of the year, and Facebook is offering all of the publishers the chance to place their games in one of the most robust, exciting platforms out there.”