The Green Sheet Online Edition
December 22, 2008 • Issue 08:12:02
The prepaid, m-payments intersection
Editor's Note: This article first appeared in SellingPrepaid E-Magazine, Dec. 3, 2008, issue 08:12:A. For more information on the prepaid sphere, visit www.sellingprepaid.com.
Many believe the future of the payments industry resides in that little gadget we can't seem to live without - the mobile phone. In a few years, plastic as a payment device may be on the way out, with consumers opting to transact at the POS with Blackberrys and iPhones instead.
If that future arrives, the prepaid industry will likely become an even bigger player in the next wave of payments. So says Lee Britton, Chief Executive Officer at London-based Altair Financial Services International PLC.
In a presentation at the Prepaid Card Summit 2008, Britton laid out the reasons why prepaid is ideally suited to take advantage of mobile payments. "Prepaid is an enabler for mobile," he said. "There's no credit application; there's no loan; there's no credit facility at all."
Because few restrictions block consumers from realizing the benefits of prepaid cards as alternative financial tools, Britton believes mobile phones are a natural fit as a prepaid form factor.
"Whether it's a card, whether it's a mobile phone, it's all about the chip," Britton said. "And the chip is just a mechanism that holds value, or it knows where to go and get value."
Britton predicted the sporting events and mass transit markets will drive the marriage of prepaid to mobile payments.
In March 2008, Altair helped pilot the first contactless prepaid card used at a European soccer stadium. The Manchester City FC MasterCard Prepaid Seasoncard allowed 3,500 season ticketholders to pay for concessions at contactless terminals throughout the stadium.
According to Britton, paying via contactless means can cut transaction times virtually in half. A transaction using cash or a standard payment card can average 37 to 40 seconds; contactless payments at the POS take under 20 seconds.
"It's a better experience for the consumer," Britton said. "Faster throughput. The checkout time is key."
Britton also cited the popularity of the Oyster prepaid card for London's mass transit system. Cardholders load funds onto cards online or at terminals to pay fares. More than 10 million public transportation riders use the Oyster card system. Reportedly, over 80 percent of all mass transit rides in London were funded by Oyster card payments.
"I think the Oyster card proves in the U.K. there is a market for contactless payment and ticketing to be combined on one product," Britton said.
In the United States, Boston's Charlie card is in many respects the Oyster card's American counterpart.
The doughnut effect
Britton said sporting events and mass transit will drive adoption of mobile payments outside those arenas and into the general marketplace.
To cater to sports-loving clientele, bars and restaurants outside arenas will implement contactless payments. The same phenomena will take place in businesses outside mass transit facilities.
"The football [soccer] stadia will be the first ones with consumers carrying a proximity pay device," Britton said. "Out of that, the doughnut effect will be the retailers outside also embracing it.
If you have the same with transport and ticketing, your doughnut effect suddenly starts to give you mass coverage."
But Britton said several factors must coalesce for prepaid mobile payments to reach that level of critical mass: All the players along the value chain - acquirers, card issuers, program managers, processors, mobile operators, hardware manufacturers, software developers - must develop the infrastructure and systems to handle m-payments.
Another critical aspect to successful implementation is security. Biometrics might be a big beneficiary, Britton said. Biometrics is technology that can authenticate users of mobile phones by fingerprints, voice identification or other biological characteristics unique to individuals.
According to Britton, it would be easier to integrate biometrics into mobile phones than to upgrade millions of POS terminals.
On the other end, a casualty of this evolution to m-payments may be prepaid calling cards. When airtime no longer resides on telecom billing systems but instead on open loop systems, whether it's Visa Inc.- or MasterCard Worldwide-branded, "there is no reason why you should have value loaded into a single-use product like airtime," Britton said. "It's a complete sunset."
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