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The Green Sheet Online Edition

December 28, 2009 • Issue 09:12:02

Mobile payments at a crossroads

An October 2009 report from The Nielson Co. found that the number of consumers using mobile devices to shop on the Internet increased 34 percent between July 2008 and July 2009, from 42.5 million to 56.9 million. Additionally, year-over-year growth among the 13 to 17 and 65-and-over age groups accounted for the greatest growth of phone users accessing the Web - 45 percent and 67 percent respectively.

Industry experts predict these numbers will continue to grow as phone carriers debut wireless network upgrades in 2010 that will increase bandwidth and speed. And with such growth, retailers are paying much closer attention to m-commerce and the potential for mobile payment applications.

Pinnacles and pitfalls

According to Conrad Sheehan, founder and Chief Executive Officer of Chicago-based mobile and alternative payment solutions company mPayy Inc., this growth represents a prime opportunity for ISOs and merchant level salespeople (MLSs) to generate a variety of new revenue streams in the mobile payments space. The potential for using phones as payment terminals, he added, is tremendous, though not without pitfalls.

"The devices that are out there are getting smarter; you can do more and more things; it's pretty extraordinary," Sheehan said.

"Unfortunately, the world of payments right now is dominated stem to stern by the banking industry and the card brands, and phones are dominated particularly in this country by the three or four major carriers. For mobile payments to become a widespread reality, the carriers need a piece of the value chain and a profit motive to build this thing out.

"Browsing the Web or checking a bank balance on a phone is one thing, but making a mobile payment is entirely different - and that's where there has to be a merchant processing platform akin to what you see in the card world. So the multibillion dollar question is, 'Who is going to build all this infrastructure and get phones to make payments in a brick-and-mortar store or over the Internet?' The demand is out there, but who's going to give?"

Incentives and economics

Sheehan believes that one of the first steps to making mobile NFC (near field communication) or proximity payments commonplace is implementing an alternative payment network that can change the economics and give phone carriers an incentive to participate in the value chain. To make mobile e-commerce as prevalent as traditional e-commerce requires a convenient and secure mobile wallet that simplifies checkout.

Additionally, MLSs must be adequately compensated to make distribution of mobile payment products and services worth their while.

Sheehan said that the technology is available right now for proximity payments, but the business model to make implementation and deployment cost-effective does not currently exist.

"Who has the incentive to drive payments to mobile retailers, and do you build a whole mobile Web site for payment processing and settlement if you're only going to get half a percent of your sales through it?" Sheehan noted. "You've got the world of the card issuer who makes the vast majority of the money. You've got Visa and MasterCard, the merchant acquirers and, in the case of small and mid-sized businesses, you've got agents.

"And so those three pieces collectively consume the entire merchant discount if you will. So if I'm AT&T or Verizon, why do I want to put a chip inside my phone if I'm not going to make any money from it? Or if I'm Motorola, why do I redesign my devices around mobile payments if there's no revenue to be had? The path to mass adoption will become a reality when a payment network infrastructure is created that gives those players incremental revenue."

Solutions and fortunes

Regardless of the obstacles that lie ahead for widespread acceptance of mobile payment technology, Sheehan is nonetheless excited about the many value-added offerings currently and soon to be available in this sector.

As a mobile payment specialist, Sheehan said mPayy offers recurring billing solutions for utility, cable and phone companies, person-to-person payment solutions, micropayments, security, compliance and risk management solutions and, by the end of 2010, multicurrency conversion, processing and settlement.

"The ability for change to happen is difficult at best, but what excites me is the sheer fact that Verizon, Sprint and AT&T by themselves touch 200 million people," he said. "They aren't currently doing it because of the way the world is set up, but eventually they'll find a way to enable payments for their customers and take advantage of the payment network.

"And that's where the ISOs and the MLSs come in. I mean, everyone needs those folks - and sales agents don't care if they're selling for Wells Fargo or Verizon. And if I can find an MLS or ISO that is focused on recurring billers and utilities, we could both make a fortune." end of article

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