Mobile Money: What's the End Game?

6:45 AM -- DUBLIN -- Management World -- After the CTIA Wireless show earlier this month, I was left thinking that the over-the-top players are leaving wireless operators behind when it comes to mobile payments. But now, on the eve of Management World, I'm not so sure. (See Mobile Commerce Sidesteps the Carriers .)

Rather than ceding the market to third parties, could the wireless operators be devising a way to break free of their partnerships and take over the market by going direct to consumers on their own?

Take the U.S. wireless operators joint venture, Isis , for example. It was my impression it was formed so AT&T Inc. (NYSE: T), Verizon Wireless and T-Mobile US Inc. could offer Near-Field Communications (NFC)-enabled mobile payments paid for via direct carrier billing. The JV disputed this when it opened up its walled partnership to a number of credit cards, admitting then that it can't go it alone without established payment companies.

It's undeniable, however, that the better business model is one where carriers aren't splitting their profits five or more ways. That's also the model Amdocs Ltd. (NYSE: DOX) will be pitching here at the show. The Service Provider Information Technology (SPIT) vendor recently introduced a cloud-based mobile payments platform that would let them do just this. So far, it hasn't said which operators it's working with.

Heavy Reading analyst Sarah Wallace points out that the wireless operators have the advantage of an existing billing relationship with loyal customers, but they are also challenged by not being a traditional payments processors. What's more, the bill shock that would ensue when a customer sees their monthly wireless bill plus all the mobile payments they made that month could be significant. Even so, Wallace believes many operators are still interested in owning the whole payment process. Partnerships could just be an interim step. (See Isis Signs Up 50+ Merchants.)

"The big emphasis for the carriers is 'you've been a customer, we have that trust and we'll offer the capability and security,'" Wallace says.

The two schools of thought -- going it alone and partnering -- don't have to be mutually exclusive, but doing both would put the operators in the position of competing with their partners, an awkward situation they often find themselves in. (See T-Mobile Squares Off on Mobile Payments.)

I think partnering is the only way the wireless operators will play a role in mobile payments. The credit card brands have the cachet when it comes to payments; they're moving faster in the market; and working together is the only hope of easing fragmentation. But it will be interesting to see which ones agree with me and which ones are just biding their time until they're ready to take on the market on their own. (See Learning to Play Nice With NFC.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 5:32:37 PM
re: Mobile Money: What's the End Game? There is a difference between digital and physical purchases. Carrier billing makes sense for app purchases and maybe other online buys, but the credit card companies definitely make more sense to facilitate physical good purchases, I think. The market is already becoming quite fragmented, which is a big problem.
macster 12/5/2012 | 5:32:34 PM
re: Mobile Money: What's the End Game?

Thanks Sarah.

I note your point re. standard wallet. Given the ubiquity of mobile phones and in order for mobile money to reach the global level that credit cards currently enjoy (e.g. using a UK mobile to pay for hotel stay in the US), indeed, a standard solution is needed. Maybe driven by one of the standards bodies in collaboration with banks?

Banks are the ones that issue debit/credit cards. Don't really see the need for a Visa or a Mastercard here. As for paying on credit (the idea of credit cards), I'm sure there will be a way to charge mobile purchases of digital and physical items to the respective 'credit' account. This could remove the bill shock concern, no?

I feel... these are the things that can help with growth. There's only so much one can do with cost-cutting efforts like netshare, ideas to remove smartphone subsidy, etc. They don't help with topline growth.

Your thoughts? LR done such a research?

macster 12/5/2012 | 5:32:34 PM
re: Mobile Money: What's the End Game?

Hi. Don't quite understand. Isn't Isis meant to be like a mobile PayPal of some sort? Can be used for digital and physical and can also be opened up to traditional payment processors. For physical purchases, will consumers get the same protection, like if bought with a credit card? What are your thoughts on banks themselves getting in on this?

I guess necessity really is the mother of invention. Mobile money is very big in Africa (e.g. mpesa in Kenya), more out of necessity than anything else. Merchants and users embraced m-pesa. I note that it does not involve or partner with any of the traditional payment processors.

P.S. This reminds me of that "we are a billing system" remark.

sarahthomas1011 12/5/2012 | 5:32:34 PM
re: Mobile Money: What's the End Game?

You're right about Isis, but rather than do carrier billing, a user can select one of several credit cards to pay. I was just saying I'd be more comfortable having charges show up on my carrier bill when they're app or mobile web related. Having a wireless bill that's $100+ for service plus all your physical purchases could definitely lead to bill shock.

Some banks are certainly trying to get in on this too, and they may have a viable solution, but I think the market is already becoming fragmented and confusing. We need one, standard wallet that works everywhere...we're a ways from that though.

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