NOC / 160 Characters Session on Mobile Payments

I noted the following comments and points of view as being interesting:

Andrew Budd, mBlox

· Mobile payments as a true replacement for cash hasn’t happened yet because of security issues

· He doesn’t believe in business models that are entirely based on the premise of cutting costs / improving payouts

· He sees the role of operators in the market (i.e. PSMS) as being a Faustian bargain because they can deny short-code service or the passing on of the MSISDN at any time

· Simpay really fell because the only problem that it was trying to address on the market had already been solved by the aggregator businesses that emerged

· The fatal flaw that he sees in all other mobile payment propositions is the shortage of anti fraud measures, and regulatory controls. “you don’t know what you don’t know”, and ethical train wrecks.

· A number of things he was saying was clearly aimed at us, and actually also at UPaid.

Of course, his own faustian bargain is that his company has been a great success due to its relationship with the networks, and it is now crucial for him to preserve that advantage and deny the right to exist of any other business model.

Roy Vella, PayPal

· Mobile slogan = “Shop without Sharing”, Safety and Security are the bywords

· They have just added the phone number and PIN to the existing PayPal account

· They are risk analysts and fraud management specialists first – all else second (they spent millions of dollars to acquire this expertise!)

· The will not be focusing on micro payments or digital payments

· They three products are called P2P, Text2Buy, and Text2Give

· One of their key advantages is that they already have the delivery address for physical goods

· They are now getting 10 million new users per quarter (did I really hear that right?) and that is all network effect. They are PCI compliant and have an ELMI licence

Love fest all around for PayPal, everyone clearly sees them as a beneficial entrant and not a real competitor

Ashley Ward, UPaid

· He sees his business as enabling the cards to go mobile, by charging pre-paid instruments

· Direct billing to cards for content.

· Nothing really new to say, other than openly disputing the mBlox/Vodafone stance, but clear that there is a battle between him and Andrew/Jeremy

Jeremy Flynn, Vodafone

· Clicks, convenience, ease – and you lose 25% for each extra click

· Pay4it will be the brand name of the X-pay project (was an internal code name) – and it is just a scheme to set up rigourous standards of practice around mobile billing using the existing operators platforms (so M-Pay in the case of Vodafone),

· It will introduce an external payments page, which he sees as way more secure and having more control

· This page will default check you for opting-out, you will have to actively opt-in

· He is clearly very annoyed by start-ups and new business models like us – he spent a lot of time insisting on their right to do it the way they do, the right to charge what they do (as paying for licenses) and reiterated the threat that they can block anything they want (although he admitted that they probably won’t).

· Pay4It will introduce spam management and will probably introduce MSISDN charges for others.

· “Off-carrier micro payments don’t work”

Both Jeremy and Andrew clearly know a number of the things that we typically point out as our advantages – because they made a point of scathingly referring to such arguments and knocking them down. They were passionate, articulate, (clearly deeply experienced), and quite persuasive – but the buzz in the audience afterwards is that they are not believed and seen to be stuck in their ivory towers. Their main goal seemed to be to discredit any other model, but not really take action against it.

Comments during the Q&A

· Micro-payments end at about the £5 level, as operators are unwilling to accept higher. The main reasoning is that they don’t want bill shock or high payments that are not for their own services. Plus the you-don’t-think-twice-about-small-change effect. PayPal doesn’t introduce a bottom end to macro payments, it just doesn’t adjust it’s fee structure, so any merchant charging less than £10 simply has to be willing to swallow the higher relative transaction cost.

· Buyers like complexity above the £10 mark – it makes them feel more secure in terms of their financial details, and it protects them from expensive impulses. PayPal has purposefully built in this assurance-I-can-cancel by confirming mobile purchase instructions via IVR with an option to not accept the transaction at the very end.

· The real opportunity for the future of mobile payments lies in two-factor ID, anti-phishing measures and internet banking as a mega cost saver for banks.

· The industry average is 7% for the cost of cash

· Micro-payments culture can’t touch the macro world (won’t understand it), and vice versa. They are incompatible business models. Mobile is the showstopper in micro payments, you an ask you mother’s maiden name for macro payments

· The key for PayPal is the audit trail – which is necessary for higher transactions.