Paying for stuff with your mobile? Yeah yeah. Heard that one before. Every three or four years there’s a lot of noise about the idea, only for it to fizzle out quietly when the technology isn’t ready. Except in Japan of course, where the entire population threw away their banknotes and credit cards years ago to pay for everthing with their mobile phones. So we’ve heard.
2006 could be different. There are several companies talking about mobile payments again, whether it’s PayPal, the mobile operators, or LUUP. Not heard of the latter? It’s a mobile payment system that launched earlier this year, aiming to provide an easier way to pay for mobile and digital content using your phone. So what’s it all about?
LUUP started life in Norway, funded by a pair of investors keen to launch a workable mobile payments system. It then launched in the UK and Germany earlier this year, and has since picked up around 15,000 customers in each country.
“We were one of the first people to be granted a full e-money licence in Europe,” says Robert Perkins, UK director at LUUP. “It basically means we can act like a bank, and operate throughout Europe. Our aim is to create a mass-market brand, a bit like Visa, to act as a middleman between consumers and the banks.”
When you sign up, you get a LUUP wallet, which you can pay into from any source - credit or debit cards or a bank transfer - and then use to pay for stuff (the company's FAQ explains more). In the UK, the company has focused on mobile content so far, aiming to make it cheaper to buy games, ringtones and other stuff outside the mobile operator portals.
Currently, the main way to pay for this is premium-SMS, where you get a bunch of premium-rare text messages sent to your phone. In truth, the advantages of using LUUP are more for the content-sellers
“The merchants can save money by using LUUP, and we’re hoping some of them will pass on those costs to customers,” says Perkins. “One of our partners, Intomobi, is offering realtones for £1, which is the cheapest you can get them anywhere online. And they’re doing that purely because we’re charging less fees than the operators do for PSMS.”
So what else can you pay for using LUUP? The company will soon launch a top-up feature in Germany so users can buy extra airtime using their LUUP wallets, although Perkins says the UK operators are more reluctant to co-operate with this.
Another possible use will be mobile gambling, although most mobile casinos and bookmakers already offer secure wallets that you can pay into using your credit or debit card.
One thing they’re not doing is paying for physical goods in the real world - going into a high-street shop and buying something using your phone. It’s often been seen as the holy grail of mobile payments, and although LUUP has run trials in Norway, Perkins says it’s a bit too early to offer it for real.
“It’s starting in Japan, and the technology is available, but in Europe and the UK it’s going to be a while before the technology catches up,” he says. “We’re interested in being there when it does, but it’s a little bit early right now.”
Even as a pure digital mobile payment technology, LUUP has competition. For example, the UK mobile operators are working on their own system called Pay4It, which will make it easier for people to buy mobile content off-portal - effectively replacing SMS.
Perkins says that there are plenty of benefits for merchants in using LUUP over Pay4It, particularly the better revenue share offered by LUUP. However, the idea of Pay4It is that you’ll be charged direct to your phone bill, rather than having to manage a separate wallet, so in the eyes of consumers, it may seem easier.
What about PayPal too? The eBay subsidiary announced plans earlier this year to allow users to pay by mobile for goods by sending a text message. It’s not exactly the same as LUUP, but it could be seen as competition.
“We actually see PayPal Mobile as good news for us and the industry,” says Perkins. “The challenge is to change people’s perceptions about using their mobile to buy things. If a big brand like PayPal is offering this, then smaller brands coming into the market like ourselves will have time to grow. There’s plenty of room.”
He also says that PayPal will focus mainly on payments over £5, whereas LUUP covers smaller payments too. Also potentially in LUUP’s favour is the fact that it is targeted at young people, with a minimum age of 14 rather than 18. Another intruiging feature is the ability to make peer-to-peer payments using LUUP to friends.
“That could really help this service to proliferate,” says chief marketing officer Jeff Lamont. “It’s one thing that PSMS or the operators will never have the capability to do.”
LUUP, PayPal Mobile, Pay4It... frankly it’s too early to tell which of these m-payment methods will succeed, or whether there is room for more than one of them. But the fact that there’s so much activity in this area does show that this time, the hype around m-payments may just turn out to have some basis in reality.