What would you buy with your phone?

Without doubt our attitude is changing towards mobile payments. The question is how far and how fast would we go. Would we, for instance, buy a pink fluffy sofa with a mobile device? When the idea of mobile phones becoming payments mechanisms was still an idea, there was a memorable advert outside the Palais de Congres in Cannes, then venue to MWC. There was a merchant, the street vendor kind you might find in a holiday destination. He was holding out a badly wrapped item which was clearly a jug, fashioned quite possibly by a local craftsman. The term craftsman is used in the loosest possible sense. The caption read “how would you like to pay – cash or phone?”

Now mobile payments are a reality, just what is the potential? And what is the real opportunity for operators?

In-app purchases are clearly the most popular way to pay online. The one-click concept is compelling and “marketers are loving it,” according to Andy Turner, Commercial Director at MobileWebAdz. “For a start, one-click purchases and subscription sign up increases the conversion rate by an eye catching ten times.” The world, says Turner, is moving away from even credit card transactions and certainly from “premium SMS, partly because an SMS is airtime, and airtime attracts VAT. A mobile payment is essentially a bank transfer and therefore does not attract VAT.”

We might well become used to paying with phones to the point that we will buy the pink fluffy sofa, but probably only if there were financial advantages as well as the marginal ‘well, it’s quicker than a credit card’ one – which is pretty slim. If the operator provided the same interest free window until your bill was due, that would certainly help. For people who need to manage their money to pay day, it might well be helpful to have another payment mechanism available.

Time will tell, and culture and attitudes will change. Now, though, the barriers for operators are still significant. To make it viable operators are still working on margins that are too high for merchants and developers. “It is a challenging business case right now,” says Turner, “operators are having to go through the hoops of getting an e-money license and generally these have limits of £100 or so per transaction. The costs are significant in setting up the mechanism.” With commission rates ranging anywhere from 10 percent to 45 percent or more, it is easy to see that, for developers, it is not that attractive.

The big boys are at the table, though, and with Apple Pay charging similar amounts to credit card companies, and not playing with operators, the tide might well be turning. That said, the might of Apple will make the operators’ battle to win the hearts and minds of customers an uphill one.

Meanwhile, there should be a competition for the person to buy the first pink fluffy sofa with their phone – if there isn’t one already.

Tags: featured, Mobile payments