New Mobile Payments Services Revive Old Model

A number of new mobile payments services have been born recently, three of which have revived the model of Simpay - a defunct/reborn joint venture between Orange, Vodafone, T-Mobile and Telefónica Móviles - that attempted to create a pan-European text messaging payments standard.

Evolution of a Model

Simpay dissolved in 2005, when T-Mobile defected from the venture, but it reincarnated two years as PayforIt.

Simpay's business model is fairly simple - create a micropayments service that leverages the millions of mobile phone subscribers, allowing them to charge these sums (less than 10 Euros) to their existing cellular provider's bill.

SimPay never got off the ground because, "It was rumoured that the operator had concerns about the way the system was integrated with handsets and other payment systems," according to Finextra. As a result, Simpay went defunct, but Payforit has now emerged in its place.

PayforIt is now an option for online and mobile transactions for the 52 million mobile subscribers in the UK. New billers have to apply with each of the carriers to gain access to the new standard.



Micropayments of <10 Euros necessarily constrains purchase size and makes this purchase method most useful for digital content downloaded directly to the phone including song, premium data subscriptions, or potentially videos.

Newest Entrants

Three new companies have launched that mimic the model of SimPay/PayforIt.

Zong

Zong just launched at the TechCrunch50 conference in California. Zong's model is almost an exact replica of PayforIt's. Zong has created a REST API that allows developers to plug its payment system directly into their back ends.

Zong works with 55 carriers in 12 countries, but has two big drawbacks from what we can tell: revenue and time to collect. According to their site, you net $0.58 on the $1.00 for every payment through Zong. That is a painful amount of rent to extract before paying for any of your overhead (CAPEX, bandwidth), input costs, and labor. While it's true to some extent that digital content has limited marginal costs, where content is KING, it is expensive, and this increases the break-even sales point for whatever product you're selling.



The second problem is that Accounts Payable time period, and only once a site has reached over 100 Euros. According to their site,

"Payout is made once the amount payable has reached 100€ and around 75 days after traffic dates. Why so long?

Mobile network subscribers pay their mobile operator within 30 days. The mobile network operator pays Echovox within 30 days. Echovox pays you - a Zong client within 15 days. (30+30+15=75) "

Paymo/Mobile Merchant Services

Paymo/Mobile Merchant Services was founded by the mBlox executives. mBlox was one of the first "short code" text messaging marketing solution services. Paymo is virtually identical to Zong, with the same shortcomings.

According to their website,

" What are the costs ?

mMS charges a % of the transaction fee - typically 10% - depending on the volume of transactions you process each month. If you choose the Individual account you can get started today and there is no Setup charge and no Monthly fee.

The main costs of a mobile payment are the fees taken by the mobile carrier. In some markets the carriers take as much as 50% of the transaction value. With Paymo, you can choose to pass some or all of these costs to the consumer as a surcharge. In this way you can still get as much as 100% of the list price of the item you are selling.

How do I get paid ?

We will pay you the money for the transactions processed using Paymo. Payments are typically made monthly. The first payment will be made once you have passed a minimum revenue level and we have received the money from the mobile operators.

When do I get paid ?

We will pay you within 10-15 days of receiving money from the Paymo network. This timing is driven by mobile carrier payment cycles and varies by market. Some markets settle within 30-45 days, other markets can take several months."

mGive

mGive is a mobile donation service providing a tool to process mobile donations for non-profits and 501(c)3 organizations. The service is particularly useful in large groups, such as concerts, where Eddie Vedder says "Text DONATE to 12345" and raises tens of thousands of dollars within a few minutes.

mGive has virtually the same model as all of the companies mentioned above. However, the company's pricing model is more complex. Donations are limited to $5 per transaction, and the company takes $0.25-0.50 depending on volume. Then, the 'Mobile Giving Foundation' takes another $0.50. Add to this $100 setup fee, and a monthly service fee of $250-1,250 related to the text messaging and web features, and the non-profit is getting 80-85% of the donations minus more operating fees and their upside is limited to the $5.00 units, and the funds are held for 60-90 days for the same reasons as the other companies.

Mpayy Mobile Payments - Faster, Less Expensive & More Secure

Each of the companies listed above is an intermediary providing a mechanism for billing charges to users' cell phone bills. Their use of the cell phone carriers results in exhorbitant rents being extracted from the merchant or non-profit organization, and significantly eroding margins. Further, the time to collect for these solutions is likely to be unacceptable to many merchant/content solutions. The transaction size and volume will also continue to be limited by the carriers' willingness to float the credit risk.

Mpayy has one challenge vs. these companies - Mpayy requires a subscription before users can make payments to merchants or charities. However, once a subscription is opened, Mpayy is the least expensive, most secure, fastest solution out there. At just $0.20 + 2.00%, Mpayy Mobile Merchant accounts enable 0% fraud liability transactions from any mobile-web enabled cell phone. Further, those funds are available for withdrawal within just 48 hours from Mpayy's advanced Cash Management console.

Mpayy also offers enterprise ecommerce payment solutions as well as secure payments through social networks.