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.

CardLine/CardForum Article

Below is the article that was featured in CardLine/CardForum.

MPAYY SEEKS GROWTH AFTER SECURING ADDITIONAL FINANCING
Mpayy Inc., a Chicago-based alternative-payments company, says it will use
additional funding from U.S. Bancorp to grow its e-commerce, mobile commerce
and widget-based payment services. Minneapolis-based U.S. Bancorp also
provided Mpayy with funding last year. ³We want to tap into larger
retailers,² Conrad Sheehan, Mpayy founder and CEO, tells CardLine. ³They
have not been as aggressive in adopting alternative payments, and for a lot
of good reasons. Any retailer should be extremely comfortable with running
high volume through our platform.² Launched in the first quarter, Mpayy says
it provides consumers, small businesses, Internet retailers and charities
with a variety of payment options. Consumers may make person-to-person funds
transfers through Mpayy¹s online and mobile Web sites and by using a
social-networking widget found on Facebook and MySpace. Consumers can pay
for goods by linking a checking account to Mpayy. Small businesses and such
independent salespeople as taxi drivers and flea-market vendors can use
Mpayy¹s mobile-payment capability to turn their mobile phones into
point-of-sale terminals. ³It works on all phones, but it¹s particularly
tailored to the most-popular devices,² Sheehan says. New York-based charity
Alliance for Lupus Research uses Mpayy¹s widget on social-networking sites
to obtain donations. Sheehan claims Mpayy offers retailers a processing
platform that is ³50% to 60% less expensive than card-based processing.² The
company also is touting Mpayy¹s security. ³We exceed all PCI standards,²
Sheehan says. ³Retailers don¹t have to worry about storing any data because
that information is hosted on servers by U.S. Bank.²

SmartPhone & iPhone Penetration Continue

This blog has covered mobile web usage growth as reliable numbers come out. A couple of interesting data points have been released lately that point to a high probability for the continuation of this trend.

SmartPhone Numbers

Nielsen Mobile put out numbers on SmartPhone penetration last week. The numbers are consistent with the Pew Research numbers we discussed here. Fully 63.9% of SmartPhone users are below 45, with 35.9% below the age of 35.

Further, focusing on this market exposes companies to some of the highest paid Americans with 35.1% having incomes over $100,000, according to Nielsen's data. These users are spending over $200 for their device and over $100 on their monthly plans, and 52% of those users are paying for the plans themselves as opposed to their companies remitting these fees.

Many Apples a Day

The Apple 3G iPhone launches on Friday, and though it is still 4th in the SmartPhone race, this year promises to be a barnburner. Apple expects to sell 5.1 million iPhones in Q3 2008 and another 6.5 million iPhones in the 4th quarter, according to numbers quoted by Silicon Alley Insider. Some analysts are estimating that Apple will sell 45 million iPhones in 2009.

SmartPhones and the iPhone are driving the move of functionality from the internet to the mobile web. As more and more of these phones come online, more people will begin to use Mpayy for free person-to-person money transfers, and independent salespeople and small businesses can use these phones as mobile Points of Sale. Check out our mobile website with advanced account management features.

Blue Steel & Other New Mpayyment Widget Skins

Lipstick on a Lamborghini

One of the things I planned to do when I started this blog was to document the empirical record of birthing and nurturing a startup. I've neglected it because at the end of the day, it's difficult to broadcast to the Internet's permanent record many things along the continuum from a lapse of concentration to tactical errors. Many times, one can become naturally reluctant to call attention to decisions and actions you've taken that materially improve the situation.



One thing that I am really enjoying is the depth of the hands-on education that becomes a necessity. I've alluded many times to the painful status of our front-end. It's like we've put a cover on the car the makes our underlying Lamborghini payment application has the shape and power of a Saturn coup. We'll be lifting the veil with a much more exciting front-end in the next few weeks that I think people will understand and enjoy. Matt Shea joined us about 5 weeks ago, and we will make the most of his skill set.

For my part, though, I have finally had the time to study and learn some basic web development skills with specific tasks that go into production. I've been working with websites since August, 2001, though I had to learn through work in connection with developers. My Poli Sci/Econ undergrad did nothing to prep me, and I started to get a grasp because I had a PHP developer and Oracle DBA who vituperatively despised one another. Through Zacks and Orbitz I became adept at writing Requirements documents, shepherding projects through design and development, and testing and maintaining the bug lists for a number of sites. As my career went on, I've dealt with sites at increasing levels of sophistication and transaction numbers, our present front-end notwithstanding.

The first full site pages I've ever created are the new micro-site for the...

Secure Payment Widget

Mpayy re-launched our Secure Payment Widget last Saturday with a new skin -- "Blue Steel" created by Matt Shea. We added some DHTML popups to help people through the system. Additional improvements to the widget were the ability to specify a new skin. We've created three initial skins in the forms of an iPhone, a Chocolate, and a kind of sad Blackberry. Mpayy's mobile payment processing system is now available as a phone skin on your blog or favorite social network.

(The widget micro-site denoted by the black buttons is a Trace Johnson original. Compliments and invectives are equally encouraged.)

The other exciting new piece of functionality we added to the widget was the ability to co-brand it with your own logo. This was necessary first to comply with MySpace application Terms of Service which stipulate that any payment applications must make perfectly clear that the application is unaffiliated with MySpace and Fox Interactive Media.



We went ahead and customized a bunch for fraternities and sororities @ our Gone Greek page also within the microsite.

Widget Commerce Tool

I was annoyed today when I saw a Payments News story on a UK company with a new Facebook widget to send money to friends, though they charge the sender 1% up to 0.50 euros. Mpayy is set to empower charitable donations, digital music & online auction sales directly through any social networking page. Mpayy's Mobile Merchant account is just $0.20 + 2.00%, less than PayPal, and more secure than most other online money transfer services being hosted within US Bank's data centers.

Series B Closed - The $$$ is in the Bank!

Mpayy has just CLOSED a Series B round of financing. All private and institutional investors from the prior round participated in this round to maintain or increase their stakes in the company. Plus, we welcome new investors into the fold.

Mpayy will use this money to improve the look and feel of its front-end, broaden and increase its marketing program, and work with new ecommerce merchants to integrate what will become the new standard in payments into their websites.

On Monday, Mpayy will welcome a new VP of UI Engineering, and next Saturday, we will relaunch our site for Mobile Merchants who wish to take their stores on the road.

For now, we've finished the bottle of Dom, and moved onto the beer, and Monday, we will redouble our efforts for both commercial and consumer adoption.

Sneak Peek to New Mpayy Mobile Site

Mpayy developers have been hard at work on a new mobile site that enhances the account features available through https://mobile.mpayy.com. Mpayy's Mobile Merchant accounts provide direct salespeople, taxis, and online ebay sellers with a free mobile point of sale system through any web-enabled cell phone. The new functionality being ported to the Mpayy mobile site will make it easier for sellers to process transactions and returns.

Mpayy's current mobile site rates a 4-Good by Ready.mobi's mobile website tester, which is certainly not bad.



However, one of the things we wanted to do was to make sure that we followed all of Ready.mobi's guidelines, including providing the ability to differentiate the experience based on the 10 best distributed cell phones, and we will launch with this device targeting ability. The new site does meet the guideline test as seen here (Dev URL is masked):



Mobile Dashboard

The Dashboard on the Mpayy Mobile Homepage still includes the Make Payment options, but a new piece of information and several new features, including Balance Information, a Withdrawal button and a Help Center.




From the Dashboard, any user can select to make a Withdrawal directly to their Linked Bank account, and get the payment batched up and ACH'd that night.




Payment Activity

Mpayy takes large steps to make sure that all communications are authenticated, including the creation of a Digital Signet at account opening. The Digital Signet is a piece of user-generated content that we place at the top of text messages and emails, so you know it comes from us. Payment recipients, whether they are free Personal money transfer accounts, or Mobile Merchant accounts for AVON/Mary Kay salespeople, Tupperware sellers, Passion Partiers, etc. who are taking direct payment, the Activity list will provide confirmation that the payment was made beyond the text message receipt.



Beyond checking their activity, sellers on the road can also process refunds with the new mobile website. This image is what happens when you drill down to a specific payment by either scrolling and selecting it, or using an AccessKey number to jump to the payment and make the selection.


When a Merchant selects to make a Refund of the specific transaction, the screen looks like this.



Secure Mobile Payments

Mpayy offers free mobile payments for anyone with a mobile web enabled cell phone. Money can be moved from any bank within the United States. On the receiving end, it is free to receive transfers, but traveling salespeople can get guaranteed payments with very low transaction costs and 0% fraud liability. Sign up, and check it out. You'll be glad you did!

Obopay Adopts Mpayy Thin-Client Single Step Payment Process

Glenbrook Partners, which covers the payments industry and strategies, ran a story today that Obopay has moved away from their 2-step "Store & Forward" approach and to the Mpayy model of enabling payments directly from users' checking accounts.

Ramy Mora, VP of Marketing at Obopay notes that the decision was made as a result of focus groups and not the careful study by Obopay employees study and testing of Mpayy's service. We'll take them at their word.

Obopay, which has taken $46 million in Venture Capital financing, started with a "fat-client" solution. A "fat-client" requires the download of software onto a mobile device, requiring a team of developers to ensure that each Operating System put out by Motorola, Apple, Nokia, LG, Samsung, etc. is compatible with the subsequent releases. This is hugely capital intensive pursuit requiring a huge team of developers. In fact, as recently as January, the company added support for Blackberry users through specific software on the device.



Obopay moved to a thin-client solution based around a WAP site, but maintained its "Store & Forward" model. It will be interesting to see what Obopay does with their payment lags and accounting opening process now that the money goes directly from Person A's checking account to Person B's Obopay account where it can be withdrawn with an ATM card. This introduces significant credit risk, and we'll look to see how they handle it.

Obopay does have a slick front-end, something Mpayy can not claim presently, and they do have a relationship with Citigroup, but usage has fallen since the partnership was announced. Perhaps this most recent change will pick the traffic back up.



Recent Press for Mpayy



Mpayy has received two "also ran" mentions in sidebars and lists of mobile payment companies of note.

In the Nilson report, Mpayy was included in a list of alternative payment systems that was a sidebar to an article covering Steve Case's startup, Revolution Money, which recently concluded a deal with Fifth Third Bancorp to accept the Revolution Card in bricks & mortar stores.

Today, Mpayy got word that it would be mentioned in Javelin Strategy's "Mobile Person-to-Person Payments and Transfers: Security and Timing Are Everything" report.

Don't shell out $2,250 to learn about Mpayy, though, as this is evidently the extent of our honorable mention. We very much appreciate the coverage, though, and enjoy being mentioned in the same breath with Visa, Mastercard, PayPal, Obopay, Textpayme, etc.

CrunchBase Information

obopay

Information provided by CrunchBase

CrunchBase Information

Mpayy

Information provided by CrunchBase

CrunchBase Information

Revolution Money

Information provided by CrunchBase

Self-Review EOW 1

Ladies & Gentlemen, We Have a Website

For the dozens of loyal readers of this website, I apologize for the lack of communication this week. http://www.mpayy.com and http://mobile.mpayy.com are now live.

The final week saw some interesting road bumps. If you look at the website of the new payments standard, you'll see the Verisign SSL certificates. Let me tell you, ladies and gentlemen, Verisign does its due diligence to validate that the websites that bear its emblem are serious companies.

The domain registry we used created a separate account with a company that holds our information private, preventing the SSL verification team at Verisign from seeing who we were. Since Mpayy was originally Magellan Payments, a company created to hold the Intellectual Property that underlies our patent pending payments system, the privacy account was linked to an email at Magellan Payments.

The fix took a few hours, but is now resolved, and the details of our registration can be seen here.

Mobile Merriment

Mpayy, Inc. launched with a full suite of payment capabilities. Mpayy now enables its Personal Account members to send money to anyone for free through Mpayy.com, mobile.Mpayy.com, as well as the many internet retailers we are in the process of signing up. Soon, we will enable a secure online widget syndicated across the many sites that can be personalized as discussed here.

Mpayy's mobile site is very slick, and initial reports from mobile website authority Ready.mobi point to not a bad first attempt. However, there is still a great deal of work to do.




Mpayy's fantastic development team at US Bank is working to release within the next few days a fix for some redirecting issues we're having. Even with a thin-client solution in which users do not have to download anything to their phones and with a solution that does not require coordination with the wireless service providers, one still has to work to test on every phone out there on the market. Beyond this short-term fix, Mpayy is committed, and well on its way, to migrating more functionality from the website to the mobile site, and continue to improve the user experience of each.

Charitable Commerce

Mpayy also continues to seek charities, non-profit organizations, and political campaigns for whom we will process donations with no cost. Mpayy's secure, commercial grade payment processing system is the perfect solution for such organizations who place a premium on security. Further, we will provide contributors with a detailed receipt that would be usable for tax receipts and personal records.

Making the Grade

Placing a premium on quality, Mpayy did add a few days to its launch
date to test its Disaster Recovery, and make adjustments to our platform
to extend the full set of functionality and security to some late model
cell phones that are still out in circulation. We expect to cover 99% of
the devices on this launch. The site is up with modest issues. All features are fully functional and secure. There are a number of small items we're dealing with in addition to our on-going efforts to ensure that Mpayy's mobile site experience is smooth on all phones on the market as well as to get our widget out the door.

All in all, we give ourselves a B-, but look forward to continual improvement.

If you have any questions, please feel free to email me at tjohnson@mpayy.com.