Mobile Operators and SMS Will Revolutionize Payments on the Internet

Making money from the Internet has proven to be harder than one would think. This especially finds expression in the sites that are providing information, content and services. Between 1998 and 2000, during the height of the wave, talk of charging users was taboo. Focus was entirely on securing as much traffic as possible and the best way to achieve this was to give away content for free. Much has happened in the past year and the Klondike days have past. The question is not whether to charge but when and how micro-payment is best implemented. Consequently the Internet business is looking for solutions to the problem of how to effectively organise micro-payment for the information, content and services that sites can offer.

Micro-payment via SMS
A number of possible solutions to the problem of micro-payment on the Internet have been put forward. These include SET and digital money/e-wallets. Common for these are that they have failed because they did not gain a broad enough user base. Now there is a new solution and one that already enjoys high penetration rates and a broad customer base: The mobile phone and premium priced SMS messages.

From a customer’s point of view, micro-payment via SMS is as simple as paying with a credit card in a supermarket. Here the mobile phone acts as a credit card – and the mobile operators act as a bank. The basic transactional process can be illustrated as follows:

The unique thing about the micro-payments via SMS solution is its user-friendliness: It is fast. The customer needs not to invest in new technology and there will be no need for the customer to share credit information with 3. parties. To fully understand the micro-payment via SMS solution, it is necessary to understand the different players and ?ingredients’ required to configure, organise and implement an SMS-based micro-payment solution. These players and ?ingredients’ are:

Advantages over Existing Micro-payment Solutions
The advantages of micro-payment via SMS over existing micro-payment solutions are multiple:

High penetration
Contrary to existing micro-payment solutions, mobile phones and as such SMS technology already enjoys penetration rates well above 50% in most of Western Europe. As such the solution already exceed all existing expectations relating to the penetration of micro-payment solutions. Furthermore, regular SMS messaging has proven very successful amongst mobile phone users.

No need for new software
Micro-payment via SMS does not require the user to install any new software on the mobile phone or the PC.

Easy to implement for all Internet sites
Both large and small sites can implement micro-payment via SMS. Depending on the size and nature of the site, it may chose between one of three different business models. These different models are further explained below.

Mobile operators as trusted 3. parties
Up till now the only practical means of payment on Internet sites have been credit cards. And although several sites have proven e-commerce successes, this payment solution is neither widespread nor very used compared to the number of sites with own content, which could generate income. There are a number of practical reasons for this. One such reason is that the credit card solution requires that the site is a trusted part in the mind of the customer.
To the many sites that offer services and content for which there is a demand, but who are not able to achieve status of trusted part in the mind of the customer, the credit card solution has not been a realistic option. It is not sufficient that the site offer services and content for which there is a demand. Because the site will have to handle credit information, the customer will need assurances regarding safe handling and security. These many sites are in need of a payment solution, which involves an already established and trusted 3. part. And in the case of SMS, the mobile operators become those already trusted 3. parties.

Already, operators are implementing technology. Because SMS messaging in general and premium priced SMS messages in particular have proven so profitable, most operators are in the process of implementing the technology necessary to handle premium priced SMS messages and as such micro-payment via SMS.

National- and international roaming Another significant advantage in using mobile phones as the platform for micro-payment is that relatively few operators share the market. As such relatively few agreements are needed in order for the solution to cover an entire market. Such roaming agreements ensure that revenues are shared between the different operators involved.

In Norway where the two operators Telenor and Netcom have had such an agreement relating to premium priced SMS services since the beginning of 2000.

As premium priced SMS services are launched across Europe, this increases the demand for international roaming agreements. Handling these new services and entering into international roaming agreements means that micro payment via SMS will soon also be available on international sites. We expect the first of such international agreements to be in place during 2001.

Secure payment is paramount in relation to making a micro-payment solution a success. Recent experiences with e-business have proven just how hesitant consumers are when it comes to using credit cards on the Internet. One of the great advantages of micro-payment via SMS is that is based on, and make use of an already trusted 3. part – the mobile operator.

And since premium priced SMS messages are priced according to pre-arranged categories, it is not possible for the site to over charge the customer without his consent.

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