TechnologyDec 03, 2010

The Mobile Credit Card

Mimi Tang

As I mentioned in my last blog entry, “How to select an M-Commerce Solution,” M-Commerce is constantly evolving and growing. Coda Research Consultancy forecasted that mobile commerce revenues in the US would grow from $2.4 billion this year to $23.8 billion by 2015. In other words, business owners should expect to reap large revenues in the next few years by taking advantage of an M-commerce solution. Within this ever growing market, several M-Commerce models have emerged and the following are the primary payment models:

1. SMS Based Payment Service – This service revolves around a mobile device’s SMS capabilities. The customer sends a payment request via an SMS text message to a short code and the merchant sends back a request for a payment in the form of a credit card number or pin number. The customer simply returns the number and a charge is then applied for the good/service plus an additional charge to the customer’s phone bill for the SMS messages. Most users have been exposed to this model through such transactions as buying a ring tone or voting for their favorite American Idol singer. This messaging service can also deliver barcodes so that vendors can scan them for access to movie theaters or concerts. This model is most pronounced in industries where products can be purchased at a low price and can be delivered instantaneously- typically with information exchange. Companies that would not benefit from this model are those that rely heavily on client interaction and follow up sales.




Of all the methods, this is the most common payment system in use, but is slowly being phased out by other methods described in this article


Often times, the message between the customer and the merchant can get lost


This service does not require wifi, therefore users can conveniently use this service anywhere

Low Re-Occurring Sales

Once the payment has been sent, there is not much the consumer can do to remember where it was purchased

Instant Satisfaction

Customers can instantly receive their product via phone instead of waiting for delivery or printing

High Cost

It can be very costly to set up the short code and to SMS


SMS encryption ends in plaintext

2. Direct Mobile Billing – This option utilizes the mobile device itself to verify the transfer of electronic funds. Users enter in their mobile phone number for the transaction and a text message is instantly sent to confirm the transaction. Once the authentication occurs, which involves a PIN and a confirmation message, the consumer’s mobile account is charged for the purchase without ever having to enter in credit card information. This method is prevalent when used to purchase virtual goods within the video game space. The prominent players in the market are companies such as BilltoMobile, Boku, and Zong.



Fast & Easy

Most transactions are completed in seconds


Users trust paying with visa or paypal versus unfamiliar names such as Boku or Zong

Low Fees

Cheaper than its rival, the SMS Based payment service


Method is restricted by your mobile provider’s limits

3. Near Field Communication (NFC) –As mentioned before, all of the big players are talking about enabling NFC into their products, which is precisely what Google’s CEO has confirmed they will be doing in the next generation Android. NFC utilizes a short range, high frequency wireless chip that enables consumers to tap their phones on a contact bar in order to pay for items. Google and Apple are not the only companies taking advantage of NFC technology; smarter companies are beginning to utilize the technology as well. For example, American National Bank is partnering with Bling Nation to offer their customers Bling Tag, which is a sticker that adheres to the back of their mobile phone and consumers can touch-and-go at participating Brookshire’s stores. You can use NFC for virtually any type of product, such as the exchange of information (e.g. business cards, music, etc.) and tangible goods (e.g. groceries, gasoline, etc.). Although NFC has not yet reached the tipping point, you should heavily consider a payment model with an open API to NFC. You will be thankful that you did. Jim Balsillie, CEO of Research in Motion, wisely said during the Web 2.0 Summit “I don’t comment on future products but we’d be fools not to have it [NFC] in the near term… and we’re not fools.”



Fast & Easy

Touch and go transaction process

Reluctance to Conform

Major hardware manufacturers outside of Motorola, Nokia, and Philips are not yet supporting this technology

Re-Occurring Customer Loyalty

As NFC and mobile location based capabilities coincide, users will be able to make smart and frequent purchases


Relies on physical contact; companies that rely on the virtual space and not human contact for sales should not incorporate NFC

4. Customization – As we all too often know, there is never just a one-size-fits-all approach. Typically, most business models require customization and the compilation of many types of models to be victorious. Therefore, the need for a savvy application platform for developers has become necessary, giving opportunities to companies like Appcelerator Titanium to emerge into the mobile payment space. This free and open source platform lets software developers transform their innovative ideas into mobile applications using existing web skills such as javascript, PHP, etc. One of the advantages that this platform offers is it already has several APIs available, so that developers can utilize them when creating their custom application. For example, consider yourself an owner of a video game store who has created an NFC model that has enabled customers to simply check out several video games by the touch-and-go model. There is no use in just stopping there; customize your process so that when a customer checks out, he/she has the ability to set up a custom profile on their mobile device that has location-based functionality installed. This way they can announce to neighboring friends that they have bought the new version of Starcraft and are open to play.

Ultimately, M-Commerce will continue to grow and expand in the next few years. Those business owners that take advantage of the different mobile payment models and customization options will be sure to reap large rewards and stay ahead of the competition.

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