August 15, 2008 3:42 PM BST
With the recent news that UK regulator PhonepayPlus has announced a review into the ?350 million (US$691.6 million) a year premium-rate industry, after complaints soared by 40 percent in the first quarter of 2007, the need for transparency in current premium-rate payment methods, such as Premium SMS (PSMS), has once again been thrust into the news agenda.
Operators are faced with business and technical challenges in managing the complexities of incorporating third party content and providing effective, cost-efficient transaction services outside their existing billing systems. Support for business processes such as payment processing, customer care, fulfillment, exception handling and settlement are vital components to bridge on-portal and off portal business strategies.
Premium SMS (PSMS) has been the primary method used by content providers to allow the purchase of off-portal content. PSMS is a popular method for end users to consume services such as chat and voting. It?s worth looking at the reasons why Premium SMS has become so popular and successful. For off-portal content and service providers, it provided a simple, easy to integrate method of placing a charge on a subscriber?s bill. Critically, it has allowed these providers to charge across operators in a given region through a single integration point, typically an SMS aggregator. In addition, the emergence of short codes and in particular cross operator short codes provided a simple, easy-to-use mechanism to advertise services and allow consumers to engage and purchase content through a simple text message to an advertised short code. In addition, when Premium SMS charging first emerged, much of the content being purchased was itself SMS-based and delivered via the SMS channel (ringtones, wallpapers and logos) so the interaction with the consumer was a relatively seamless process of sending an SMS message to request the content and receive it via a return SMS message which also triggered the charge to the subscriber?s bill or prepaid account.
Despite its success, Premium SMS, as a model for payments, has its limitations which are now widely recognised within the Mobile Industry by operators, aggregators and content providers. While SMS still has an important part to play in the content value chain in the discovery of content and interaction with the user, operators and content owners alike need to ensure they offer a payment mechanism that will once again restore trust with consumers by providing transaction visibility and traceability.
PSMS does not provide a reliable transactional mechanism for authorising and capturing payment requests. The lack of transactional reliability can give rise to a significant amount of revenue leakage. These issues and more point to a real need to address the lack of transparency on volume and frequency of charges with direct-to-bill payments, which is the model for the next evolution of the mobile content market. Using a Direct-to-Bill service that leverages a payments platform, merchants are able to charge consumers more accurately and provide appropriate security, fraud protection and transparency into transactions for all parties. It also enables payment for emerging, media rich content and services that PSMS cannot support such as in-game charging.
In the UK, the PayForIt scheme is the first move by operators to provide a standard direct-to-bill charging facility, and one that can only help the mobile-payments market to mature and grow. We can expect to see similar initiatives across Europe in the coming years.A key feature of the PayForIt initiative is comprehensive revenue-settlement capabilities, ensuring the accurate settlement of both initial payments and subsequent post-payment events, such as refunds and charge-backs.
As this trend goes global, operators who don?t embrace new payments technologies like these risk losing their share of transactions, as consumers are urged by content providers to use alternative, lower-priced payment mechanisms that are not dependent on access to bill.
Thus, while the m-payments space continues to develop, it?s clear that a more interoperable payments mechanism is needed in order to pave the way for more content and service innovation and greater transparency for the consumer. As the premium mobile content market continues to grow and new media rich applications evolve, a more collaborative payment mechanism is needed than PSMS which will enable content innovation and the introduction of promotional programs, joint discounts, and loyalty programs. Similar to an e-commerce platform, mobile operators need to link their offering with the generation of accounts receivable, accounts payable and settlement for multiple parties. In order to do so, operators need a comprehensive payments platform to support their on-portal and off-portal businesses.
The new generation of payments and charging platforms provide the key technology that allows operators, ISPs and aggregators to work together to successfully exploit both on-portal and off-portal markets simultaneously. The successful and proper deployment of payments solutions helps operators, aggregators and content providers to grow while still focusing on their core competencies. With the appropriate payments platform, consumers will be able to access more interesting content allowing content providers and operators to increase revenues, thereby creating a win-win-win situation for all players in the mobile content ecosystem.