Today I interviewed Dmitry Polyanovksy, Co-Founder and CEO of mobile micropayments company SmsCoin. Based in Israel, but run by Russians, the company powers millions of mobile transactions by Premium SMS every month in over 90 countries. We sat down to talk about the potential, and limitations, of this mobile money channel.
What does SmsCoin do, exactly?
It’s an SMS aggregator that handles payments for the Internet. For the last five years, it has provided smaller on-line businesses with a way to monitise their property through SMS. Importantly, the service is quite open, giving its clients a lot of options for how they want to use it, and it’s completely free to use. Dmitry claims that this territrory is massively underdeveloped – the company has a strong following in Russia and neighboring countries, and has been growing in Europe, LATAM, Asia and the USA.
How does it work?
If you have an on-line presence, you can use SmsCoin to monitise it. Examples include pay-walls on blogs, pay-per-download for file sharing sites, paying for applications from a store, or buying digital content on social networks. If you host as service like this, you simply copy code from SmsCoin onto your website. This allows your customers/subscribers to pay for your service quickly through Premium SMS.
If the website owner wants, this can be a white label service – there’s an option to handle all the payments on-site, without leaving the page. If you take that choice, there’s no indication that you’re using SmsCoin to pay. But you can also redirect to SmsCoin’s website, which carries quite a lot of brand loyalty in its current markets.
Really, though, isn’t Premium SMS a bit… old fashioned?
Sure, if you’re American. But nowhere else in the world has such a ubiquitous culture of credit card use. There are plenty of markets (Russia being a big one) where neither credit cards nor PayPal has an established presence. In large parts of Russia there aren’t even particularly trustworthy banks. So people like to do cash transactions – which is essentially what Premium SMS is.
Isn’t there a hefty operator charge involved there?
Yes, unfortunately. For every 10 dollars SmsCoin sends via Premium SMS, the operator takes 5. The rest is aggregated and split up amongst SmsCoin and its partners – with SmsCoin seeing only a tiny percentage of each transaction (but, as mentioned above, it currently processes several million per month, so that’s ok).
The size of the transactions is also a problem – you can’t compare Premium SMS to credit cards or paypal in that regard. The maximum transaction size is usually 10 of the local currency.
Is the growth of bank-based mobile payments a threat?
Dmitry believes that in order to thrive, this market needs to be far more open. He spoke of operators and financial bodies trying to regulate Premium SMS payments by force and put a lot of limits in place. SmsCoin wants to see a pure capitalist economy for this market – it believes that what you need is to open it completely to the consumers, and the market will regulate itself.