I wrote an article about the Payfone and Verizon deal (see link) and got several comments back. So, I decided to interview CEO of Payfone Rodger Desai for some more detailed information. Please read the interview below.
BENA: Payfone promotes itself as one-click operator billing but I found out that you still need an SMS Pin code for registration. Is this unavoidable at the moment?
PAYFONE: The PIN is a one-time requirement and is only required when the consumer is making a purchase with a merchant for the first time on a PC or over Wi-Fi. There is no PIN required when purchasing on a mobile phone. The PIN is in place to protect both the consumer as well as the merchant. For subsequent purchases, the PIN is not required. When the user decides they want to purchase an item, they simple choose a button that says, for instance, “mobile account” or whatever it may be branded as (under the merchant’s discretion re their checkout page), which would also sit alongside a number of other payment methods at checkout, such as, for instance, PayPal, Credit (Visa, MasterCard, Discover, AMEX, etc.) or Debit Card. A field would then appear that would allow the consumer to enter their mobile phone number. At this point, because this is the first time the consumer would be making this merchant purchase, an additional field would appear prompting the user to input a simple, one-off 4-digit PIN. Payfone would then instantly generate a random one-off 4-digit PIN, which would be texted to the user within seconds.
By issuing the PIN via text to that user, Payfone is able to authenticate that consumer across a wide variety of parameters during the transaction, ensuring they get exactly what they paid for, while tying the SIM card, device ID and location to the purchase and each amount, so when a mobile number is used on a different phone or in a different location – Payfone has the ability to track this. This in turn helps Payfone to eliminate identity theft, operator care costs and merchant refunds, thereby increasing conversion and ultimately revenue.
Once Payfone has authenticated and authorized the user with that merchant, the user no longer has to use the PIN with that same merchant moving forward. All that is required of the user is to click their “mobile account” button and enter the phone number and the purchase would be directed to their wireless monthly phone bill, along with the appropriate information associated with that transaction/purchase so that the user can verify their purchase at the end the month upon review of their wireless bill. These would of course be line item, similar to what a consumer has become accustomed to over the years with credit card bills, etc. We would love to show you a demo if you would be interested, as once you see it in action you’ll see just how user friendly the purchasing process is with Payfone.
BENA: Is there any SMS free way to set up a secure billing or is it essential? Yes, via the mobile device.
PAYFONE: We authenticate a secure billing channel through the mobile browser or application. We do have other authentication methods that do not require SMS PIN’ing as described above. The merchants can decide which solution is most appropriate for their deployment.
BENA: I believe that mobile commerce is going to be huge. But its the interface and security issues that keep coming back to stall uptake. Do you think that mobile commerce is already huge or how long to go before mass penetration?
PAYFONE: The latest industry buzz and recent alliances, such as our own with the likes of Verizon Wireless and American Express (Serve), are all indicators that the market is definitely heating up and that the demand is there. There are several studies out in the market today that claim consumers are ready for mobile commerce. Generator Research (March 2010) claims global mobile payments transactions are expected to rise to $1.13 trillion in 2014 from $37.4 billion in 2009, at an annual growth rate of 98%.
Also a recent study by Mobio Identity Systems Study found that 94% of consumers would use their phones to make payments if they knew it was secure.
With smartphone penetration on a meteoric rise and consumer demand for mobile commerce on a similar upswing, we very much believe that mobile commerce is well and truly on its way to being huge. However, we absolutely agree with your point, in order for mobile commerce to reach critical mass, a balance has to be struck between being able to offer a seamless user experience along with iron-clad security.
Payfone has worked really hard to get this right. Due to Payfone’s ability to directly integrate with operator’s network and intelligently identify a consumer’s profile in the system, makes it the only company capable of securely streamlining the entire mobile payments process.
Unlike other industry players, Payfone offers an open, cloud-based Mobile Commerce Service that leverages the security already built into the mobile operator network. This deep network access allows for the authorization of credit card, debit and mobile operator billed payments, dramatically reducing fraud, charge-backs and identity theft. With this approach to mobile payments, operators and merchants are able to complete transactions more securely and accurately, reducing fraud and risk and generating more revenue. For consumers it means greater choice and a simple, safe and secure credit card-like purchasing experience via mobile and online.
BENA: I wrote in brief about your new deal with Verizon. Now, we all know that having an operator’s support is often essential but some companies prefer to go over the top of operators and try and scale that way. What are Payfone’s hopes with the deal with Verizon?
PAYFONE:Short answer – immediate access to Verizon’s huge subscriber base, however we actually see our recent partnership with Verizon to be a win-win-win for everyone involved. By that we mean, Payfone’s new partnership opens up significant revenue opportunities for Verizon Wireless as well, enabling the company to play a more significant role in the transaction flow and improve conversion with fewer clicks to conduct mobile payments.
For merchants, the collaboration means improved conversion and revenue yield, given more transactions are completed securely and accurately. For consumers it means greater choice and a new level of convenience, security and reliability via Payfone’s simple and secure credit card-like purchasing experience. Verizon has been working with Payfone for more than a year now and they have come to appreciate Payfone’s technology, as well as the credentials that Payfone brings to the table.
Payfone’s goal is to deliver the broadest, most advanced mobile payments solution to Verizon’s subscribers and that entails working with other financial institutions and vendors. Verizon will be leveraging Payfone’s open, cloud-based Mobile Commerce Service as the central integration point for its overarching mobile payments strategy.
Payfone has the credentials and technology to partner and integrate with other financial institutions and mobile commerce providers as the ecosystem evolves. In addition, you may have read that Verizon Ventures recently made an investment in Payfone and that clearly indicates that Verizon has a very strong partnership with Payfone and Verizon feels Payfone can help it evolve Verizon’s mobile payments strategy over the long term.
EXAMPLE: Today if you buy digital content, transactions typically go straight to your credit card, which means the operator is left out of the transaction. Through Payfone, Verizon Wireless is now able to participate in that revenue stream, drive usage and penetration and adoption of mobile payments.
BENA: Is there a security or information on consumer share with this service. Who holds or owns the information? I realise these are Verizon customers and the payment comes off the bills but what about the type of purchase and when it was made. Who manages and owns that?
PAYFONE: The operator owns the billing relationships with their customers and are ultimately responsible re how a subscriber’s bill is presented to them and how purchases are itemized on the subscriber’s bill i.e. delineating out the various sections of the bill, such as differentiating between voice minutes, data consumption and purchases pertaining to digital or physical goods.
In terms of Payfone’s role in the management and processing of the transaction, it acts as the intermediary between the operator and the merchant, authenticating and authorizing millions of transaction in real-time and supporting multiple simultaneous connections e.g. 1,000 Transactions per second (TPS), with capability to support larger TPS as needed.
Payfone provides high fidelity processing to reduce operator care costs and flexible pricing taking into account key factors such as taxes, reconciliation and other key services such as settlement and cancelation. Also, Payfone dynamically determines eligible billing options such as regulatory limits, insufficient pre-paid funds, merchant location permissions or over credit allowance for post-paid subs, so in the event a consumer’s initial purchase request fails e.g. due to lack of funds, Payfone can quickly diverts the user to another method of payment, leading to a higher conversion rate and a seamless user experience.
For instance, the operator can determine subscriber spending caps, which are then enforced by Payfone through a series of business rules set out to rate the user to determine whether the user is authorized to make certain types of purchases or has the available funds to ensure the completion of that transaction for the merchant. For example, these business rules could be based on a number of factors such as the type of user plan, age, credit rating, location (out of the country) and whether there are parent controls on the type as well as amount of the purchase e.g. teenage buying ringtones or Facebook credits via mobile.