There was a cluster of really interesting mobile payment companies at the Under The Radar conference near San Francisco today. One of the ones that intrigued me most was Payfone. CEO Roger Desai talked us through the offering from the company – which aims to use mobile roaming technology to power worldwide mobile transactions.
One of the first big methods for allowing purchases and payments through mobile was Premium SMS. A big problem was that PSMS was never designed to be a payment method. It was slow, it was open to fraud and dropped texts meant failed transactions. The basic idea behind Payfone is that there is already an incredibly comprehensive, quick and scalable mobile money transfer system in place, and it connects telecoms operators to one another all over the world. This system is used by networks to facilitate mobile roaming. It needs to be accurate, it needs to be fast, it needs to operate across borders, and it needs to exchange currencies on the fly. Payfone asks “why can’t we extend this system, that operators use to transfer money amongst themselves, to consumers for mobile billing?”
There are some major advantages in using operator roaming channels for payment (what Payfone calls “network-intitiated mobile billing”). For consumers, it’s a one click process and only takes seconds to complete a transaction. There’s also no registration. Because you’re already on the mobile network, all they need is your phone number. The billing records are also very detailed sot that consumers can check exactly where all their money has gone. The entire roaming system is real-time, works all over the world in every currency, and doesn’t require any software or upgrades from the operators.
For merchants, it is highly resistant to fraud – not surprising, considering it’s a revenue channel designed expressly for operators! Everything is based on the device SIM, so everything is tracked by the operator and secured by the operator. It allows a cross-merchant fraud database to be compiled from the transaction records, so that repeat offenders or criminal patterns can be detected.
Payfone doesn’t want to become a “real world” payment company through this. It wants to apply it to two main areas: digital goods and mobile applications. Payfone regards itself as a “payment processor” – it doesn’t want to edge any existing companies out. This service would be licenses to existing companies as a more efficient system to process mobile billing payments.
So far Payfone has been getting the permissions necessary to launch the service and doing testing. They’re now starting to do merchant acquisition, and claim to have 400,000 merchants on board already.
Judge question: How does this work via roaming?
In order to enable roaming to exist, the operators needed to create a common interface that they could all access. And they did create it. And unlike PSMS, this channel WAS designed to handle content and complex data - it’s just never used that way!
Judge question: where do you make your money here?
Payfone will take a small cut from each and every transaction – but much smaller then credit card transactions.