| Consumers around the world are abandoning | | | | but we can also handle mid-sized payments |
| fixed line phones in droves and replacing | | | | from $10 to $25 and even larger payments up |
| them with mobile phones. According to a study | | | | to hundreds of dollars." To pur¬chase |
| by research firm Mori, fixed-to-mobile | | | | online content or services, BitPass |
| substitution is occur¬ring across the four | | | | "Spenders" first purchase a virtual prepaid |
| major markets surveyed - the United Kingdom, | | | | debit card using traditional payment channels |
| United States, Germany and South Korea - with | | | | such as Visa, MasterCard, Discover, American |
| upwards of 45 million consumers estimated to | | | | Express or PayPal. They can then use these |
| now make all their voice calls from their | | | | credits with BitPass "Earners" to anonymously |
| mobile phone in these markets alone. This new | | | | and securely purchase music, photos, games, |
| generation of landline-less consumers has the | | | | articles and other items. Graves asserts that |
| potential to drive m-commerce to new heights | | | | the company's "good funds" model means that |
| in the years ahead. This wireless explosion | | | | no merchant has ever been a victim of fraud. |
| also has implications for mobile merchants | | | | |
| and their ability to process electronic | | | | Similar to eBay, BitPass makes its money from |
| transactions virtually anywhere at any time. | | | | the seller, not the buyer. The com¬pany |
| | | | normally makes a 15 percent commission on |
| One person who keeps the pulse of m-Commerce | | | | items less than $5 and pay Earners via |
| and mobile payments in partic¬ular is | | | | automated clearing house (ACH) or Pay Pal |
| Simon Pugh, president of the Mobile Payment | | | | when their account accu¬mulates $20. "We |
| Forum. The Mobile Payment Forum describes | | | | handle three critical items for our users: |
| itself as a global, cross-industry alliance | | | | authentication, access control and payment |
| of leading organizations from the wireless | | | | processing," says Graves. "Our goal is to |
| and financial industries dedicated to | | | | help sellers of all sizes monetize digital |
| realizing the full potential for mobile | | | | content." |
| payments. Pugh explains that "there are two | | | | |
| broad categories: remote trans¬actions | | | | Content and service providers can enable |
| that are usually micropayment-based and local | | | | their offerings in as little as 30 minutes by |
| transactions that use RF (radio frequency) or | | | | simply uploading a single file to their site. |
| NFC (near field communications), which can be | | | | Pixel]ump is one merchant that uses BitPass |
| used for any size transaction but are | | | | to sell ringtones, games and graphics, and |
| currently associated with quick-service | | | | delivers them via short message service |
| retail." | | | | (SMS). |
| | | | |
| Let It Ring | | | | Meanwhile Peppercoin recently announced its |
| | | | Peppercoin 3.0 Small Transaction Suite, which |
| In terms of remote transactions, Pugh sees | | | | adds subscription and prepaid payment |
| ringtones, MP3 files, movie theater tickets | | | | capability to the company's pay-as-you-go and |
| and other time-driven event ticketing as | | | | post-paid processing service. Peppercoin is |
| today's big movers. "It is a much better | | | | partnering with Sun Trust Merchant Services |
| shopping experience to buy larger items over | | | | to deliver the small payment processing |
| the Internet from your home or office PC," he | | | | system to merchants. "Peppercoin's solution |
| says. As phones and personal digital | | | | is the only one that supports our merchants' |
| assistants (PDA) sport larger screens, more | | | | needs for digital, mobile and physical |
| memory, keypads, Internet protocol (IP) | | | | point-of-sale (POS) transactions," says |
| connectivity and faster download | | | | Barbara Roeber, Sun Trust's general manager |
| capabilities, it will make it easier to | | | | and senior vice president. |
| transact remotely. Yet Pugh concedes that it | | | | |
| will take quite awhile for transactions to | | | | Mark Friedman, president of Peppercoin, is |
| migrate from the micro level (under $5) to | | | | also excited about the possibilities: "Each |
| the macro level. | | | | year, more than 354 billion cash transactions |
| | | | occur in the U.S. for less than $5 at the |
| Bellevue, WA-based Infospace is a leading | | | | physical point of sale, representing $1.32 |
| producer and publisher of personalized media, | | | | trillion in aggregate rev¬enue. We hope to |
| games and directory services for the mobile | | | | tap into this market and move these consumers |
| market. It offers the largest licensed | | | | away from cash payments." |
| catalog of monophonic (single tone) and | | | | |
| polyphonic (16 to 24 notes using the Musical | | | | 'Small' Markets |
| Instruments Digital Interface [MIDI] format) | | | | |
| ringtones in North America. According to | | | | Leading markets include vending ($18 |
| Consect, a consulting firm headquartered in | | | | billion), parking ($10 billion), coin-op ($6 |
| New York, ringtones generated about $4 | | | | billion) and quick service restaurants ($110 |
| bil¬lion in sales around the world in | | | | billion). Peppercoin already has a foothold |
| 2004. America accounted for only $300 | | | | in the parking meter market with its signing |
| mil¬lion of that, although Consect | | | | of Reino Parking Systems, a global leader in |
| predicts the figure will double this year. | | | | on-street parking solutions. The new |
| Shane Dewing, vice president at Infospace, | | | | high-tech meters are equipped with card |
| says "ringtones are all about | | | | swipes, but users with cards on file also can |
| personal¬ization. Right now most are | | | | pay by dialing a toll-free number and |
| simple polyphonic snippets, but we see the | | | | entering a meter number and payment amount. |
| future as entire MP3 song downloads and even | | | | Additionally, users will receive SMS text |
| video ringtones." | | | | messages when their parking time is close to |
| | | | expiring so that they can con¬veniently |
| Infospace handles the complicated and onerous | | | | and remotely add more time to the meter. |
| task of licensing music from record | | | | Users of the system can also purchase virtual |
| companies, publishers and artists, as well as | | | | parking passes with their debit or credit |
| formatting the ring¬tones for the myriad | | | | cards, thereby trans¬forming these cards |
| of handsets that are out on the market. | | | | into virtual pre-paid cards-the next time |
| According to Dewing, "40 percent to 50 | | | | they swipe the same debit or credit card, it |
| percent of our music sales are from | | | | will deduct the charge from their balance |
| independent labels, so it is much easier for | | | | that is stored on the gateway. |
| us to han¬dle these thousands of licensing | | | | |
| agree¬ments than it is for our clients." | | | | Not wanting to be left out of the small |
| | | | payments market, Star Networks is reducing |
| Most of the major telecom players handle | | | | its fees for a wide range of merchants where |
| their downloads on a "post paid" basis | | | | low-ticket cash transac¬tions predominate: |
| through their monthly billing statement, | | | | commuter-transit agencies, parking lots, news |
| often relying on third parties such as Qpass | | | | dealers, laun¬dromats, car washes and |
| and Qualcomm to provide the technology needed | | | | cinemas. The nation's largest electronic |
| to handle authentication and entitlement. | | | | funds transfer network has even gone so far |
| Sprint is the exception in that they have | | | | as to create a new merchant category, called |
| developed their billing and delivery system | | | | small ticket, with fee pricing intended to |
| in-house and have successfully offered a | | | | encourage installation of PIN pads and |
| sub¬scription-based service, as opposed to | | | | con¬version of typical cash payments to |
| the other carriers who have focused on single | | | | PIN debit. |
| downloads. Consumers also can download | | | | |
| ringtones, wallpapers, screensavers, games | | | | While many merchants shun payment card |
| and quizzes from popular online sellers such | | | | transactions of $10 or less, small ticket |
| as Zingy and Jamster. | | | | sales increased nearly 50 percent from $23.7 |
| | | | billion between 2003 and 2004, according to |
| While the post-paid model is a stan¬dard | | | | CardData Diamond. Fast food sales with |
| payment method right now, micropayment firms | | | | average ticket sales running $11 per |
| such as BitPass and Peppercoin are hoping | | | | transaction hit $22.5 billion in 2004, while |
| their solu¬tions can find traction in both | | | | credit/debit card sales of transactions of $5 |
| the m-commerce and e-commerce mar¬kets. | | | | or less grew from $10.8 billion to $13.5 |
| Matthew Graves, COO at BitPass, describes its | | | | billion last year. |
| target market as "any payment $10 or below, | | | | |