Mobile Payments Too Expensive to be Useful

By January 16, 2009

Mobile payments have been possible for months: where monetary transactions can occur solely through the use of a cell phone. With such an obvious innovation, it is unfortunate that implementation has come upon several snags, the largest one being the prohibitive transaction fee. Using social networks as carriers for their applications, developers create needs for virtual items. This should be familiar to Facebook users who have received gifts or participate in the popular app Mob Wars. In the latter example, players level up in a mafia hierarchy while exchanging real cash for in-game weapons. Spanning the gap between applications and mobile carriers, companies like United Kingdom-based Mobillcash enable users to utilize mobile transactions with a simple interface that is much less keystroke-intensive - entering a mobile phone number, receiving a text response, and replying with a single letter. Instead of entering personal data and credit card or bank routing numbers, the charge is applied by the mobile carrier.

The efficiency and convenience of purchase-by-text are the clear selling points, but the end result is the charge burden on the consumer. This can run fairly steep, as another mobile payment company Zong says in their cost assessment: "Depending on the country, a carrier can charge you anywhere from 30 to 50% of the sales price." This completely eliminates feasibility for traditional goods, where there is a narrow margin of profit. The only place that this business model is feasible is for digital goods, if even these.

The fastest fix, according to TechCrunch, is simply to move to credit card charges. The incurred fee from the mobile carrier is what makes mobile transactions prohibitive. If this were to happen, the multitude of potential applications would be viable immediately. If not, the standard technology strategy applies: sit back and watch it get cheaper/faster/smaller.

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