Coming of Age

Gary Corbett, Commercial Director at Oxygen8 Communications, offers advice on how best to harness the power of mobile micropayaments, a technology whose time, he argues, has arrived

Suddenly, everyone is talking micropayments. And with good reason: according to Gartner, by 2014, over 3 billion of the world's adult population will be able to transact electronically via mobile or Internet technology, representing a phenomenal market opportunity.
While this trend is driven, in part, by the speed with which emerging countries are embracing mobile and the Internet, there is also a growing recognition that to maximise opportunities in areas such as gaming, social networking and content provision, the industry needs to deliver easy-to-use micropayments.

Prime target
In the UK, it is estimated that 16% of the adult population does not have a debit card, rising to 38% for credit cards. And amongst the youth sector, the prime target for many online services, those numbers are even higher. These figures are even more significant in emerging markets.
And while, to date, many organisations have eschewed micropayment options such as premium SMS, due to the significant charges levied by the networks, the market has reached a tipping point: the opportunity now outweighs the network cost.
Micropayment technology also offers the online community a very real opportunity to address the issue of fraud and identity theft. While most consumers are confident about using credit cards online, the cost of Internet-based fraud escalates year on year, and there is growing awareness that SSL-based (Security Socket Layer) sites do not offer an adequate long term, secure solution.
Micropayment, in contrast, is essentially secure. Leveraging the trusted mobile network and device, micropayment technology can be securely integrated into online payment methods, charging directly to the consumer’s mobile phone bill.
It is also completely transparent: full payment is processed before delivery of goods and services, which ensures there is no more partial payment or out-of-credit re-billing. Users receive a payment confirmation, or a screen encouraging them to top up, enabling transactions to be delayed until they have credit.

Best solution
But with new micropayment solutions arriving on the market on a near-weekly basis, organisations are struggling to work out what is the best solution. Add in the challenges associated with very different national regulations for micropayment use, diverse business models, and variance in network charges, and it becomes clear that it’s easy to make the wrong decision, and that doing so could result in a major business cost and expansion constraint.
There are a number of services on offer, from the Payforit solution to premium SMS billing and voice solutions. Given the very different opt-in regulations and network maturity in place globally, organisations will have to support more than one micropayment approach to truly maximise the opportunity.
It is essential to look for a solution that can support both one-off micropayments and subscriptions, to support diverse business models, especially in the online content delivery market. Furthermore, by opting for a solution that supports both timed and event-driven subscription models, organisations can streamline the whole subscription handling process.
Dealing with the complexity of multiple networks and multiple country regulations is simply too complex for the majority of businesses, so it is therefore important to work with a provider that can handle this complexity and ensure the end customer receives the same level of seamless service irrespective of network or market.

Grossing up
While the technology can obviously provide benefits for the consumer, it is obviously important that websites can gain serious commercial benefit – above and beyond broadening market access. 
In fact, on smaller values, micropayments are actually more cost effective credit card payments. However, network charges will, for the time being remain higher than credit or debit card charges, so organisations need a way to charge customers a premium for the ease, convenience and security of a micropayment alternative.
By offering the customer the option of making a micropayment, but charging a little more – known as grossing up - an organisation can maintain its margin, without cannibalising the existing customer base.
With the right integration into the core product/service software, it is a simple process to offer two prices – one for credit card transactions and one for micropayments – enabling the customer to make the choice. Online businesses are rapidly discovering that consumers are happy to pay this premium for the ease and security of using micropayments. Indeed, the mobile billing payment process is proven to improve conversion rates, with organisations typically achieving a 10 to 15% increase in revenues.
This model can even work internationally and across different networks, despite the variance in network changes. If the micropayment provider can seamlessly adapt the price to reflect the network charge, the organisation can ensure the margin is sustained.

Flexible options
The micropayment market looks set to explode. Social networking, gaming and dating sites are already demanding flexible, secure options for small subscriptions; whilst the introduction of new devices, such as eBook readers and Apple’s iPad, is providing publishers with a fantastic new way to sell content – if the payment methodology is right.
In fact, micropayments are relevant to any web-based business that wants to offer its customers an alternative, secure method of online transactions. And the mobile is the obvious payment method. It is secure, trusted and ubiquitous. Indeed, individuals globally are increasingly using the mobile as the primary route of Internet access, with 76% of mobile phones in the UK now Internet-enabled.
The time is now right: micropayments offer the most transparent and trusted way to buy goods and services on the Internet. Consumers now have a secure, convenient alternative to the credit card; whilst businesses can achieve global market expansion, improve conversion rates and significantly increase revenue. Micropayments have, most definitely, come of age.