Mobile Payment - Tipping Point?

The type of mobile payment I am talking about is the REAL kind, where the purchase shows up on your mobile phone bill. Now, as it relates to the purchase of content such as a ring tone whose sole purpose is use on the mobile phone itself, my opinion is - who cares? What I am writing about is the purchase of content or services that our outside of that realm. And, to further clarify, I would like to focus on what I refer to as Mini-payments ($2-$5) and especially on Normal-payments (>$5). Micro-payments are $1 or less.

I did find out that the Haiti donations are being handled completely differently than regular mobile payments for all the ring tones and digital goods being purchased. In other words, the vast majority of the $10 is going to get to Haiti (eventually).

The downside is that with all this positive attention paid to this method of payment and potential spill over to more people (who otherwise could easily pay with a credit card/Paypal) buying their digital goods with a Mobile payment, the merchant is going to lose roughly 47% of their revenue.

Now, in places like S. Korea where mobile payments have become mainstream, even for physical goods, the merchant pays roughly double what they pay for credit card transactions.

So, the question is, will Mobile payments (in the US) continue to cost the merchant approx 50%? If they do, then this moment will just be another blip and the mobile carriers will miss out on the biggest opportunity in their lifetime. Real mobile payments priced reasonably are the only real alternative payment threat to the card brands and PayPal.

(Note - I pay my mobile phone bill with my credit card!!! Interesting twist to this discussion?)

Text donations for Haiti?

It is wonderful that so many people have been inspired to make donations to Haiti and this has brought a lot of attention to the use of Mobile Payments to achieve this. (I made a donation the old fashioned way via my charitable trust account which will probably be paid by check to the Red Cross.)

In some ways this latest phenomenon reminds me of the people that lined up to give blood after 9/11. The problem was that sadly, not much blood was needed and a lot of it went to waste and with no crisis at hand, we are back to the mode where the agencies that collect blood have to beg people to come in for donations. Yes, I give blood regularly! (& if you can you should too).

The point here is that I wonder how much of that $10 is getting to Haiti? Normally payments by text messaging methods cost the receiver ~50% off the top and take 6-9 weeks to be received since the carriers wait to pay out until they collect from the consumer. Now, I have heard that at least in the case of Verizon, they were not going to wait. But, I have not heard if the carriers are waiving their fees or most of them?

The credit card industry has surely taken some criticism, some deserved, some not, over the last year or two. But, compared to mobile payments, they are much more cost effective and efficient. The fees are generally ~2-3% and the funds usually get to the merchant within 2-4 days. And of course, the dinosaur of all payments, checks, well we won't even go there. Those are close to free and if using the ACH almost as fast (wonder why PayPal tries to get you to use this as a funding mechanism!!)

"How to use your Gift Card"

I often redeem my credit card reward (thank you Mr./Mrs. Merchant for paying a premium in Interchange, oh am I suppossed to thank my bank?) for a "debit" card. I just got one for $200 bucks. You gotta love the instruction manual that comes with it! Under "how to use your Gift Card", it states a number of things; 1) "...tell the merchant you'd like to sign a receipt", 2) "At a PIN pad, swipe your card (keep in mind they just called it a "Gift Card" that clearly says "Debit" on the front), ....choose "Credit" and sign your receipt. Luckily, it tells you, "Although it states "Debit" on the front of the card, your Gift Card does not come with a PIN." You gotta also love that there is a 6 page pamphlet of fine print that accompanies this thing.

How did we end up here?

And we wonder why PayPal is doing so well!!!!

Best Practices for Subscription Based Merchants

it my be counter-intuitive, but making it easy for a customer to end their subscription may be the best method of growing your business...(it will clearly have a dramatic impact on reducing your chargebacks!)
Here are a few thoughts;
1) have a link clearly visible on your home page for Customer Service
2) make it easy for a customer to cancel their subscription, albeit nothing wrong with offering alternatives to cancelling but nonetheless, just deal with it if that is what they want
3) if the cancel requires human intervention, have those people available 7 days a week, if not 7x24, but preferably have it be self-service
4) process refunds promptly
5) communicate clearly and repeat the message that the credit will take 7-21 days to show up online and up to 2 billing cycles to show up in paper statements
Why do these things make sense?
1) in this connected world we live in, word of mouth references are profoundly important and someone saying, "I used X and it was great and when I was finished with their service and went to cancel it was a piece of cake..." is much more likely to win you the next customer and potentially even this one back later when their needs change
2) it will clearly save you money in operations cost, chargeback fees, etc.
3) you will sleep better at night and be doing your part to give the subscription based business world a better name.

Underwriting, what is that? & How does it impact subscription based merchants?

It is wonderful that new business is the engine of our economy. It also means that individuals who start these businesses often have gaps in their experiences. For example, one of the most common questions I get is - why does it take weeks to get approved for a credit card merchant account and why do they need copies of my personal tax returns, etc.?

Merchants need to understand that their credit card acquirer/processor is taking responsibility upstream for their viability. For old world face-to-face merchants selling physical goods this was less of an issue than it is for ecommerce merchants and especially those selling intangible goods and/or services. And, it is doubly true for those delivering those services over an extended period of time.

If you take a payment from a consumer for a 12 month subscription to a service, you get paid within 2-3 days. If for some reason, your business fails in month 6, and the consumer files a chargeback to get their money back, if your business is gone, it is the acquirer/processor who has to cover that cost.

Bye, bye, Revolution Money!

American Express just announced they are buying it for not much more than what has been invested in it. There has been so much smoke and mirrors about this company, for anyone that actually knows what they are talking about, it at least has provided some entertainment value. If American Express cannot figure out how to copy anything of value that this company had (and if anyone can explain to me what that was) for a lot less than $300M, it is a pretty bad situation.

PayPhrase?

I am sure I am missing something about this new feature from Amazon. I was really looking forward to having yet another Username/Password to remember (not!). I guess by calling it a PayPhrase, we are not supposed to realize it is just another Username. I only have about 100 others. When I saw the release, I immediately went and signed up presuming that perhaps this was something genuinely new and different. Alas, it was not.

With GoogleCheckout heading toward oblivion and PayPal seemingly unstoppable, I realize that desperation can drive other copycats to try and force innovation, but this one really seems like a very long stretch.

If anyone understands what this is supposed to accomplish and can explain it to me, I would really appreciate it.

Thanks!!!