“SAPIENZA” - UNIVERSITA’ DI ROMA
FACOLTA’ DI ECONOMIA
DIPARTIMENTO DI MANAGEMENT
DOTTORATO DI RICERCA IN
“ECONOMIA E FINANZA NEL GOVERNO DELL’IMPRESA”
TESI DI DOTTORATO
XXIII CICLO
MOBILE REMOTE PAYMENT: AN EXPLORATORY STUDY OF MERCHANT
ADOPTION
MASSIMILIANO SILENZI
Tutor: Maria Vernuccio
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
ABSTRACT
There are more than 5.6 billion mobile phone users worldwide, making mobile
phones more common than PCs. Mobile technology is a modern phenomenon with a
great impact on industries and our society. Mobile phones began as very limited devices
that provided only voice services. Today, these devices also provide a myriad of data
services that allow us to browse the Internet, send text messages, check emails, watch
movies, listen to music, take pictures, record videos, play video games and read
documents.
Mobile can also be used for payments, thus adopted by merchants in such a way to
provide a new way for their customers to make their purchases.
Different systems and business models have been developed for enabling Mobile
Payments such as "Proximity" systems based on NFC technology and "Remote" systems
that use the Mobile Operator's network and mostly widely adopted technologies such as
SMS, WAP and Mobile Internet. Mobile remote payment systems are one of the most
popular technologies for transactions today, especially across the media and online
industries.
Prior research mostly focuses on technology innovation or consumer-centric view
while there is still less knowledge related to supply-side perspective and merchant
attitude towards adoption of Mobile Payments. Literature is even more scarce when it
comes to understanding the merchant adoption of specific Mobile Payment Systems such
as "Remote Payment" systems based on carrier billing technologies. Typically, these
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
systems have been widely adopted by merchants around the world and for some have
become a phenomenal tool of success. There is also scarcity of research describing the
operative factors affecting the deployment and management of Mobile Payments.
This research is an exploratory research of the merchant adoption of Carrier
Billed Mobile Remote Payments. This qualitative study was based on in depth interviews
conducted on executives and managers from 15 international companies that operate
globally in the digital space and that have made a successful use of Mobile Remote
Payments.
The results of this research are divided into two parts. In the first one, which is
dedicated to the "Strategic Phase", the research aims to understand what enables, drives
and inhibits the adoption of Mobile Remote Payment systems by merchants. In the
second part, the “Operative Phase”, the research instead outlines the factors driving or
inhibiting the successful deployment and management of such systems by merchants.
Both parts are organized into descriptive frameworks where the factors identified are
analyzed in great detail and explained also through direct quotes of the interviewees.
What emerges from the “Strategic” part of this study is that in order for merchants
to adopt Mobile Remote Payments, they must operate within very strict limitations, such
as offering mainly digital goods and services and within a micro-transaction based
business model. Furthermore, these merchants have to bear incredibly high commissions
if compared to credit card or other payment tools. However it emerges that this tool is so
simple and secure to use, and immediately available to anybody with a mobile phone that
it produces key beneficial factors for the merchants that really drive their adoption. These
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
factors include addressing unbanked users (Young people, emerging markets), increasing
impulse purchases and the possibility of developing new business models.
The result of the study of the operative phase shows that 4 macro factors clearly
need to be considered when merchants deploy and manage a Mobile Remote Payment
system. These are 1) Purchase Experience; 2) Payment System Reputation; 3) Merchant –
Provider Relationship; 4) Price Structure and Billing Policies.
Keywords: Mobile Payment, Mobile Commerce, Mobile Remote Payment, Mobile
Marketing, Merchant Adoption, Technology Adoption, Payment Systems
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
TABLE OF CONTENTS
Chapter 1: Introduction ........................................................................................................8
1.1.
Purpose of the Study ...................................................................................................... 12
1.2.
Theoretical Approaches Used in This Study .................................................................. 12
1.3.
Scope of the Study ......................................................................................................... 13
1.3.1. Geographic Scope: ....................................................................................................... 14
1.3.2. Business Model and Technology Scope....................................................................... 14
1.3.3. Managerial Scope ......................................................................................................... 15
1.4.
Description of the chapters............................................................................................. 15
Chapter 2: Literature review ..............................................................................................18
2.1. Theoretical Approach of the Literature Review: Convergence Based Framework ............ 19
2.2. Literature Review Methodology ......................................................................................... 21
2.3. Literature Review ................................................................................................................ 24
2.3.1. Definition and Conceptualization of Mobile Payment ................................................. 25
2.3.2. The Technological View: Review of Mobile Remote Payment Systems and
Technologies .......................................................................................................................... 31
2.3.3. The Competition Perspective: Review of the Mobile Remote Payment Value Network
and Competitive Environment ............................................................................................... 39
2.3.4. The Consumer Perspective: Review on Consumer Adoption and Attitude Toward
Mobile Remote Payments ...................................................................................................... 43
2.3.5. Mobile Payment Merchant Adoption ........................................................................... 51
2.4. Identifying Research Gaps .................................................................................................. 54
Chapter 3: Research Questions and Methods ....................................................................57
3.1. Research Questions ............................................................................................................. 57
3.2 Rationale for Research Methodology ................................................................................... 60
3.3 In Depth Interviews Methodology ....................................................................................... 61
3.4 Data Collection .................................................................................................................... 62
3.5 Data analysis and Research Framework Developmnt .......................................................... 64
Chapter 4: Findings: “Pre-requisites, Drivers and Barriers to Successful Adoption of
Mobile Payments”..............................................................................................................67
4.1. Merchant Adoption Pre-requisites ...................................................................................... 69
4.1.1. Proliferation of Mobile Technologies (St. 1): ............................................................. 70
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
4.1.2. Viable Payment Infrastructure (St. 2) ......................................................................... 71
4.1.3. Sustainable MP Business Model (St. 3) ....................................................................... 72
4.1.4. Need for a New Payment System (St. 4) ...................................................................... 75
4.1.5. Knowledge of the Payment Systems (St. 5) ................................................................. 76
4.2. Merchant Adoption Drivers ................................................................................................ 77
4.2.1. New Business Models, New Products and Services (St. 6) ......................................... 77
4.2.2. New Customers (St. 7) ................................................................................................. 79
4.2.3. Improved Purchase Experience and Security (St. 8) .................................................... 80
4.2.4. Increased Impulse Purchases (St. 9) ............................................................................. 81
4.2.5. Increased Product and Service Availability (St. 10) .................................................... 82
4.2.6. Low Implementation Costs (St.11) .............................................................................. 83
4.3. Merchant Adoption Barriers ............................................................................................... 84
4.3.1. High Commissions (St.12) ........................................................................................... 84
4.3.2. Limited Pricing Options (St.13) ................................................................................... 87
4.3.3. Complexity of Local Regulations and Operator Policies (St.14) ................................. 88
4.3.4. Operator / Provider Payment Terms (St.15)................................................................. 90
Chapter 5: Findings: “Enablers, Contributors and Inhibitors of Successful Mobile
Payment System Deployments”.........................................................................................91
5.1 End User Purchase Experience Optimization (Op.1) ........................................................... 94
5.1.1. Discovery (Op. 1.a.) ..................................................................................................... 95
5.1.2. Purchase Flow (Op. 1.b.).............................................................................................. 96
5.2. Payment System Reputation (Op. 2) ................................................................................. 105
5.2.1. Payment Provider Brand (Op. 2.a.) ............................................................................ 106
5.2.2. Quality of Service Testing (Op. 2.b.) ......................................................................... 108
5.2.3. End User Support (Op. 2.c.) ....................................................................................... 113
5.3. Merchant and MRP Provider relationship (Op. 3) ............................................................ 115
5.3.1. Economic Conditions (Op. 3.a.) ................................................................................. 117
5.3.2. Product and Service Quality (Op. 3.b.) ...................................................................... 126
5.4 Optimization of Price Structures and Billing Policies (Op.4) ............................................ 135
5.4.1. Price Structures (Op. 4.a.) .......................................................................................... 136
5.4.1. Billing Policies (Op. 4.b.) .......................................................................................... 145
Chapter 6: Discussion and Conclusions...........................................................................150
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
6.1. Summary and Discussion of Main Findings ..................................................................... 151
6.2. Theoretical Implications.................................................................................................... 158
6.3. Managerial Implications.................................................................................................... 159
6.4. Limitations of the study .................................................................................................... 160
6.5. Direction for future research ............................................................................................. 161
References ........................................................................................................................164
Research Methodology ............................................................................................................ 164
Convergence Theory ................................................................................................................ 165
Technology Acceptance Theory .............................................................................................. 166
Mobile, Payments & Mobile Payments ................................................................................... 168
Market Research & Analysts ................................................................................................... 174
Appendix 1: Glossary ......................................................................................................176
TABLE OF FIGURES
Figure 1: Example of Operator Billed Mobile Remote Payment flow ..............................11
Figure 2: Description of the Chapters ................................................................................16
Figure 3: Organization of Literature Review .....................................................................24
Figure 4: Mobile Payment - Remote vs. Proximity ..........................................................28
Figure 5: Mobile Remote Payment: Credit Card / Bank Billing vs. Remote Operator
Billing ................................................................................................................................30
Figure 6: Merchant Adoption of Mobile Payment (by Mallat and Tuunainen 2008) ........52
Figure 7: Differences in scope between Mallat and Tuunainen’s study and this research 59
Figure 8: Merchant Adoption Framework of Operator Billing Mobile Remote Payments
...........................................................................................................................................69
Figure 9: Operative factors and sub factors affecting deployment and management of
Operator Billing Mobile Remote Payment Systems ..........................................................92
Figure 10: End User Purchase Experience Optimization ..................................................94
Figure 11: Factors Affecting Payment System Reputation .............................................105
Figure 12: Operator Billing Mobile Remote Payment Merchant Provider relationship ..116
Figure 13: Optimization of Price Structures and Billing Policies ...................................136
Figure 14: Merchant Adoption Framework of Operator Billing Mobile Remote Payments
.........................................................................................................................................152
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapter 1: Introduction
The escalation and convergence of distributed networks and wireless
telecommunications, together with the evolution of handset technologies, has created a
tremendous potential platform for providing payment and transaction services. Mobile
Phone adoption has seen exceptional growth globally, reaching today 5.3 billion mobile
subscribers (ITU, November 2011), that is 77% of the world’s population. The increase
in adoption was accompanied by an extraordinary evolution of Operator network
technologies and of handsets’ capabilities, leading current Mobile technology to be an
interactive and multimedia platform (leung & Wei, 2004) or medium (Sinisalo et al.,
2007). In fact, it is limiting to think of Mobile Phones just as a means for communicating
“on the go”. Mobile Technology enables users not only to perform calls and send text
messages. Today’s handsets are equipped with functionalities which surpass telephony
needs, and which inspire the development of value-added mobile services. People can
today use their Mobile devices to browse the web, download applications, play games,
interact on their favorite social networks, stake and share pictures, watch films and listen
to music.
The number of mobile phones is by far higher than other technological devices
such as television or computers, that could be used to market, sell, produce, or deliver
products and services to consumers. This has opened lucrative and interesting
opportunities for merchants, service providers and Mobile operators. Mobile phones can
be used as access devices, and mobile commerce in general. Thus, Mobile technology
8
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
has also gained relevance within different industries including the banking and financial
services industry. Mobile Payments is the possibility to purchase goods, services and to
pay for bills with the use of a mobile phone or other personal device and with the use of
mobile and other wireless technologies.
Several studies have identified Mobile Payment key adoption drivers by users and
have indicated there is a substantial willingness to use their handsets for making
purchases.
In 2011 it is estimated that the global Gross Transaction Value of Mobile
Payments was of 240 bln USD (Juniper Research, 2011) and forecasted to grow very
strongly in the next years1.
However, Mobile Payment Industry, purchasing methods, transaction flows and
technological standards are still fragmented. Mobile Payments can utilize proximity
technologies such as Bluetooth, UWB, NFC (Balaban, 2005; Mallat et al., 2004) or
“Remote” technologies such as SMS, USSD and Mobile data traffic connections like
WAP (Dhalberg et al., 2007). According to Gartner (2011) NFC is being overhyped and
will not be mainstream for at least four years. SMS and USSD will continue to dominate
payments in developing markets and WAP payments will dominate in developed world.
Mobile payments can be performed by charging the transaction on to the user’s
mobile phone bill (or prepaid credit) or by associating his device to a credit card or bank
account (Mallat, 2004; Dewan and Chen, 2005).
1
Juniper Research (2011) forecasts total end user spending via mobile for digital and physical goods,
money transfers and NFC to reach 670 billon USD by 2015. Portio Research (2011) estimates end user
spending for mobile payments including in-app payments, mobile ticketing and mobile coupons to reach
663 billion USD by 2014.Yankee Group (2011) predicts that global mobile transaction value estimated to
be 241 billion USD in 2011 will reach 1 trillion USD by 2015.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Today Operator Billed Mobile Remote Payments are one of the most successful
systems in use. This type of Mobile Payment is based on “Remote” technology (that is
uses the mobile operator’s network) and the cost of the transaction is charged directly to
the phone bill or pre-paid credit of the mobile user (Figure 1).
If the user of the service described in Figure 1 is in Italy, and the service was sold
at 2,00 euros + VAT excluded, then the following would be a likely revenue model and
commissions structure2:
1. End User pays: 2.00 euros + VAT to Mobile Network Operator
2. Mobile Network Operator pays keeps approximately 40% of the value and
thus pays the Mobile Remote Payment Provider 1.20 euro + VAT.
3. Mobile remote Payment provider applies a small transaction processing
and operator connectivity aggregation commission of 10% and thus pays
the Merchant 1.08 euros + VAT.
In the above example it becomes clear that this type of system has incredibly high
commissions, that are not comparable to other payment tools such as credit card. These
commissions are very high all over the world and besides a few exceptions range from
31% to 68% depending on the geographic market3.
As this study will further clarify, Mobile Remote Payment systems have even
other limitations when utilizing operator billing. Besides the high commissions on the
2
This revenue model and commission structure is an estimation based on information collected during the
empirical research presented later in this study.
3
This information was collected during the interview process and represents 10th and 90th percentile of the
commissions applied by a provider across 69 countries. More information is presented later in the study.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
transactions there are, for example many limitations concerning the maximum price that
goods and services can be sold for, and complicated local regulations and operator
policies the merchants must comply with.
Figure 1: Example of Operator Billed Mobile Remote Payment flow
Despite all these difficulties, there has been a strong proliferation of this type of
Mobile Remote Payments, with a growing adoption by merchants and strong growth of
end user spending through this tool45.
4
According to Strategy Analytics (2011) both US and European Users see Operator billing today as their
preferred way for purchasing mobile content.
5
Global operator billing was 37 billion USD in 2008 (Morgan Stanley 2009) and has grown considerably
in the last years.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
So what are the key Mobile Remote Payment Services adopted today? What is
driving the adoption of these systems by merchants? How do they and the other players in
the industry operate to grow and make mobile remote a successful payment system?
These are some of the questions that this study will try to answer.
1.1.Purpose of the Study
Prior research focuses mostly on technology innovation or consumer-centric view,
while there is still less knowledge related to supply-side perspective and merchant
attitude towards adoption of Mobile Payments. Literature is even more scarce when it
comes to understanding the merchant adoption of specific Mobile Payment Systems such
as "Remote Payment" systems based on operator billing technologies. However these
systems have been widely adopted by merchants around the world and for some have
become an incredible tool of success. There is also scarcity of research describing the
operative factors affecting the deployment and management of Mobile Payments.
This study aims to explore through an empirical qualitative research the adoption
of Operator Billed Mobile Remote Payments. More specifically to define and describe:
1) The factors enabling, driving and inhibiting the adoption of such payment systems; 2)
The operative factors to be considered when deploying and managing such systems.
1.2. Theoretical Approaches Used in This Study
The term “Mobile Payments”, can bring to mind academic research on
Convergence, that in this case can be applied to the integration of the “Mobile” and
12
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
“Payments” domains. This study will utilize the three approaches utilized for studying
convergence as the framework for reviewing literature on Mobile Payments.
For the research of merchant adoption this study will utilize the framework
proposed in 2008 by Mallat and Tunnainen in their study of merchant adoption of Mobile
Payments. This Framework classifies factors determining merchant adoption into three
groups: Pre-requisites, Drivers and Barriers. This model is also useful for comparing the
outcome of this research that will be conducted at a global scale and on different
merchants segments with the results of Mallat and Tunnainen’s research on Finnish
merchants.
1.3.Scope of the Study
This study of merchant adoption on Mobile Payments is characterized by the
following three factors:
1) The research is not limited to any geographic territory or area;
2) The research is primarily focused on Mobile Remote Payments where users
are charged directly to their phone bill or to their pre-paid credit6;
3) The research covers both the strategic phase of the adoption, that is the
decision making process of adopting the mobile payment system, but also the
operative aspects of the deployment and management of the system.
6
Later on we will define this as Carrier Billing Mobile Remote Payments.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
1.3.1. Geographic Scope:
The research is conducted at a global level. The qualitative research was
conducted on multinational companies located in seven different markets throughout
Western Europe, North America and East Asia. The aggregated Operator Billing Mobile
Remote Payment coverage of these companies is of well over 70 countries throughout all
continents.
1.3.2. Business Model and Technology Scope
Merchants today can select from a plethora of mobile payment systems, each one
with very distinct characteristics. There are many factors that characterize the Mobile
Payment solution or solution types. These factors include the differences in the
technologies utilized, the value chain of players involved in providing the service, the
business models, the implementation costs, the commissions, the purchase flows, the time
it takes to complete the transaction, the context in which the transaction takes place, the
types of goods and services that can be purchased. Even though their application in
enabling wireless commerce is comparable, they do have specific differences and
advantages that suggest use of one over the other. (Dewan and Chen, 2005).
Therefore by limiting the study to one well defined category of Mobile Payment
solutions, with similar characteristics, it is possible to understand the specific factors
affecting the adoption of this type of solution by merchants and not risk making
generalizations that could apply to one type of solution and not to the other.
This study is limited to the adoption by merchants of “Operator Billing” Mobile
“Remote” Payment solutions (from now on referred to also as OBMRP), that is solutions
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
that make use of the Operator’s Mobile Network and Services such as SMS and Mobile
Internet connections to perform transactions that are then charged directly to the users
phone bill or pre-paid air-time credit.
1.3.3. Managerial Scope
This study goes beyond the pure understanding of the adoption decision of MRP
by merchants. Another goal of this research is to provide also an understanding of where
and how merchants operate their OBMRP systems. Thus the scope of the study includes
what are referred to from now on as the “Strategic Phase” and the “Operative Phase” of
adoption. These can be described in the following way:
1) The strategic phase describes the factors affecting decision making process
that leads to the successful choice of adopting Mobile Payment;
2) The operative phase describes the factors affecting the optimal configuration
of deployment and management of Mobile Payment.
1.4. Description of the chapters
Following the introduction, the second chapter is dedicated to the literature
review. The review identifies the key findings on Mobile Payments and on Mobile
Remote Payments. The review provides insights into current knowledge on Mobile
Remote Payments by utilizing “Convergent Businesses” or “Convergence” Theory and
thus analyzes the literature according to the convergence between Mobile and Payment in
terms of technology, consumer and competition perspectives. The review continues by
outlining current knowledge on merchant adoption of Mobile Payments and focuses on
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
the results of a previous study on merchant adoption published by Mallat and Tuunainen
in 2008, setting it as a reference model for the rest of the research. Lastly the main gaps
in current research are identified, proposing new studies on Merchant Adoption as a way
to contribute significant knowledge on Operator Billing Mobile Remote Payments.
Figure 2: Description of the Chapters
Chapter Three is dedicated to defining the research question and the qualitative
methodology utilized in this study. More specifically, in the third chapter there is a
description of the approach utilized for collecting the data (Qualitative Constructionist
Approach through in depth interviews), the sample of companies and qualified staff
interviewed, and the content analysis and ex-post categorization technique utilized.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapters Four and Five are dedicated to the findings of the research. The first
illustrates findings in the “Strategic Phase” and the latter explains the findings in the
“Operative Phase”. Both chapters start by proposing a model that outlines the factors that
emerged from the interviews and then proceeds into explaining in detail each factor, also
through direct quotes of the interviewees.
Finally in the conclusions, a strategic and operative complete model is presented
as a framework for analyzing merchant adoption of Operator Billing Mobile Remote
Payments. The conclusions discuss the limitations, the academic and managerial
implications of this study and ultimately propose future lines of research.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapter 2: Literature review
Mobile Payments have attracted the attention of scholars and have produced a
significant amount of research. The two most studied factors in contemporary research
are mobile payment technologies and consumer perspective of mobile payments.
However, Mobile Payment technology research is still fragmented and missing a highlevel organization. Merchant or Supply Side adoption of Mobile Payments has been less
studied, and there is no evidence of significant academic research dedicated to Operator
Billing Mobile Remote Payment adoption by merchants.
The literature review aims to outline current knowledge related to Mobile
Payments with an emphasis on findings related to merchant adoption and on Mobile
Remote Payments, especially those that make use of operator billing.
By framing the literature review in terms of Convergence theory, it is possible to
overcome the scarcity of Operator Billing Mobile Remote Payment literature by tapping
into “Mobile” and into “Payment Systems” domains, thus extending range of disciplines
that can be studied. Convergence also provides a well-organized framework for
describing the key findings that are relevant to specific Mobile Payment Systems such as
"Remote Payment" based on “Operator Billing”.
The first part of the review starts with the main definitions of Mobile Payments,
outlining the key conceptualizations in order to provide a clear definition of “Mobile
Remote Payments” and “Operator Billed Mobile Remote Payments”.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Then the review, organized on a “Convergence” based framework, provides
insights into the current knowledge of Operator Billing Mobile Remote Payments from a
technological, competition and consumer perspective.
Further on, the review focuses on current knowledge on Merchant adoption,
outlining the model provided by Mallat and Tuunainen in 2008 and other relevant
insights. The chapter ends by identifying gaps in current knowledge and identifying a line
of possible research.
2.1. Theoretical Approach of the Literature Review: Convergence Based Framework
The competitive scenarios and business boundaries of many industries have
significantly changed (Prahalad & Hamel, 1994; Hamel & Prahalad, 1996; Bettis & Hitt,
1995). As a result of different factors including advances in Technologies (Valdani,
1991) and the effect of Privatizations and Liberalizations (Hamel, 1996; Dematté 1998),
many businesses don’t even have a reference market or sector and are competing (or find
themselves competing) against unexpected players, some of which not immediately
identifiable as competitors. Such a phenomenon has been theorized as “Convergence”. As
a consequence of Convergence, most of the successful models utilized to define the
market and competitive scenarios, such as Value Chains, Five Forces (Porter, 1980,
1985) and Product – Market Framework (Abel, 1980), are difficult to be applied
(Ancarani & Costabile, 2005).
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
It is possible to identify in the academic literature three different approaches to the
study of Convergence:
1) The Technological Approach. Convergence is based on the new opportunities
arising by the integration of different technologies, and as such has been
widely studied, among others by Harvard scholars such as Bradley, Hausman
and Nolan (1993), Collins, Bane and Bradley (1997) and Yoffie (1997). For
example, ICT is the convergence between Information and Communication
technologies.
2) The Competition Approach. Convergence is based on the integration between
different product and service offers, business sectors and industries.
Competition is not limited to the digital sector. An entire range of new
markets and sectors are on the rise or have even gained maturity. Infotainment
(the convergence between information and entertainment) and e-banking are
just a few neologisms that identify these new and converging sectors. The
competition approach sees the increasing intensity of direct competition as the
key driver to convergence, pushing players to reconfigure their business
models to compete in adjacent business sectors or in new business sectors that
can be approached thanks to their underlying assets and resources (Prahalad &
Hamel, 1994; Hamel, 1996; Chakravarty, 1997; Wirtz, 2001).
3) The Consumer Approach. Technological and competition or industry
approach are not sufficient to explain the dynamics of Convergence.
Especially the more recent studies on Convergence have focused on demand
and consumer attitude. It is important to shift from the technological
20
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
excitement, where many new products and services are possible, to focus on
consumers, with their emotions and functional and symbolic needs (Wind &
Mahajan, 2002). Interestingly, Shankar, O’Driscoll and Reibstein in 2003 use
as a key example in their work the incapacity of customer value creation is the
main reason of failure of many companies in the M-Commerce sector.
The literature review utilizes Convergence to study current “Mobile Remote
Payment” knowledge integrating findings from “Mobile” and “Payment” literature under
a technological, competition/industry and consumer perspective.
2.2. Literature Review Methodology
To determine the current state of Operator Billing Mobile Remote Payments an
extensive review was conducted. The first phase of the review was to determine the
review scope and relevant source material. Since mobile payments are an
interdisciplinary and “convergent” topic, similar to e-commerce and mobile marketing,
relevant articles are published in a wide variety of journals. Furthermore, mobile payment
research is still an emerging research area and most of the contemporary research is
published in conference proceedings. Since the review aims to understand Operator
Billing Mobile Remote Payments, which are a sub segment of Mobile Payments, there is
even less material. Following the convergence approach the research was not only
specific to Operator Billing Mobile Remote Payments but articles that could provide
specific insights into Mobile and the Payment domain were utilized in such a way to
integrate the findings from these disciplines.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Therefore, both academic
journal papers from various disciplines and also
conference proceedings were included in the search. Despite a potentially lower quality
of the conference proceedings, these are informative for charting the current topics in this
rapidly progressing area of research, and for identifying gaps to be covered by future
research. It is also expected that the best conference papers will probably evolve to
journal articles and thus serve as leading indicators for the focus of future publications.
The research started with a wide and systematic research of materials in the
leading databases for online journals and conference materials: EBSCO Host, Science
Direct, IEEE Explore and Google Scholar. The analysis also went “backwards”, by
identifying other works of the authors and citations to be reviewed in addition to the
articles downloaded from the database.
The documents were also combined with proceedings from five of the key
conferences in the Mobile Remote Payments sector that the author attended7.
This process returned 350 documents. These materials were read and archived
with the following criteria:
1) Articles perfectly in scope (Total = 0): These are articles that fit perfectly
within all the aspects of the scope of this research, that the article is
exclusively limited to operator billing mobile remote payments and discussing
merchant adoption at a global level.
7
The Conferences are: Mobile World Congress, Barcelona Feb 2011; Mobile Payment Conference, Milan
Politecnico April 2011; Social Gaming and Virtual Goods Conference, Berlin May 2011; Mobile Payment
Conference, London September 2011; M-Commerce Conference, Mobile Entertainment Forum, Sep 2011
Sao Paulo.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2) Articles in scope (Total = 16): The topics discussed in the article fit with at
least one of the scope guidelines. For example, these are articles that might
discuss specifically mobile remote payments, but focus on the end user
adoption, while this study focuses on merchant adoption.
3) Articles out of scope but relevant (Total = 71): These are articles that discuss
Mobile Payments, or just Mobile or just Payments, and are thus clearly out of
the precise scope defined for this study. Yet these articles were considered by
the author important for the representation of general knowledge on Mobile
Payments with some interesting findings that are relevant. For example,
articles that describe the general attitude towards Mobile Payment adoption by
end users. Although the topic is focused on the user perspective, and may be
considered also too generic since it does not specify if this is related to
Operator Billing Mobile Remote Payments, it provides a first useful reference.
4) Articles out of scope and irrelevant: These are articles that were considered by
the author irrelevant for the purpose of the research and as such were
discarded. For example, some of the conference proceedings of the IEEE
Explore were highly technical (for example, limited to the understanding of
protocol). Others limited themselves to NFC and Proximity Payments and also
were discarded.
In the second phase, all the papers falling into the first three categories above
were classified into seven groups, also according to the “Convergence” based
framework, and more specifically: 1) Definitions 2) General 3) Technology
23
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Perspective 4) Competition and Value Chain Perspective 5) Consumer
Perspective 6) Merchant Adoption 7) Miscellaneous.
2.3. Literature Review
Literature review is divided into three main sections as described in Fig 3. The
first section, dedicated to the definition and conceptualizations starts with general
definitions of Mobile payments, then conceptualizes Mobile Payments in the form of
“Remote” and “Operator Billing” in order to arrive to a standard definition and
conceptualization of Operator Billing Mobile Remote Payment that will be utilized for
this study.
Figure 3: Organization of Literature Review
24
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
The second part of the literature reviews Mobile Payments from a technological,
competition and consumer perspective, starting from a high level knowledge on Mobile
and Payments and drilling down into key topics related to Operator Billing Mobile
Remote Payments. The third part of the review instead focuses on Merchant Adoption of
Mobile Payments in general.
2.3.1. Definition and Conceptualization of Mobile Payment
Mobile payment services can be considered a special form of the electronic
handling of payments. Looking at existing definitions, we find several distinct
commonalities and differences. Following are some common definitions used in
literature:

Krueger 2001: «Mobile payment can be defined as a payment that is
carried out with a handheld device such as a mobile phone or a PDA
(personal digital assistant)»;

Zmijewska 2004: «Payments in which at least one part of the transaction
is conducted using a mobile device (such as a mobile phone, smartphone,
or Personal Digital Assistant) through a
mobile telecommunications
network, or via various wireless technologies»;

Karnouskos and Fokus, 2004: «A mobile payment or m-payment is any
payment where a mobile device is used to initiate, authorize and confirm
an exchange of financial value in return for goods and services»;
25
Mobile Remote Payment: An Exploratory Study of Merchant Adoption

Turwoski and Pousttchi: 2004 «it is a type of electronic payment
transaction procedure in which at least the payer employs mobile
communication techniques in conjunction with mobile devices for the
initiation, authorization or realization of payment»;

Au and Kauffman 2008: «as any payment where a mobile device is used to
initiate, authorize and confirm an exchange of financial value in return for
goods and services»;

Pousttchi 2008: «m-payments are defined as a type of payment transaction
processing in which the payer uses mobile communication techniques in
conjunction with mobile devices for initiation, authorization, or
completion of payment»;

Dhalberg et al. 2008: «Mobile payments are payments for goods, services,
and bills with a mobile device (such as a mobile phone, smart-phone, or
personal digital assistant (PDA)) by taking advantage of wireless and
other communication technologies».
Most conceptualizations emphasize the mobile device as the key characteristic
distinguishing mobile payments from other forms of payment. Some authors focus on cell
phones (e.g., Henkel, 2002), while others include all mobile communication devices (e.g.,
Zmijewska et al., 2004). Regarding the function of mobile payments, all definitions refer
to the transfer of monetary value. Differences can be found when it comes to the phases
of the payment process that are considered to be part of the mobile payment. Henkel
26
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
(2002), for example, refers to the authorization and initiation of the payment process in
his definition, and Dahlberg et al. (2008) also include this realization, i.e. the execution of
the payment, in their definition.
In terms of conceptualization, different studies have proposed a distinction into
two broad categories of Mobile Payment, that is “Mobile Remote Payments” and “Mobile
Proximity Payments” (Fig. 4.). Not all scholars refer to these two names for making this
distinction. For example, Dewan and Chen (2005) refer to such distinction by diving
Mobile Payments into “Cellular” and “Contactless”.
Au and Kauffman in 2006, using a pure technological approach, describe two
technology standards, among others, that are helping to achieve device and platform
interoperability, resulting in current projections for high growth . These are Short
Message Service (SMS) and near field communication (NFC), the first one being a
Mobile remote technology and the second one a wireless proximity standard.
However, NFC and SMS are today not sufficient to make the distinction between
“Proximity” and “Remote” Payments. The rise of new technology standards and the
implications at different levels such at Industry/stakeholder level and consumer must be
considered. In fact, Kim et al. (2010) describe M-payments as typically made remotely
via premium rate SMS, WAP billing, Mobile Web, Direct-to-subscribers’ bill and direct
to credit cards. Furthermore, by adding terms such as “Direct to Credit Cards” to SMS
and WAP, Kim et al. raise from the technical “standard” distinction to an “application” or
“service” level, that is, the technology designed to perform a specific function directly for
the user.
27
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 4: Mobile Payment - Remote vs. Proximity
Flatraaker (2008), distinguishes mobile payments as either “proximity” payments
(typically card payments using the mobile handset) or “remote” payments (typically made
when buying digital or physical goods/services over the internet). This distinction is again
insufficient to make a coherent conceptualization. But it contributes to raising the
distinction from purely technological to a more consumer-centered definition, because it
places the attention on the need that is being resolved through this solution and the
context in which it is taking place.
Al-Dala In et al. (2009) describe Mobile Remote payments as “based on a mobile
personal device that is an intermediary between the customer and the other parties
involved in the transaction, instead of merchant being the intermediary as in current epayment systems”. Such conceptualization differs from all the previous ones, as it is
28
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
based on a “Player” perspective (who does what) as opposed to technological or
consumer approach distinctions.
For the purpose of a better comprehension of the distinction, the following table is
a synthetic re-adaptation of the framework of Dewan and Chen (2005) for distinguishing
“Remote” and “Proximity” payments:
Table 1: Mobile Remote Payments and Mobile Proximity Payments
Mobile Remote
Key Use Case
Mobile proximity
User purchases digital good or
User purchases food at a
service over the web and pays
physical store and pays for the
for the service with an SMS.
purchase with a contactless
Credit Card.
Mobile Data (GPRS, UMTS,
Wireless Proximity Data NFC,
EVDO, LTE, HSxPA)
IR, RFID, Wi-Fi, UWB
Key Communication Protocols
SMS, WAP, HTTP, WSDL
HTTP, EDI, XBRL
Charging of purchase
Mostly directly to User’s
Mostly to user’s credit card or
Phone Bill (also to credit card
banking account
Key Wireless Data Standards
and to other electronic wallets)
Device
Mobile Phone, Smartphone,
Mostly Cards and NFC /RFID
Pad (Anything equipped with
dedicated devices (although
a Mobile SIM Card)
some phones and phone cases
are currently being
distributed)
Reference Point of Sales
Web or Mobile Store / Site /
App
Physical Shop
29
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Prepaid and telecom operator billing systems provide a built-in payment
mechanism for mobile subscribers, who form a vast potential user base for mobile
payments (Zhang et al., 2002). The possibility to charge such mobile users directly to
their phone bill or pre-paid credit through the use of the operator’s systems will be here
defined as “Operator Billing”.
Figure 5: Mobile Remote Payment: Credit Card / Bank Billing vs. Remote Operator
Billing
For the purpose of this study “Operator Billing Mobile Remote Payments”
(OBMRP) is defined as:
The act of purchasing goods, services, and paying bills with a mobile device by
taking advantage of the Operators’ mobile network and services and charging the
amount directly to the user’s phone bill or pre-paid phone credit.
30
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
For this definition, mobile devices may include mobile phones, PDAs, wireless
tablets and any other device that connect to mobile telecommunication network and make
it possible for payments to be made (Karnouskos and Fokus 2004).
2.3.2. The Technological View: Review of Mobile Remote Payment Systems and
Technologies
Not surprisingly, the technological environment has been the most researched
factor, as calculated by the number of relevant papers which were archived in this
category. Yet the analyzed literature covers only fragments of technologies used to
develop and produce mobile payment services. Much of the literature was discarded for
the purpose of this study as it referred to short range wireless technology and protocols
and trust / security mechanisms used for proximity systems. When it comes to analyzing
Mobile Remote Payment, dedicated technological literature is poorer compared with
proximity related technologies, and is primarily focused on the following topics: 1)
Systems 2) Protocols 3) Tools 4) Security and Trust mechanisms.
By reading the technical papers, one probably finds it difficult to form a highlevel holistic understanding of the technology of mobile remotes payments and its
business implications. A technological review of wider scope is necessary for building a
clear business understanding of the technology, and this is also another reason for
utilizing “convergence” a framework for developing this sort of analysis.
31
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
From this “Technology Convergence” perspective, Mobile Remote Payments are
the integration of Mobile Device and Network Technologies used by Operators with
Payment technologies typically used by Financial Institutions and intermediaries.
2.3.2.1. Evolution of the Operator’s Enabling Infrastructure
Technological environment consists of wireless8 and other related technologies
which are used to develop and produce mobile payment services. Some of these
technologies develop slowly, such as mobile network technology or transaction protocols.
Some other technologies have very short development cycles, such as mobile handsets
and their components. Continuous development of technologies facilitates more reliable,
user friendly, versatile, and functionally rich mobile payment services (Dhalberg et al.
2007).
Seven technologies have been identified as enabling Mobile Payment business
models (Pousttchi et al. 2007): IVR, Calling Line Identification Presentation (call
capture, CLIP), SMS, Unstructured Supplementary Service Data (USSD), Wireless
Application Protocol (WAP), Near Field Communication (NFC), Java 2 Platform Micro
Edition (J2ME), and, finally, Subscriber Identity Module Application Toolkit (SIM
Toolkit). Yet, after a full review of literature this classification can updated9. First of all,
newer and more recent technologies have been deployed throughout the value chain. For
example, J2ME is used in Feature phones, Smartphones rely on iOS, Android and other
8
Wireless is a quite different platform from mobile leading to differences in its conceptualization (Anckar
and D’Incau 2002, Kumar 2004). A wireless access itself can allow only very limited mobility within the
range of this access point. True mobility can, however, only be achieved by an underlying mobile network,
which implements the mobility across the whole area covered.
9
This includes a wider analysis of technical papers including 3GPP, W3C, ETSI Standards and Mobile
Technology Conference proceedings (including proceedings Mobile World Conference 2011, Barcelona)
32
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
more
advanced
operating
systems
and
middleware
33
(www.apple.com;
developer.android.com). Also, some of these technologies enable others. For example,
SIM Toolkit will interact with the user via J2ME or other middleware (JSR 177: Security
and Trust Services API for J2METM). Lastly, the technologies mentioned are specific
services of a more general Service. For example, CLIP is a specific services utilizing
requests made to HLR – Home Location resource – and other databases used in different
mobile payment applications (3GPP TS 23.082).
When focusing on Operator Billing Mobile Remote Payments, for a more clear
distinction it is possible to provide a more comprehensive perspective by identifying two
key enablers10: 1) Enabling Data and
Network Technologies 2) Enabling Billing
Communication, Authorization and Authentication Services.

Enabling OBMRP Data and Network Technologies are GSM, GPRS
(Global Packet radio Services), EDGE (enhanced data Rates for GSM
Evolution), WCDMA (wideband Code Civision Multiplexing), HSxPA
(High Speed Download or Upload Packet Access), LTE (Long term
Evolution). 11

Enabling
OBMRP
Billing
Communication,
Authentication
and
Authorization Technologies: Mobile Remote Payments are not necessarily
10
Where the first one will group the literature referred to the lower - middle part of the OSI Model, and the
second one will group the literature referred to the middle - higher end.
11
GSM is the second generation mobile communication technology that enables among other things SMS
and GPRS services. GPRS was the first packet access data traffic deployed on Mobile Network
infrastructure, released 1997, allowing communication for mobile devices. WCDMA (in its different forms
UMTS, IMT2000, etc..), HSxPA, LTE are subsequent technology upgrades that have substantially
increased the speed of data communication rates bringing the Mobile Network to be comparable in terms of
Internet data speed to Fixed Line Broadband systems such as ADSL and FTH (Fiber to the Home).
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
entirely performed on the Mobile Device or Network. According to the
definition utilized in this study, in order for the Mobile Remote Payment
to take place the transaction can even be just initiated, authorized or
completed on the operator’s mobile network. These technologies are
primarily:
o SMS (Short Message Service - 3GPP TS 23.040): 3.3 Trillion SMS
Text messages will be sent in 2011 (Mobithinking 2011, Portio
Research, 2011). This technology is among the most widely
adopted by consumers for sending short messages and does not
require advanced mobile handset, or any special configuration.
Basically any cell phone of the 5.3 billion (ITU, 2011) active
mobile subscribers globally can send an SMS. SMS is utilized both
for authentication and/or billing purposes. SMS is used for billing
in the so called Premium SMS format: 1) P-SMS MT (Mobile
Terminated) is an SMS that, when delivered by the Operator to the
Mobile User, automatically charges the amount of the purchase to
the phone bill or to the available user’s prepaid credit. P-SMS MO
(Mobile Originated) is a text message that, when sent by the user,
charges him the amount of the purchase to his phone bill or
available credit.
o USSD: It is usually associated with real-time or instant messaging
services. There is no store-and-forward capability, as is typical of
other short-message protocols like SMS. The vendor's "check
34
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
balance" application hides the details of the USSD protocol from
the user. USSD can also be used to refill user's money balance on
phone (SIM card to be exact). USSD is also utilized in Mobile
Payment to charge the user for purchases directly to the phone bill
or available pre-paid credit.
o WAP (Wireless Application Protocol) and Mobile Internet: Both
are services for accessing information over a mobile wireless
network. WAP was strongly embraced by mobile operators to
standardize the production of microsites for mobile devices and to
support advanced functionalities related to the mobile environment
(Kumar et al., 2003). Mobile Internet is a generic term utilized to
describe the access to the World Wide Web through the Internet
APN. In general terms, WAP is seen as more “closed” (with
reference to the operator environment) and legacy compared to
Mobile Internet. All new generation smartphones (iPhone, Android
based handsets, etc.) either are not equipped or discourage the use
of WAP. Yet WAP does have an interesting advantage, compared
to the internet protocol. Operators have equipped the protocol with
the MSISDN (Telephone number) of the user. This comes in
particularly handy for identifying securely the user when browsing
a WAP site. Mobile Internet standards do not carry the MSISDN
Information. WAP and Mobile Internet are used either for
authentication or for billing purposes: 1) User purchases on the
35
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
36
web, and WAP Billing or Web protocols are used to charge the
user to his mobile bill or available prepaid credit,
2) User
purchases content from Mobile Site and WAP Billing protocols
(e.g. purchase from the Apple iStore).
2.3.2.2. Evolution of the Mobile Device
All mobile devices have a number of features in common, but manufacturers also
try to differentiate their own products by implementing additional functions to make them
more attractive to consumers. This has led to great innovation in mobile phone
development over the past 20 years. Different classifications are available in literature
and in market studies. Kang et al. 2011 distinguish two categories of handsets12:
1) Smartphones: There is no clear industry-standard definition of smartphone,
but generally the PDA (Personal Digital Assistant) and the general mobile
phone combine the functions of various applications, using the Internet and
the portable PC (Yangil and Chen, 2007). Smartphones are instead advanced
handsets with high performing computing ability and network performance.
Some smartphones also have other advanced features, such as HD screens,
Touch Screen capabilities and very advanced browsing features.
2) Feature phones: These are all those handsets that cannot be considered
smartphones and are thus lower end and mid-tier handsets. Except for more
basic handsets (that have very limited features and are used almost exclusively
for voice and SMS communication), feature phones offer functions such as
12
Such distinction is commonly accepted and utilized within the mobile industry.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
playing music and taking photos, and sometimes simple applications based on
generic managed platforms such as Java ME, Symbian or BREW.
Surprisingly, smartphone technology or advanced features are not an enabler:
different Mobile Remote Payment solutions utilize SMS (Pousttchi et al., 2007), which is
available even on the most basic of all handsets. Traditional Mobile Value Added Service
Industry, such as ringtone and mobile games providers, have thrived from basic and
especially feature phones, creating an industry worth 46.9 billion euros in 2008 (Yankee
Group 2008) before iPhone and any other smartphone were available or relevant.
Furthermore, a basic phone is enough for a user to purchase on the web through P-SMS.
Yet evolution of handsets has contributed to the growth of Mobile Payments,
especially in the purchase of digital content and applications from mobile sites and app
stores (Mobithinking, 2011).
2.3.2.3. Operator-Billed Mobile Remote Payment Services
The research did not produce any article which made a clear overview of the
solutions utilized for Mobile Remote Payments. Again, different articles did describe
specific architectures and solutions for mobile remote payments, especially based on case
studies of solutions offered by service providers.
37
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Following is a list of operator-billed Mobile Remote Payment solutions collected
in the review:
1. Mobile Terminated13 (MT) Premium SMS: if a mobile user sends an SMS
to an advertised number with a specific message (e.g. ‘text WIN to
84225’) he will get an SMS response to his device, which will cost them
money to receive14. (Garner et al. 2006; Pousttchi et al. 2007)
2. Mobile Originated15 (MO) Premium SMS: Customers pay a premium to
send a message rather than to receive it. MO Billing is less popular than
MT billing. First of all because operators prefer to have a confirmation
that the content or service is actually delivered before charging the user.
Also, it is preferable to have the possibility to use information from the
operator’s systems to check that the requested content is suitable for the
customer. (Garner et al., 2006).
3. OTP16 (One Time Password): The OTP application uses time
synchronization between a server and a mobile application to generate one
time passwords. The consumer starts the OTP application on the mobile
phone and enters the PIN. A hash is being built, using the PIN and other
information to identify the consumer on the server side (Massoth and
Bingel, 2009).
This is the SMS sent from the carrier’s systems to the user’s device
A crucial mechanism in MT Premium SMS is the ability to send multiple receipts to a user for content of
a higher value. For example, to pay for a game at £4.50, three messages at a cost of £1.50 will be received
by the user. The first two messages will display something trivial, such as ‘billing receipt’, with the third
containing WAP push information in the SMS header enabling the device’s browser to download content
with a GPRS connection (Garner et. al 2006)
15
This is the SMS sent by the user.
16
Merchants interviewed in this study mainly refer to this solution as “Pin-Code Flow”.
13
14
38
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
4. WAP Billing: The WAP application sends a WAP Push message
containing a customized URL to the consumer. The consumer opens the
message which loads the WAP browser loading a web page asking for
authorizing a payment with the PIN. (Massoth and Bingel, 2009).
Alternatively, the user browsing a WAP page clicks on the link to
authorize the payment.
5. Interactive Voice Response. IVR application uses the basic GSM mobile
telephone technology to call a consumer and ask for a PIN (Pousttchi et
al., 2007; Massoth and Bingel, 2009).
2.3.3. The Competition Perspective: Review of the Mobile Remote Payment Value
Network and Competitive Environment
The growing intensity of businesses' direct competition increase pressure on
margins and sustainability of their competitive advantage, especially in the more mature
or declining markets. This drives businesses into migrating into adjacent or at least
accessible market sectors (Valdani, 1995) by integrating or reutilizing their resources,
assets and know how. Prahalad and Hamel (1994), Hamel (1996), use the concept of
"driving convergence" for those companies using "out of bounds" strategies that redefine
and reshape industry boundaries.
Operators, platform providers and financial services companies are increasingly
indicating their interest in commercializing mobile payments. The convergence between
Mobile and Payments is defining a new competitive landscape, where the boundaries are
39
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
still not clearly defined and no player or solution can be considered today the standard.
The opportunities that arise from the integration of these technologies have attracted the
interest of Mobile and of the Finance Industry that are cooperating but also competing to
increase their stake in this new market (De Meijer & Bye, 2011). New players are
emerging, dedicated to offering Mobile Payment solutions to merchants competing to
consolidate their position in the market. The competitive landscape is affected also by
regional or local regulation and restrictions imposed by operators and other players in the
market.
2.3.3.1. Finance and Mobile Industry Competition and Cooperation
The different solutions offered today in the market, whether based on remote or
proximity are developed either as single player model (individual banks and MNO) as
intra-industry collaboration (between MNOs or between banks) or even inter-industry
collaboration (between banks, MNOs and others).
For the Finance industry using mobile phones for financial transactions is clearly
an opportunity to bring major benefits to its current users and to attract the world's
unbanked or “un-carded” population. Yet most of these systems are closed, limited to one
bank or one operator, dooming them to limited growth and ultimately losing out to the
newer, more open mobile payment business model (Holmes, 2011).
The Mobile industry has been growing into new adjacent spaces based on the new
opportunities that have risen from the improvement and evolution of mobile technology
and to its integration with other technologies such as Television and Video (Silenzi,
2004; Vernuccio & Silenzi, 2008) reduce the impact of commoditization of voice services
40
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
(Bhattacharyya & Sivanand, 2011). The escalation and convergence of distributed
networks and wireless telecommunications has created a tremendous potential platform
for providing marketing services (Barnes & Scornavacca, 2004), where today Mobile
Operators act as publishers selling advertising on their Mobile Portals. The evolution of
mobile technology has led Mobile handsets to become an Interactive and Multimedia
platform (Leung & Wei, 2004) making it possible for Mobile Operators to offer users a
wide range Value Added Services such as Ringtones, Images, Information, Applications,
Music and Video downloads and Streaming. Operators have leveraged three very
important assets for the development of Value Added Services market, exploiting their
large base of mobile users, their pervasive network for distribution of content and
services and their billing systems for charging users for such services directly to their
phone bill or pre-paid “airtime” traffic.
Operators have also understood the potential of reutilizing the same VAS assets
for enabling the mobile payment market, and they can leverage an enormous customer
base that already owns a “payment instrument” - the mobile phone bill or pre-paid credit
(Zhang et al., 2002). In fact, by utilizing Mobile Remote Payment solutions, there is no
need for users to purchase NFC, RFID or other short-range technology devices or for
merchants to invest in such infrastructure. Operators can exploit their billing solutions for
enabling their users to purchase online or over their phone third party goods and services
and be directly charged to their bill. Operator Billing Mobile payment offers a practical,
convenient and easy-to-use alternative to cash that is safe and opens up terrific new
possibilities for consumers, especially in the form of remote purchasing (Bhattacharyya
41
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
& Sivanand, 2011). This means for the operator the possibility of growing into a new
sector and growing its revenues through the remote spending that is charged to its users’
bills.
The cornerstones of the payments industry are interoperability, standards,
ubiquity, and scale (Holmes, 2011). Card payments have achieved scale and are now
ubiquitous in many parts of the world. The interoperable payments system feeds itself.
The more places there are to pay (or draw cash) using cards, the more cards are in
demand from cardholders.
The success of the mobile network operators in the value added services and
micro payment leads to the question whether financial services firms should let the
mobile network operators take the initiative in the m-payments arena.
Efforts to cooperate have been made, such as providing joint mobile payment
solutions17. Economic theory says that inter-organizational investments in IT are never
easy, due to the difficulties of identifying how to apportion the emerging benefits (Bakos
& Nault, 1997) and how to share the financial and operational risks (Kauffman &
Mohtadi, 2004). Moreover, as in the case of e-billing, financial services firms carry the
advantage of having the trust of the consumers due to deeper and longer-term
relationships (Au & Kauffman, 2003).
17
Telefonica and Mastercard announce on January 25th 2011 a 50/50 Joint Venture: «Movistar mobile
subscribers in Latin America will be able to use their mobile phones for person-to-person money transfers,
bill payment, mobile airtime reload and retail purchases, among other services».
42
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
The winners in the race for market share of the mobile financial industry will be
those promoting open mobile payment schemes. All successful players will ultimately
copy and participate in accordance with the rules and standards of the payment system. A
single bank may offer its own customers some useful payment innovation, but in order
for it to become pervasive, it must expand to include other banks operating in the market.
Banks do not hope that mobile communication operators will command their own
businesses, and similarly, mobile communication operators want to prevent banks from
controlling their own capital operation. Thus mutual non-confidence between the two
parties restricts the development of mobile payment (Zhang, 2008).
2.3.4. The Consumer Perspective: Review on Consumer Adoption and Attitude Toward
Mobile Remote Payments
The winning technology is not necessarily the best one in terms of intrinsic
functionalities, but is the one that spreads best among consumers, thanks to its capability
to resolve better than others, their needs, often in a simple way (Mahajan et al. 2000;
Mohr et al. 2005).
2.3.4.1 Consumer Approach to Payment Instruments
Data on individual consumer payment behavior are especially difficult to obtain.
Some studies estimate payment instrument use or adoption using country-level data, such
as Humphrey, Kim, and Vale (2001) and Humphrey, Pulley, and Vesala (1996).
However, heterogeneity within each country can be substantial, and one cannot infer
43
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
what payment or consumer characteristics induce specific payment behavior based on
aggregate international comparisons.
Several papers have analyzed the effects of individual consumers’ sociodemographic characteristics on the adoption of payment instruments or have shown
adoption rates by
demographic groups (Stavins, 2001; Mester, 2006; Bertaut &
Haliassos, 2005) finding strong effects of demographic characteristics on the adoption of
payments. However, surveys on consumer finance have limited information on the use of
payment instruments, the characteristics of those instruments, or consumers’ attitudes
regarding the instruments. Rysman (2007) used detailed proprietary data to explore
consumer payment behavior but also lacked data on payment characteristics and
consumer attitudes.
Ching and Hayashi (2008) showed the importance of consumers’ perceptions in
payment behavior by measuring consumers’ preferred payment instrument. Jonker (2005)
found that perceptions are correlated with payment behavior. Alhassan (2008) in his
study verifies his hypothesis that, at retail point of purchase, cash, debit and credit card
will be preferred payment modes for low-, medium- and high-value transactions.
Schuh and Stavins (2009) found that the increase in the number of payment
instruments reflects consumer adoption of newer electronic payment instruments whose
relative characteristics influence consumers’ decisions to adopt them. These
characteristics are: 1) Convenience; 2) Cost; 3) Record keeping; 4) Timing.
44
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2.3.4.2 Consumer Approach to Mobile technology
Undoubtedly, the mobile phone has transformed peoples’ lives. Recent market
research still shows important regional differences in consumer mobile behaviour.
According to ComScore’s excellent 2010 Mobile Year in Review (February 2010)
Japanese consumers are still much more advanced in their mobile usage, with 55.4
percent accessing the mobile Web and 57.1 percent using email, but US and European
consumers are catching on fast. Even in developed nations (where smartphone
penetration is higher), more people use mobile Web than mobile apps. US consumers
prefer browser to apps for most mobile activities, according to Keynote/Adobe18. After
calling, sending email and text messages, the number 1 mobile activity is accessing maps
and directions. This is followed by social networking, accessing local information and
reading news. Respondents generally favour the browser experience over downloadable
mobile apps, except when it comes to games, social media, maps and music. Consumers
report equal satisfaction levels with their browser and app experiences, and spend nearly
equal amounts of time interacting with each.
Academic literature has instead outlined the following to have been attributed by
users as key characteristics of Mobile technology:
1. Immediacy (Anckar & D'Incau, 2002; Curwen, 2007). This is confirmed
by a research by conducted by China Mobile that finds that 91% of users
have their mobile device within one meter’s reach twenty-four hours a
day, seven days a week, 365 days a year.
18
Survey of 1,200 U.S. consumers, mostly smartphone users, October 2010
45
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2. Intimacy: The mobile phone is attached to a person rather than a place, it
is personal and completely in control of its owner, which gives them a
sense of control access, autonomy and privacy (Curwen, 2007; Ranchhod,
2007; Vatanparast & Asil, 2007).
3. Personalization (Jun & Li, 2007; Li & Stoller, 2007, Ranchhod, 2007).
Mobile gives the possibility for users to personalize their device and the
use they make of it.
4. Context (Banerjee & Dholakia, 2008; Braiterman 2007; Ranchhod, 2007).
Mobile technology
makes it possible for the user to adapt the
communication and interaction based on the context and/or location which
the user is in.
5. Interactivity (Anckar & D'Incau, 2002; Bauer et al., 2005; Curwen, 2007;
Ranchhod, 2007). The two-way communication platform enables
interactive communication enabling a synchronized and a-synchronized
interactions with people and machines, and can also develop a strong
brand experience for the user.
2.3.4.3. Consumer Acceptance of Mobile Payments
Consumer Acceptance is defined as the relatively enduring cognitive and affective
perceptual orientation of an individual. Most works use the construct of intention to use
as a proxy for consumer acceptance (Mathieson, 1991; Venkatesh & Davis, 2000). This is
a particularly suitable concept, since empirical findings underscore the idea that intention
to use is an appropriate predictor of later usage (Sheppard et al., 1988). In the IT/IS
46
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
literature, a variety of models have been advanced to explain innovation usage
(Venkatesh et al., 2003). Among them, the technology acceptance model (TAM),
proposed by Davis (1989), has evolved as the most popular (Chau & Hu, 2001). It can be
considered the most influential extension of the theory of reasoned action (TRA) and the
theory of planned behavior (TPB), replacing variables related to attitude and behavioral
control with technology acceptance measures (Bagozzi, 2007) TAM also applies to a
wide range of research questions, including wireless LAN usage (Yoon & Kim, 2007),
adoption of Internet banking (Lee, 2009), and attitude toward self-service solutions
(Dabholkar and Bagozzi 2002). Therefore, even if TAM was originally intended to
predict IT system use in the workplace, the TAM variables can also be employed to
predict consumer acceptance in a variety of settings.
A number of studies have focused on the adoption factors of m-payment. Not
surprisingly, these studies have been based primarily on the TAM, with additional
constructs adapted for the study of m-payment such as security, cost, trust, mobility,
expressiveness, convenience, speed of transaction, use situation, social reference groups,
facilitating condition, the attractiveness of alternatives, privacy, system quality, and
technology anxiety (Chen & Adams, 2005; Cheong et al., 2004; Dahlberg et al., 2002;
Dahlberg et al., 2003; Dahlberg et al., 2003b; Dewan & Chen, 2005; Mallat, 2004; Mallat
& Dahlberg, 2005; Zmijewska, Lawrence, & Steele, 2004).
In a survey-based study, Linck et al. (2006) asked consumers which
characteristics of mobile payment applications they perceived as particularly relevant.
The authors present an analysis of frequencies, indicating that consumers prefer simple,
secure, and inexpensive payment services.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
The more recent study of Kim, Mirusmonov and Lee, see “perceived ease of use”
and “perceived usefulness” to be significant antecedents of the intention to use mpayment. Individual differences, convenience, and reachability are critical determinants
of the perceived ease of use of m-payment. Compatibility has an insignificant effect on
perceived usefulness and perceived ease of use. M-payment knowledge has a greater
effect on perceived ease of use than does personal innovativeness (Kim et al., 2010).
None of these studies make explicit reference to the intention to adopt Mobile
Remote Payment Systems. However, such studies provide significant insights for the
development and refinement of mobile payment services in general, where attention must
be paid to the development of appropriate m-payment services’ business model and
marketing strategies as well as systems design. Furthermore, since these studies focus on
the intention to use as a proxy for predicting adoption, the use of “Remote” as a type of
Mobile payment can be also interpreted according to the more general findings.
2.3.4.4. Operator Billing Mobile Remote Payment User Experience
A well-organized model describing the possible Operator Billing Mobile Remote
Payment use cases and / or exhaustive comparative analysis in terms of user experience is
still missing. The articles, especially the more technical ones, provided some insights on
specific payment systems. Even less was found in terms of organized frameworks with
reference to Operator Billing MRP. Listed here are the key insights that can be applied to
Oarrier Billing Mobile Remote Payment User Experience19:
19
The articles made either explicit reference or it was possible to deduct (for example from the use cases or
technologies discussed) that there was direct reference to Carrier Billing.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption

Main Categories of items purchased: Although in literature there is
reference to the use of Mobile Payments for the purchase of a wide variety
of goods and services20, when the system is narrowed to Operator Billed
Mobile Remote Payments, cases and studies make reference almost
exclusively to the purchase of digital content and virtual goods. Ticketing
and Couponing also seem viable. More specifically main items and
services users purchase via Operator Billing are:
o Mobile Content: from traditional content such as Ringtones,
Wallpapers and basic games to rich multimedia content and apps
for smartphones.
o Web and Digital Content such as music and video files, software or
streaming access (Mallat and Tuunainen 2008).
o Virtual Goods such as bonus points and features for online and
mobile games. These include features to be used in MMOGs
(Massive Multiplayer Online Games) or customizations and digital
items to be utilized within virtual online and mobile communities.
o Ticketing: Includes payment for car parking services (Östberg,
2003), public transportation services (Mallat et al., 2006; Mallat et
al., 2006).
20
Recent studies have also found reasonable consumer demand for mobile payments at different types of
vending machines (Kreyer et al., 2003). Technically a OBMRP solution is applicable, however insights
from other research demonstrates that the current commissions applied by Mobile Operators makes this an
unsustainable business model.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption

Mobile remote payment flows: different user flows are described (or have
been deducted by the author from the more technical papers). These flows
include (but are not limited to:
o User sending of an SMS to confirm the payment of an item
purchased on the web
o Receiving of a confirmation code within an SMS, that the user
must then insert into a web form for an item purchased on the web
o Confirmation of payment with the mobile browser page for items
purchased within a mobile store by either accepting to charge on
Mobile Operator Bill. This can be combined with SMS technology
utilizing what is referred to as WAP Push. The user receives an
SMS containing a WAP link. By clicking on the link the user
confirms the payment.

User’s Context: Mobile payments are especially suitable in the context of
remote commerce, such as selling through the Internet and mail order
(Begonha et al., 2002; Kreyer et al., 2003).

Mobile Remote Payment Timing: Transactions can be initiated and
completed very quickly. A remote payment where the user receives a
pincode by SMS and inserts this 4 digit code into a web form can usually
within 20 seconds (Pousttchi et al., 2006, Dewan & Cheung, 2005).
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption

Post Adoption: In his recent study on post-adoption behavior
51
21
of Mobile
Payments, Tao (2011) describes how expectation confirmation, perceived
ease of use, perceived usefulness and usage cost significantly affect users’
satisfaction, further determining their post-adoption behavior.
2.3.5. Mobile Payment Merchant Adoption
There is very little in terms of dedicated academic knowledge of Merchant
adoption of Mobile Payments. In 2008 a study dedicated to exploring merchant adoption
by Mallat and Tuunainen was published. This study remains a reference point for
understanding the supply side or merchant perspective of Mobile Payment.
2.3.5.1 Mallat and Tuunainen Model
Mallat and Tuunainen conducted an empirical research on Finnish merchants
aimed at understanding their intention to adopt Mobile Payments. The scholars propose a
model that identifies 18 factors either enabling (Pre-Requisites), contributing (Drivers) or
inhibiting (Barriers) the adoption of Mobile Remote Payments as described in Figure 6.
The key drivers for merchants’ adoption of mobile payments is not only to
increase sales and to reduce payment processing costs but also to exploit specific benefits
provided by the mobile technology--for example, to increase impulse purchases.
However, the results of their study also suggests that such benefits are recognized by only
a few merchants (such as mobile content providers) that have found a viable way or
business model to leverage mobility of the payments systems.
21
based on three variables: continuance intention, recommendation and complaint
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 6: Merchant Adoption of Mobile Payment (by Mallat and Tuunainen 2008)
The drivers associated to sales increase include wider product and service
availability, new services, new customers, modern image and enhanced customer service.
They point out that merchants seem to perceive payment systems as some form of
customer service, one that (if the consumers are not satisfied with the payment system)
impacts customer satisfaction and merchant sales directly. They also point out that by
offering a new payment system that fits customers’ needs, merchants can improve their
relationship with their customers and attract new ones.
Cost reduction in terms of transaction costs would be a driver, but merchants did
not think it would be possible in the future. businesses providing. Drivers were stronger
for Mobile content, ticketing, vending, or other small-value services through electronic
channels or at unmanned POS. Restaurants with personal service and POS merchants
52
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
with busy, large-value cash desk transactions were more uncertain about the benefits and
the applicability of mobile payments in their businesses. This may in part explain the
current low adoption rates of mobile payments.
Their study suggests that adoption barriers are still strong and affect the majority
of merchants. It also suggests that barriers and the risks related to adoption are evident for
the merchants, whereas the benefits are more uncertain and are likely to affect certain
businesses only. Merchants perceive the current mobile payment systems as complex and
slow, as compared to card and cash payments, and suspect that mobile payments are not
suitable for busy checkout counters. Their survey results suggest that even the adopting
merchants expect customers to need advice on the use of mobile payments. New
contactless mobile payment technologies that utilize RFID and near field communication
(NFC) may offer more effortless solutions for the proximity payment environment in the
future. Compared with SMS, the payment procedure of these technologies is simpler for
the user, and there are good experiences of contactless RFID technology in such
applications as public transportation (Balaban, 2005; Poon & Chau, 2001).
Regarding remote mobile payments, high costs are largely attributable to high
provider commissions and are among the key barriers to the adoption of mobile
payments. Overcoming this barrier requires changes in the payment system providers’
revenue sharing models. If the costs of mobile payment systems cannot compete with
traditional payment instruments, mobile payments are likely to remain as niche solutions
instead of developing into general payment instruments.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Other barriers, such as lack of standardization and critical mass, are more difficult
to overcome because they may require changes not only in individual providers’ business
models but also in legislation and in consumer habits, as well as in cooperation between
major competing players, such as financial institutions and telco operators.
Mallat and Tuunainen indicate also as limitations of their study the geographic
reach (Finland) expressing the need for new research to confirm their findings in different
countries with different mobile service infrastructures. They also indicate that the low
response rate of their survey, probably driven by the novelty of the subject, suggests that
further empirical studies are still needed.
2.4. Identifying Research Gaps
MP enabling technology and consumer acceptance have been among the aspects
with a wider coverage of research, which is still current today. Concerning Technology,
there is an abundance of studies related to NFC and Proximity technologies. There are
fewer studies when it comes to Mobile remote payment technologies, because most
Mobile remote technology Payment Systems do not require new standards, but instead
use widely available technologies such as SMS, USSD and Mobile Internet. Therefore
there is great availability of documentation concerning these available technologies. What
is still missing is a high-level or holistic organization and description of Mobile Payment
solutions. There is good availability of knowledge concerning the business models that
can be developed through the use of Mobile Payments, thanks to works such as the one of
54
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Poustcchi et al.22 (2009), which have clearly paved the way to understanding the mobile
payment business possibilities. However, there is no specific work associating the
business models that can be deployed on specific technologies, with business cases or
empirical research describing the sustainability of such business models.
Concerning consumer acceptance, there are two main gaps. The first one is that
research is mostly predictive. The use of TAM, UTAUT or other variations of consumer
acceptance models are very important for technologies in an embryonic phase. Mobile
Remote Payment today has been vastly deployed, especially in the micro payment
segments. The predictive analysis should in some way be confirmed by identifying and
measuring the factors that are really conditioning the use of Mobile Payments. The
second gap is that none of the research has made precise distinctions between Remote
and Proximity or between Operator Billing and Credit Card / Bank Account / Electronic
Money billing. Yet we can deduct that the needs that today’s two different systems
resolve (also due to limits in current regulation, technologies and industry environments)
are probably quite different. More likely, proximity is used to simplify purchases on Point
of Sales, simplifying the authentication / confirmation of transactions, while Remote is
instead used mostly in online environments (both in front of the PC or “on the go”). So,
although the consumer acceptance has been widely tapped, it is still lacking some
evidence from consumers who have adopted the system and is still missing that focus on
the type of mobile payments being performed.
22
Engineering of Mobile Payment Business Models
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
A full comprehension of the dynamics related to merchant adoption of Mobile
Payment systems is still to be found. Mallat and Tuunainen provide some significant
insights. However, in their findings they realize that there are clear differences between
types of systems (Proximity versus Remote) and types of merchants (for example, Mobile
Content providers or ticketing versus Restaurants). As previously mentioned, some
studies characterize NFC as being overhyped and say that it will not find a wide adoption
for at least the next four years. Thus it is still focusing on adoption of specific mobile
payment solutions.
Lastly, the main gap in current Mobile Payment literature is related to the
operative deployment of Mobile Payments, especially in the case of Remote based
systems. There is no theoretical framework or managerial reference today as to what best
practices are and what factors are to be considered when merchants deploy and manage
Mobile Remote Payment Systems.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapter 3: Research Questions and Methods
This chapter first outlines the main research questions in this exploratory study
and then describes the methodology used in this dissertation to investigate them.
In an attempt to improve the current knowledge of Mobile Remote Payment by
providing a “Merchant Based” perspective, this research aims to study the adoption by
Merchants of Mobile Payment. More specifically this study aims to first of all explore
and understand what determines the adoption of Mobile Remote Payment Systems by
Merchants. Secondly the research aims to describe the operative aspects of deploying
Mobile Remote Payments in order to identify those factors that contribute to the
successful introduction of this system within the company.
3.1. Research Questions
The research aims to identify the drivers and obstacles to a successful 1)
“adoption” and 2) “operative deployment” of Mobile Payment Systems, thus it has been
divided in two separate parts. The first part is the study of the successful adoption by
merchants, from here on referred to as the “Strategic Phase”. The second part studies
instead what is from here on referred to as the “Operative Phase”, that is, the factors that
contribute to a successful implementation of a Mobile Payment System.
The first part of the study, the Strategic Phase, is to some extent similar to the
study conducted by Mallat and Tuunainen in 2008. However, this new research is
needed, as it analyses and verifies whether their findings:
57
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
1. Are still actual (considering that over 3 years have passed since their
publication in 2008 and that there have been strong technological
evolutions and industry dynamics since then).
2. Can be generalized at a global level merchants, since this study is
conducted at a global level
3. Change when those factors are applied to specific merchants categories,
business models or payments systems.
The second part widens the scope of the understanding of Mallat and Tunnainen,
contributing to developing inputs.
Compared to Mallat and Tunnainen’s study that is the main reference in Merchant
Adoption of Mobile Payment, this research has:
1. A narrower solution scope, because this research focuses on Mobile
Remote Operator Billed as opposed to general Mobile Payments that
include Proximity.
2. A deeper Marketing phase scope, because this study isn’t limited to
identifying those strategic factors driving or creating barriers to adoption,
but instead goes deep into identifying, describing and understanding those
operative factors that then contribute to the success of Mobile Payment.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 7: Differences in scope between Mallat and Tuunainen’s study and this research
Furthermore, this study is not aimed at providing an analysis of intention to
deploy MRP as predictive guidance to adoption23, like the one of Mallat and Tunnainen.
On the contrary, this research is more focused on providing a deep understanding of the
reasons that have led to adoption of MRP by merchants and especially in what has made
23
Most of the companies interviewed by Mallat and Tuunainen had never deployed Mobile Payments,
some of them were undergoing pilots.
59
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
this payment system successful, by concentrating on those merchants that have today
successfully implemented Mobile Remote Payments and on this system have created
sustainable and profitable business models.
Research Question 1: What are the factors that enable, drive and inhibit a
successful adoption of Operator Billing Mobile Remote Payment Systems by Merchants?
Research Question 2: What are the factors that positively and negatively
contribute to the successful deployment of Operator Billing Mobile Remote Payment
Systems?
3.2 Rationale for Research Methodology
In order to provide an insightful industry perspective, this study is based on an
Interpretative Constructionist approach (Rubin & Rubin, 2004) and utilizes qualitative
empirical field research in the form of In Depth Interview. The interpretative
constructionist approach, in fact, aims to elicit the interviewee’s views of their world,
their work and the events of the experiences they have observed. The approach expects
people to see things with different lenses and to come to somewhat different conclusions
at the same time. More specifically, this approach tends to ignore the “average”, as
positive constructs usually do, and focus on the detail, the differences and the specific,
and to develop an understanding based on this (Rubin & Rubin, 2004).
In Depth Interview consisting of a secure conversation between the interviewer
and respondent is also more adequate than group interviewing (such as focus groups),
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
which may inhibit interviewees from disclosing confidential information, thoughts and
ideas, since the issues involved are directly tied to the company’s competitive strategy.
3.3 In Depth Interviews Methodology
The In Depth interview was conducted on unstructured and semi-structured
questioning approach. Due to the exploratory nature of the study, both for RQ1 and RQ2,
unstructured questioning was thought to be ideal in order to obtain a complete overview
of the topics related to the research questions and to not condition and confine
information to pre-concepts of the researchers. The interviews drilled down into the
interviewees’ knowledge, knowhow, experiences and opinions on Operator Billing
Mobile Remote Payments.
Following the first review and content analysis of information collected, a second
round of semi-structured interviews was led to focus on specific topics, to cover gaps
identified or to further clarify.
In an effort to obtain higher levels of quality data, the interviewer followed
specific questioning techniques, among which were the following:

Ask clear questions (Kvale, 1996; Cicourel, 1964)

Ask truly open-ended questions (Kvale, 1996)

Ask one question at the time (Patton, 1987)

Ask experience/behaviour questions before opinion/feeling questions
(Patton, 1987)

Use funneling (Cohen & Manion, 1994)
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
3.4 Data Collection
For this study twenty-two managers coming from fifteen multinational companies
were interviewed. The companies were selected as a judgment, or purposeful, sample,
which is the most productive approach for responding to the research questions. All of
the companies have successfully adopted OBMRP and have generated significant
business through this payment systems on numerous markets around the world. As a
result they can provide interesting insights on what has driven their adoption and what
has inhibited it in the different markets. Furthermore, since these companies have
successfully deployed such systems, it is also possible to investigate the operative phase
by understanding the factors that they consider relevant during deployment and
management of OBMRP. Following is a description of the sample24:

Sectors: Social Networks and Virtual Communities, Game Publishers,
News Publishers and Online Media, Couponing and Social Buying

Global Headquarters: Western Europe (8); Eastern Europe and Russia (1);
East and South East Asia (4); North America and Canada (2)

Global Revenue 2010: between 1 and 20 million euro (2); between 20 and
50 million euro (2); over 50 million euro (5); undisclosed (6)

Revenue Mobile Payments H2 2010: between 1 and 10 million euro (3);
above 10 million euro (4); undisclosed (8)
24
The companies are major multinational brands of the digital space. Due to the confidentiality of the
information disclosed, the companies wished to remain anonymous and have no reference linking this
research to their companies. The description of the sample is also limited in order to not provide any direct
reference.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption

Geographic Coverage via OBMRP: Total countries covered = 74; average
number of countries covered = 24.1; median number of countries covered
= 25; minimum number of countries covered = 1; maximum number of
countries covered = 55; Standard Deviation = 22.1
The sample of interviewees was selected according to the Key Informant
Technique (Williams, 1967; Sjoberg & Nett, 1968; Krippendorf, 1980). Interviews were
conducted (where possible) at different hierarchical levels of the organization. When
speaking with CxO and first-line managers, the focus was on the more strategic aspects of
the business. When speaking with middle managers and operative staff, the interviews
covered more details on the implementation and management phase. Interviewees varied,
too, depending on the size of the organization and the relevance of OBMRP within it. For
example, sometimes the higher hierarchies were critically involved not only in the
strategic decision-making processes but also in important operational aspects. The
interviewees included:

CxO Level (CFO; CTO; CEO; COO or similar): 7

First Line Management: Payment Director; Marketing Director; IT
Director: 9

Operative Managers and Specialists (Payment Manager; Billing Manager;
Product Manager; Business Analyst; payment specialist or similar): 8
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
3.5 Data analysis and Research Framework Developmnt
The analysis of the information collected relied heavily on a classic (qualitative)
approach to Content Analysis (Berelson, 1952; Kassarijian 1977).
Data collected was transcribed into word processing files, which included both
interviewee responses and other field notes. The data was integrated with other sources of
information on the sample companies collected from the web, including: content from
corporate and product websites, press releases, corporate presentations, investor relations
documents and other company official documents. After a careful reading of the
aggregated data, other notes were integrated into the file in reference to topics that needed
better understanding, for example, notes on the company’s products taken from their
corporate website.
During a second careful reading, the following actions were taken:

Keywords were assigned in reference to the different topics that emerged
from the interviews.

Topics and issues that required further understanding were listed.

Then a written (email) request was sent to the interviewees requesting data
and business cases in order to provide evidence or further comprehension
of the key topics identified or concerning issues that required more
comprehension.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
This process returned the following information:
1) Five MS Powerpoint presentations containing slides describing
OBMRP user flows / acquisition process, product and service
descriptions, quantitative data and charts (mostly referred to user
consumption habits).
2) Three Excel sheets containing quantitative data: mostly referred to
country coverage and pay-out offers by Mobile Payment providers.
3) Four textual answers in the form of email: mainly quantitative data
supporting information and opinions provided during the first round of
interviews.
The data collected were further analysed and other key topics highlighted and
notes taken.
Then a second round of interviews was conducted with semi-structured questions
whose purpose was to resolve open issues and go deeper into the key topics. For the
second round of interviews a restricted subset of eight interviewees was selected from the
previous sample. As in the first round of interviews, different examples, opinions,
business “anecdotes” and small cases were collected and again passed to a word
processor.
The next step involved a reorganization of all the information collected. Through
the use of spreadsheet software, information was then organized into units and coded in
relation to the key concepts that they expressed in order to define content categories.
65
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Categories were thus defined ex-post, a further precaution in order not to rely too much
on categories defined by literature and therefore avoid pre-concepts that could hide other
potential findings.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapter 4: Findings: “Pre-requisites, Drivers and Barriers to Successful Adoption
of Mobile Payments”
All interviewed people, as expected, were very knowledgeable of MRP, even at
the highest hierarchical levels of the organization. Executives were not only well aware
of the impact of MP and also specifically of Operator Billing Mobile Remote Payments
on their companies’ business performance, but also demonstrated a deep understanding of
OMMRP—and claimed to be involved in the related decision-making processes. Some of
the merchants interviewed have stated clearly that to some extent they owe their success
to OBMRP, which has enabled them to offer easy to purchase digital content and services
to the widest audience possible. Following are some expressions gathered that can
contribute to outline what MRP represents for merchants who have deployed these
systems:

«Everybody has a mobile phone and anybody knows how to send an sms it
changed the way people shop online»;

«It banked the unbanked, we can address younger audiences and target
emerging markets»;

«Online shopping was something that only some people were willing to
do. With Mobile anybody can shop online because it is so simple»;
67
Mobile Remote Payment: An Exploratory Study of Merchant Adoption

«When we understood the potential of this tool we redesigned our
company strategy and an entire part of our business».
It is clear that these businesses have been successful in adopting the OBMRP tool
and they thus show great enthusiasm about the topic. Yet the same people interviewed did
not neglect the important limitations of MRP, their concerns about operator approaches
and the initial difficulty in adoption and in operating sustainable business models that
make use of OBMRP.
In general, today Operator Billing is a viable and successful tool for those
businesses operating in the digital segment and that can create business lines based on
small value transactions for the sale of digital goods and services. OBMRP is considered
by merchants who have adopted this tool to be the “killer application” when it comes to
those businesses that are willing to trade off high commissions (by some merchants
described as “unfair”) kept by the mobile operators in exchange for a very high
performing purchase method capable of growing exponentially the total number of
transactions made.
The result of this empirical study produced fifteen factors that enable, drive and
inhibit the adoption of Operator Billing Mobile Remote Payments. These factors have
been mapped into the original model proposed by Mallat and Tuunainen, and thus were
grouped into Pre-requisites, Drivers and Barriers as described in Figure 8.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 8: Merchant Adoption Framework of Operator Billing Mobile Remote Payments
Following is a full review of the merchant MRP adoption factors, highlighting the
key topics and issues, including quotes of the people interviewed.
4.1. Merchant Adoption Pre-requisites
As in Mallat and Tuunainen’s model, Pre-Requisites were identified and grouped
as those factors that can be considered suitable circumstances to allow OBMRP, but not
sufficient to drive the adoption. Of the six factors identified, the first two (“Proliferation
of Mobile Technologies (St. 1)” and “Viable Payment Infrastructure(St. 2.)”) cannot be
controlled by the Merchant. The third factor, “Adequate Business Model”, requires that
either a merchant’s business must comply to specific characteristics that make OBMRP
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
possible or must make major strategic changes to the company’s strategy in order for
OBMRP to be suitable. (St. 4) and (St. 5) are instead under more control of the merchant
and relate to the merchant’s willingness or need to adopt new payment instrument and
knowledge and information it will collect to support its decision process.
4.1.1. Proliferation of Mobile Technologies (St. 1):
Proliferation of Mobile technologies is the key factor that enables any form of
Mobile Payment including OBMRP. Merchants take into account aspects, such as the
very high penetration of Mobile Lines, with penetration close to 100% in most advanced
markets, but also the growing mobile adoption in many emerging markets. Merchants
also mentioned the uptake of mobile related services such as SMS and also newer
services such as email, mobile internet and apps.
CEO of Social network says :«Today it is a fantastic way to reach over 3 bln
users. In the world today there are certainly more Mobile users than Credit card
holders»
The proliferation of newer and higher performing devices becomes also the
enabler of new MRP enabled business models.
«There is no doubt the mobile phone has become something much more than a
communication device. It is always with us and we can do so many things with it, that
mobile is becoming one of the main ways we connect to people, information and to the
digital and physcal world in general. It would be crazy to think that in a few years from
now, with all these mobile users, this device won’t become the centre of our shopping
experience».
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Proliferation of Mobile technologies is also an enabler for Mobile Commerce in
the sense of those purchases made completely in a Mobile Environment such as within a
Mobile App store or a Mobile website.
4.1.2. Viable Payment Infrastructure (St. 2)
Merchants consider that the availability of the operator’s base technologies and
remote payments provider offer the starting point for adopting the system (This is quite
different from Proximity based payments, which require dedicated technologies and
infrastructure such as NFC). Thus any market where operators have deployed even legacy
premium SMS technology, and where payment providers have aggregated the operator’s
payment offer into an easy to integrate solution for the merchant, becomes a possible
market where the merchant can adopt MRP.
A Merchant says: «Users from more than 50 countries around the world purchase
digital goods on our web site. We aim to reach 70 countries within the first half of next
year. Our providers are everyday connecting to operators in new markets every week, for
example in Africa, Middle East and Central Asia. For us it will not be too complicated to
enable the Mobile Payment for these markets soon.»
Another merchant shows the current countries offered by its five global MRP
providers: The combined coverage is 78 countries throughout all the continents. There is
total coverage of Western and Eastern Europe, Northern Africa, most of the Middle East
and South East Asia and all of North and South America. Countries currently not covered
by these providers include some areas of central Asia, smaller markets of Central
America and some markets of central and southern Africa. This does not mean that in
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
72
these markets MRP is not possible, it may just mean that the larger providers haven’t yet
completed the commercial agreements and integration into the local operators.
4.1.3. Sustainable MP Business Model (St. 3)
In order for a merchant to adopt MRP, his business model must be able to sustain
the current constraints of MRP, which are the following:
1. Regulatory Constraints: Merchants in Europe, for example, cannot sell
physical goods via MRP (unless the provider offers the merchant a
government licensed electronic money service, but only few providers
today have such a licence, and there are also some issues in the purchase
flow that make this often less practical). In Turkey, in contrast, physical
goods can be purchased via Mobile without any problem.
2. Pricing Limitations: There are specific limits of the maximum amount per
single transaction that are imposed by regulation authorities, by operators
but also due to the nature25 of this payment tool. MRP can be adopted by
those merchants that have a micro transaction based business model. In
other terms MRP can be adopted by those merchants that sell goods and
services primarily26 in the 0.1 to 10 euro price range.
3. Commissions
applied
by
operators
as
transaction
fees
are
disproportionately high if compared to other payment instruments. The
25
For example the fact that in many countries there is a large penetration of Pre-paid mobile users, and it is
not possible to charge large amounts when their credit of their current balance is insufficient.
26
Merchants reported some exceptions, among which: Turkey (Max price 65TL on Turkcell), Italy (15 € on
all operators).
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
information that was supplied by one of the merchants describes the
current commissions applied in each country to each transaction according
to the standard offer of its MRP provider27. With the sole exception of the
offer in Turkey of MRP for the physical goods category, the costs of
transaction are in no way comparable to credit card charges. Merchants
claim that the pay-out rates they receive on credit card systems (that is the
amount reversed by payment provider to merchant for each transaction) is
between 95% and 98.5% of the end user price. According to the
information provided by this merchant, the median pay-out rate offered by
a MRP provider for 69 countries is 47.0%28 of the End User Price VAT
excluded. To make things more complicated, local operators in almost all
countries must apply VAT to the transaction (that cost cannot always be
recuperated by the merchant). Just to make an example of what a 47%
payout-rate means: for every user purchasing something worth 10.00 euros
VAT excluded (where the VAT is 20%), the merchant will receive cash
for 47% of 8.33 euro (10.00 euro - 20% VAT), which is equal to 3.91 €. A
social network explains: «Based on the cost structure of a company’s
27
The merchant explains that this is the standard (technically called a rate card) offer of one of its current
providers (One of the world’s leading providers of MRP services). The provider first makes a volume based
weighted average of the payouts it receives from directly the carriers or the aggregators it uses in the
specific market and then applies a 5% commission. The merchant also explains that the MRP provider has
direct connections in approximately 10 to 15 markets and in such markets it receives the payout directly
from the carrier. In the other 55–60 markets there is a second level of intermediation between the MRP
provider and the carrier, by other MRP providers that apply their commission that can range between 3% to
about 7%.
28
Sample 69 countries indicated in table: Pay-out rate on EUP VAT exl. median = 0.470; mean = 0.473;
standard deviation = 0.165; 25th percentile = 0.360; 75th percentile = 0.589; minimum = 0.073; maximum =
0.821.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
business or service it can adopt MRP in those markets where the pay-out
rates allow the merchant to cover its costs and investments. For example if
your business is about selling digital content such as music or films it will
be difficult in most markets to cover the cost of the rights and at the same
time provide its customers a competitive offer in terms of price. If instead
your business is about selling virtual goods or premium features or access
to a website, then Mobile Payment can be possible. In these kind of
businesses you have some fixed costs and some investments to make, but
your COGS are relatively low. For example once you have paid for your
developers and web designers and product managers to create a premium
feature on your website, then there is practically no additional cost if one
user, one thousand or one million purchase it. These are the businesses
where Mobile Payment is possible».
4.
Digital Environment: All the merchants interviewed make explicit
reference to the fact that MRP today is basically possible only for those
businesses or services that have a strong digital component. The CEO of a
Games Publisher illustrates what he believes the relationship between
OBMRP and Digital world is: «Mistakenly, many people believe MRP is
only good for online games. Instead this is wrong. We were probably the
first industry to adopt this model as were among the first to deploy
premium based services already in the late 90’s instead of relying
completely on advertising as a source of revenue. Some of us
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
experimented “dialers29”, others started with premium rate IVR and this
has made us the segment that has clearly the highest adoption rate. But
there are many other industries that can use Mobile [Remote] Payments
today. Of course what they need is a “digital store”, in other words they
need for their user to be able to make the purchase and receive his good
not in physical point of sale. I can think of many different industries or
businesses that can apply. Classifieds websites selling premium
positioning for the placing the ads in a more visible space: Antivirus or
Satellite navigation companies selling their software updates; digital
storage and file sharing services and many others. Operating within a
digital ecosystem is a key component for offering mobile payment».
4.1.4. Need for a New Payment System (St. 4)
The need for a new payment system was also confirmed from merchants as a key
requirement. Almost in the same way that in Mallat and Tuunanin’s study a vending
machine distributor explains that its users do not always have coins with them to make a
purchase, the merchants interviewed in this study explain the need of their customers for
a new payment tool as a key enabler. According to merchants there are four factors that
determine the need of their customers for using the MRP tool:
29
A dialer is a computer program which creates a connection to the Internet or another computer network
over the analog telephone or Integrated Services Digital Network (ISDN) network. Some dialers are
designed to connect to premium-rate numbers and thus can be considered a form of Operator Billing (Not
Mobile). Especially during the late 90s (when analogue modem connections was the most utilized method
for connecting to the internet) there was abuse of premium rate dialers. Providers of such dialers often
search for security holes in the operating system installed on the user's computer and use them to set the
computer up to dial up through their number, so as to make money from the calls. This led to users to
mistrust this payment technology.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
1. Un-carded users: Not everyone who would like to purchase something
online has a credit card. There are very many differences among
geographic markets and socio demographic user segments (such as age ).
2. Simplicity: Traditional e-commerce transactions are not always simple to
be performed. Not everyone who wants to make an online purchase is
willing to go through the entire process of filling out his card details.
Merchants explain that the process can be complicated, users must have
their card with them or remember the number, expiration date, security
code. Users must also fill out all the information into a registration form.
The implementation of security controls for online credit card purchases
such “3D secure” has had a negative impact on sales. Users that purchase
something online, especially if it is worth just a few euros are asking to do
this in the simplest way possible.
3. Privacy: Users like MRP because in most cases it is anonymous, that is,
users do not have to fill out their name or personal information during the
purchase process.
4. Security: Despite all the improvements made in the past years, merchants
believe that today not all users trust credit card as a secure way to make
online purchases.
4.1.5. Knowledge of the Payment Systems (St. 5)
In order for merchants to adopt OBMRP of course they must know about the
existence of such systems. According to the interviewees all merchants who operate in
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
the digital space and who have a business model somewhere in line or adequate for
OBMRP have heard about it. However, what differs between the different companies is
the degree of knowledge. In order for OBMRP to be adopted, a company’s managers
need to have a good understanding of its potential and limitations and the strategic
implications of implementing such systems.
Furthermore, players in the OBMRP ecosystem—such as operators, providers and
regulators—are continuously updating and revising their policies, their offers and
technology. A Merchant explains: «For example everybody in the games or in the dating
industry knows about Mobile Payments. However some companies I think are still
reluctant to adopting it just because they probably don’t know that in the past six to nine
months there has been a very strong increase of the payouts and pay-outs offered by
operators in some European markets».
4.2. Merchant Adoption Drivers
Mobile payment adoption drivers were examined by identifying the benefits that
mobile payments offer to merchants and by describing the business areas that are most
applicable for mobile payments.
4.2.1. New Business Models, New Products and Services (St. 6)
One of the key benefits of MRP is the possibility to use this tool in order to create
new business models and offer new products and services. Until recently, all merchants
operated in an “online” environment that was dominated by a free (advertising based)
business model, where the user accessed the service for free and the advertising placed on
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
the web pages covered the cost of providing the service. MRP instead provides a viable
payment tool that can leverage the development of premium or “freemium” based
business models.
A merchant says: «Our online newspaper has been offered through a totally freeto-access model. The revenues generated through advertising covered most of our costs
for providing the services. The revenue from physical sales of the paper copies (and the
advertising in it contained) covered the rest. We never put online all the content of our
paper version, as we need to maintain the value or “premiumness” of what people
actually pay for compared to what they get for free online. A couple of years ago we
started experimenting with premium digital content, as we know that those same users
that actually purchase physical copies of our newspaper are probably interested in
purchasing digital copies and paying for related premium online services. But our first
approaches to a premium digital offer (mobile and web content and services) that users
could purchase via credit card did not really work and we reverted to a free advertising
funded service model. Then thanks to Mobile Payments instead we have redesigned our
digital business model and made it “freemium”. Everyone can access the free sections of
our news web and mobile sites. Users can purchase via SMS digital copies of our
newspaper, they can subscribe for just a couple of euros a week to access the premium
section of our online news paper and this is charged directly to their phone bill. Mobile
payments have enabled us to shift towards a new and very successful business model».
Other examples provided by the other merchants make it clear how MRP is not
only a tool for improving current business, but can be considered a key enabler for
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
designing new services and developing new business models leveraging on the
characteristics of this payment tool.
4.2.2. New Customers (St. 7)
Merchants have described how MRP is a way to attract new segments or to enable
purchases for new customers. Merchants adoption is in fact driven by the possibility to
offer services to (or increase purchases from):
1. Young segments: Penetration of credit card is much lower than penetration
of mobile phones among teenagers and young adults.
2. Emerging markets: Penetration of credit card is much lower than mobile in
emerging markets, such as Turkey or Latin America; furthermore, the
higher penetration of Mobile compared to PC in many emerging markets
and the increased usage of Mobile Web browsing creates a new segment
of “online” users that can be addressed by merchants.
3. Distrustful online credit card users: There is a relevant group of online
users that are not against shopping online, but that do not make online
purchases, just because they do not trust submitting the credit card
information over the web or via mobile.
4. Users who want to maintain their privacy: «you might not want to be
paying your subscription to a dating site on your credit card, especially if
you have family. Those customers can instead buy a prepaid phone card
and make totally anonymous purchases».
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
4.2.3. Improved Purchase Experience and Security (St. 8)
Another benefit merchants perceive as driving the adoption of MRP is the fact
that they can offer their end users an improved purchase experience and a higher
perception of security during the transaction. Merchants base their reasoning on the fact
that MRP provides a secure, faster and simpler purchase experience, especially when
compared to credit card or other payment instruments. Mrchants believe that by
deploying MRP systems they can:
1. Increase number of transactions: As a Merchant explains: «One of the
main reasons, if not the main reason, we and other providers adopt
Mobile Payments is because it is just so much quicker for our user to buy
something by just sending an SMS compared to filling out credit card
details. We think this gives a boost to the overall number of purchases
people make».
2. Increase perceived value: Merchants are quite confident that their users
and customers perceive MRP as something of value and that this improves
the relationship between the merchant and the customer. A Games
Publisher explains: «by offering MRP not only we increase by far the
amount of transactions we make, but we are improving the quality of the
service we are providing, or in other terms the overall experience of our
Customer. If he finds it simple to purchase premium features on our game,
he will be more satisfied, more loyal. We wouldn’t want our customers to
start playing games on our competitor’s platform just because he offers
MP and we don’t».
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
4.2.4. Increased Impulse Purchases (St. 9)
Seven of the interviewees mentioned the word “impulse purchase” during the
interviews. According to these merchants, MRP provides a fantastic tool for Merchants to
leverage impulse purchases and this is a key driver of adoption. A Games Publisher
illustrates this concept: «An impulse purchase is when someone buys something based on
an instinct or like an urgent need that this person still hasn’t had time to process
rationally. If this person takes the time to rationalize the purchase then he or she may
change their mind and decide not to buy the product. This is why goods that stimulate
impulse purchases are usually placed as close as possible to where the transaction will
take place. In this way the customer won’t have time to rationalize and change his mind.
The example you are given in school is the products sold in the super market right next to
the cash register. As a “freemium” game publisher, the goods we sell fit very well the
description of impulse purchases. Our users play the game for free. But they can buy
premium features in order to have higher chances to complete the game levels. They can
also pay to skip levels when they get stuck, to purchase a super weapon that can help him
beat his friend he is playing against, or simply to accelerate the game to pass to the new
level. All these purchases are very emotional, the user is very engaged in the game.
Mobile here becomes a fantastic tool for purchases: the user just sends an SMS and his
purchase is made. We can consider the mobile phone in the pocket of our customer, a bit
like the cash register next to the chewing gum at the super market, but much more
powerful because the user doesn’t spend the whole day and seven days a week in the
super market in front of the cash register».
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Similar examples were made by social network providers, virtual community
providers and video streaming providers. The use of MRP to exploit impulse purchases
was a key driver in their decision to adopt the system.
4.2.5. Increased Product and Service Availability (St. 10)
MRP not only allows customers a new payment tool, but enhances the potential of
new commerce platforms such as mobile stores and digital television. This was
mentioned as an adoption driver by different merchants including online games
publishers, a news publisher, and a social network provider.
This concept is explained well by a merchant: « Our next challenge is on the
mobile. We are working hard to attract users on to this platform, but also to monetize
users on this platform. Our experience with iPhone has been very positive, users
download our application and make many purchases via the iStore. However iPhone is
not the only phone out there. Android is growing strong in many markets, some markets
in South America have a very high RIM penetration, Nokia is starting to push its
Windows phones. Operator Billing basically works with all of these systems. We can offer
our services to our customers via device native applications such as Android Apps or
cross device web applications developed in HTML5 and accessed by the user via his
mobile browser. All these services use SMS and Mobile Direct Billing directly to the
phone bill of the user as the key payment tool».
Merchants, for example, see in Mobile a key platform where their users can
access their services and products. The Mobile Payment system introduced by Apple was
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
a great success, and merchants have leveraged this closed market offering their
“applications” through the Apple iTunes store. However, there is a great fragmentation of
Mobile Devices including smartphones. Some merchants have started developing their
services in order for them to be compatible with a wide number of smartphones, such as
iOS, Android, RIM, Windows, Symbian, but also with feature phones. Although
smartphones have developed vertical markets30 that utilize credit card. MRP supports the
development of cross device compatible services and the related purchase process for
such services.
4.2.6. Low Implementation Costs (St.11)
All merchants agree that the cost of implementing MRP systems is not high, and
this low cost is a key driver of adoption. Mobile Payment Providers offer standard
solutions that can be easily implemented into the merchants’ website, mobile sites or
mobile device native applications. Merchants explain that there is high competition
between Mobile Payment providers and this has led them to usually waive all set up costs
in order to acquire merchants and increase transaction volume.
Main setup costs identified by merchants are related to:
1. Internal development costs: These costs are related to the technical
integration to the MRP provider’s system. These costs are usually low
when they are referred to implementation of standard mobile payment
solutions, but can grow if the merchant has special technical needs;
30
Android Market, Black Berry App Store
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2. Customizations: The merchant may be required to cover or contribute to
the costs of any customization needed from its MRP provider.
3. Compliancy costs: The merchant may incur some minor costs in order to
comply with operator policies and local regulations.
4.3. Merchant Adoption Barriers
In addition to the advantages discussed in the previous section, the interviewees
and the survey respondents identified several barriers to the adoption of mobile payment.
The perceived barriers were similar across the interviewed merchants.
4.3.1. High Commissions (St.12)
All merchants agree that one of the main barriers of adoption of MRP is the high
commissions applied by operators. Besides the unsustainability of MRP commissions for
business or services that have high costs of goods sold (described in the pre-requisites)
that thus exclude the possibility of adoption by some merchants, the high commissions
also inhibit adoption of MRP by those merchants who can develop sustainable business
models but then prefer other payment tools.
Merchants seem to define specific thresholds up to which they are willing to
accept the trade-off between the increased purchases and high commissions of OBMRP.
Then they compare this with the benefits of using other payment tools like credit card,
electronic money like Paypal or Moneybookers, and scratch cards just to mention a few.
Thanks to the documentation provided by a merchant and the information
collected during the interview, it is clear that this company basically has very low direct
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
variable cost for the services they sell, so of course they can live even with very low payout rates that need to cover their investments, fixed costs and marketing / advertising
costs to attract new users. However, what they don’t want is for Mobile to cannibalize
credit card and other high paying payment tools. Cross-verifying this information with
the pay-out rate offer by a global MRP provider, it seems obvious that this company,
except for some exceptions such as strong emerging markets like Brazil, as a general rule
will not adopt mobile if the pay-outs are lower than 30% to 40% of the End user Price
VAT excluded.
In discussing adoption barriers, what is even more interesting is how this
merchant promotes or inhibits the use of mobile payment in the different markets. In
those markets where the pay-outs are low (below approx. 65–70% of end-user price VAT
excluded), the merchant:
1. Gives incentives to its customer if it will purchase via credit card instead
of MRP. More specifically, for the same amount spent by the customer, he
will get much more if the consumer uses credit card instead of Mobile.
Like many online businesses, this merchant uses a virtual economy
through which users can purchase credits that they then utilize to purchase
virtual goods and access to premium features. Just to give an example, a
4.00 Reals purchase in Brazil made by credit card or Paypal will return the
customer 39% more credits than for purchases made by SMS.
2. Merchant gives higher visibility to the credit card and the other higher
pay-out options. For example, the merchant highlights the credit card box
in the web page and flags the Pay by Credit Card radio button so that the
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
user wishing to pay by mobile must make the additional step of selecting
“Pay by SMS” payment option.
The practice of providing end user incentives if they use higher remunerating
payment tools such as credit card and of giving more visibility to such payment tools was
observed in most of the merchants and clearly indicates that the higher commissions do
inhibit adoption.
Besides the more rational aspects, the high commissions applied in some markets
clearly raise even emotional aspects that could indicate how these are a barrier of
adoption. During the interviews, the following sentences were noted as being said by the
merchants when discussing cost of MRP commissions: «way too high; unfair; nonsense;
operators keep most of the value we create». One merchant with a very strong global
brand explained that they do not launch MRP if they are not retuned at least 85% of the
end user price. They have managed to close only a handful of deals directly with
operators or through their MRP providers obtaining special conditions and are not
launching MRP as a payment system in other markets until operators will accept their
conditions. A Merchant explains: «We know we could be making a fortune even on a 50%
pay-out rate. Our business is growing anyway so we don’t need that and anyway this
makes no sense. We have decided that there is no way that more than 15% of the value of
our product can be withheld from the operators and payment providers just for enabling
the transaction. We accept that there is a greater value in using Mobile compared to
other payment tools, but there is a limit. Our strategy we think is paying well. We have
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
obtained some special conditions from Mobile operators around the world and believe
that soon we will be able to convince other operators to change their commission
structure»
4.3.2. Limited Pricing Options (St.13)
One of the main barriers to adoption of OBMRP is that pricing options are limited
because of regulation, operator policies and technological restrictions.The two main
limitations are on the maximum price allowed and on the price point availability.
Virtual Community Merchant says: «Our service packages range between two
and fifty dollars. Of course we use mobile for the smaller packages. Depending on the
market we operate we can use mobile for two, five or even ten dollars».
A games publisher says: «In some markets there isn’t really that much freedom in
terms of choosing the price for our service. For example let’s say we want to sell
something at five, our provider tells us that operators don’t have five yet and that we
must choose between four and six ».
Different merchants put emphasis on other payment instruments to point out that
the negative effect of limited pricing options means that the merchant must revert to
credit card or electronic money solutions like PayPal. More specifically, limited pricing
options means that:
1. for the higher price points of the merchants offer, the OBMRP system will
not be adopted
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2. For the price points of the merchant’s offer that do not match the ones
offered by operators and providers, it is likely that the merchant will not
adopt the OBMRP or that there will be a delay in its deployment. In fact,
the merchant may have to change the price structure of its offer in order to
sell the goods at the same price whether the user pays by credit card or
Mobile. This result has various implications, such as the turnover impact
of re-pricing, or the cost and time of reconfiguring the price on the various
commerce systems.
Merchants also explain that the market is changing. That operators are
increasingly providing higher tariffs and that new billing technologies are allowing more
flexible pricing options and that pricing. However, together with the cost of transaction
commissions, limited pricing options seem to be among the most important barriers to
adoption.
4.3.3. Complexity of Local Regulations and Operator Policies (St.14)
Complying with local regulations is not easy, especially when a merchant
operates across several markets. For example, merchants must pay attention to provide
users all the information and disclaimers as request by the telecom operators. They may
have to give visibility to the operator’s logos or the logos of the association that
represents them for the mobile payment services. They may have to provide specific
customer care information. Some operators also require the merchant, for example, to
implement specific measures in order to provide additional customer protection, such as
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
sending periodic caring messages via SMS to all the users that have purchased
subscription services, or for example implementing parental control tools. Furthermore,
sometimes such rules are not only different based on the country, but can even differ
depending on the operators within the same country.
There is no international standard that merchants can adopt to comply instantly.
Complying with all the local regulations and operator policies requires time and effort.
One of the main contributions of the mobile payment provider is also to support, as much
as possible, limiting these local adaptation efforts for the merchants. Merchants explain
that many of their providers take care of providing the customer care information within
the payment pages or sending the so called “caring the messages”31.
A key insight into how local regulation complexity represents a real barrier to
adoption is given by a social network company that explains: «every time you adopt
Mobile Payment in a new country it will require some technical effort to make the
payment pages and flows compliant with what operators in that country are asking for.
This is not the real problem for us. What we consider every time we launch mobile
payment in a new country is that there will be a continuous impact on our teams to
remain compliant. Operators are continuously updating their rules and ask merchants to
implement changes within just a few days from when they communicate a new rule …
And we work probably with more than one hundred operators around the world. On
31
These are usually imposed by Mobile Operators in order to ensure better transparency towards the end
user. Usually caring messages are sent to the user in the form of SMS messages that inform the user the
purchase has been completed or that the user is subscribed to a service and provides information on the
service/product purchased, the price and customer care hotline or email address.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
average we get from our payment providers one request a week to update something in a
disclaimer, in a payment page or in a flow».
4.3.4. Operator / Provider Payment Terms (St.15)
Merchants illustrate very different situations when it comes to payment terms.
The information provided suggests that there are important differences with respect to the
payment terms applied by the operators. It seems that first of all there are important
regional differences, with operators in specific regions (such as Northern Europe) paying
before operators in other markets. Also, some operators work on a monthly reporting and
payment basis, while others work on a two month basis. This means that the reports,
invoices and payments are made every two months. However, almost no merchants work
directly with operator, but instead utilize providers that aggregate the OBMRP offer of
different operators. These providers, especially the large international ones, mitigate the
effect of late payment terms making global deals with merchants and paying regularly.
Merchants claim that if the payment terms were better it would probably increase the
adoption of OBMRP, as the merchants would be able to reinvest more quickly into
marketing and products to grow their business more rapidly.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Chapter 5: Findings: “Enablers, Contributors and Inhibitors of Successful Mobile
Payment System Deployments”
The results of this research were mapped out as outlined in Fig 8. Four operative
topics should be considered when deploying Operator Billing Mobile Remote Payment
Systems: 1) Optimization of the end user purchasing experience, 2) Choice of a Payment
System with a good brand and reputation especially among end users, 3) Selection of a
OBMRP provider with whom to establish a relationship that goes beyond simple
transaction processing, and 4) Optimization of pricing and billing policies.
Before going into the details of each operative aspect listed it is important to
outline some general findings. In general terms, Merchants wishing to maximize revenues
are looking to make sure that the highest number of transactions are made on the system
and that they are charged the lowest commissions for these transactions. These two
factors are referred to by merchants as Conversion Rate and as Payout.
In standard e-marketing practices, “Click Through Rate” and “Conversion Rate”
are consolidated performance indicators measuring the call to action effectiveness of
advertising campaigns. Successful Merchants deploying OBMRP are either tracking
Purchase Conversion Rate or are implicitly selecting providers that can ensure the highest
standards in terms of conversion. The purchase conversion rate has been described from
merchants as the “ratio between customers that successfully completed a transaction to
the number of customers that either intend to make the payment or that initiate a payment
process”.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 9: Operative factors and sub factors affecting deployment and management of
Operator Billing Mobile Remote Payment Systems
Payouts and Purchase Conversion rates are tracked by Merchants to benchmark
the quality of the different service providers, but also to compare the performance of
different payment systems32.
32
Data utilized for this example is an estimation by the author utilizing as assumptions different sources of
information aggregated from the interviews and does not necessarily reflect the reality. One of the main
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
93
Table 2: Example of Operator Billing Mobile Remote Payment vs. Credit Card
performance
Mobile Remote Payment
Users that have selected items to be
Credit Card
1200
purchased and land on payment page
Users that complete Transaction
700
100
Avg End User Price
€8
€ 15
60%
98.5%
€ 3.360
€ 1.225
Payout rate (%)
Revenues
There are a variety of business, marketing and technical factors that can strongly
affect the purchase conversion rate. Some of these can be controlled by the different
players operating in the value network (operators, service providers, merchant, etc.) and
include, for example, the technical performance of the purchase flow, the simplicity of
the payment flow, and so on. Other variables are beyond the operative control of the
players, and refer to either strategic aspects mentioned before (such as the market
segment addressed) or to social and demographic factors.
In this part of the research, the attention is mainly on those factors that can be
somewhat governed by the Merchant either directly or through its relationship with the
other players involved.
assumptions is the ratio between credit card and OBMRP purchases. It was based on information provided
by a merchant who claimed that the number of purchases on his website made on Mobile were at least
seven with respect to credit card.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
5.1 End User Purchase Experience Optimization (Op.1)
By ensuring an optimal end user discovery of the payment instrument and
purchase flow, the merchant can significantly increase the performance of the Mobile
Remote Payment System.
Figure 10: End User Purchase Experience Optimization
In the discovery phase, the user has selected items to be purchased and is
evaluating whether to continue the purchase process and, where given the opportunity to
decide, which payment instrument to use to carry out the transaction. The purchase flow
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
instead is that set of actions that the user undertakes to make his purchase, that initiates
once the user has selected the payment instrument and ends with the confirmation that the
transaction has been completed.
5.1.1. Discovery (Op. 1.a.)
Merchants using MRP as a key instrument for driving revenues need to clearly
attract users to the payment instrument. These are the main findings in terms of
discovery, whether this happens in a web, mobile or offline environment:
1) Visibility: When proposing MRP, if the merchant’s strategy is to really
promote the use of this payment tool by its customers, it is important to
provide visibility of the payment tool if other payment options are provided.
Merchants may not want to promote the use of MRP in favor of higher payout rates provided by other payment tools such as credit card, as described in
the strategic phase. Despite this, merchants agree that it is critical to give good
visibility of the MRP option. One merchant explains this concept: «of course
we prefer it when our users pay with credit card or PayPal. But most of our
users don’t have credit card or PayPal. So if we hide or give little visibility to
the Mobile payment option we risk losing even the SMS transaction, so
adopting this system would make no sense».
2) Explanation: When proposing MRP as a payment instrument, it is important to
clearly specify that it is “Mobile Payment” with sentences like “Pay with your
mobile”, “Pay by SMS”. It is not enough to rely on the brand of the payment
provider “MoPay”, “PayMo”, “Onebip”, “Zong”, and so on. One merchant
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
from the social network segment has verified this through different tests and
explains his opinion about this: «We are attracting millions of new users every
year. Not all our users are accustomed to mobile payment. We see that once
users try this method, they recur to it often, but by explaining to the newcomer
that that logo or brand x means actually that he can pay with an SMS, is the
trick into increasing your base of paying users. Maybe one day the Brand will
be self-explanatory like VISA, but that day has still to come».
5.1.2. Purchase Flow (Op. 1.b.)
Findings on the purchase flows are categorized according to the following: Web
Purchase Flows, Mobile Site Purchase Flows, and In App Purchase Flows:
5.1.2.1. Web Purchase Flows
The two main flows for purchasing items on the web via mobile remote payment
are:
1. MO Initiated Flow (Unique Code): User is shown a unique code on the
web page. He sends it in the body of an SMS text message to a short
number (ex. 484248). When the merchant’s systems receive the unique
code from the user, and matches it with the one displayed on the web
page, the transaction is completed.
2. MO Initiated Flow (Shared Code): User inserts his MSISDN (mobile
phone number) into a webform, then sends an SMS with a small merchant
identification code or word (like “one”, “farm”, “yes”) in the body of the
text to a short number, usually 5 or 6 digits (for example, 484248). When
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
the merchant verifies that the number sending the SMS is the sameone
inserted into the webform, the transaction is completed
3. Web Pincode Flow (OTP33): User inserts his MSISDN in a web form. The
MRP system sends him a 4 digit pincode via SMS. The user inserts this
pincode in the web form. If the pincode inserted by the end user matches
the one sent via SMS by the system, the transaction is completed.
According to most merchants, the general rule is that users seem to prefer the web
pincode flow because it seems to convert better than the other flows. However, through
deeper analysis, the following aspects should also be taken into account when selecting
the type of purchase flow and designing the end user interface and interaction with the
system:
1. Availability: Web Pincode Flow is not always available in every
geographic market or operator. Of the 45 markets in which a Chinese
browser games publisher offers its services, “pin-code” flow is made
available by his MRP provider only in 15 of them. His provider deploys
new flows approximately within three months from when these are made
available by operators. His MRP provider has been recently upgrading
different markets from “MO Flow” to “Pin-Code”, yet many key markets
still do not offer this. The payments specialist says: «Pincode is generally
made available in the most technologically advanced markets such as in
Western Europe, South East Asia. But then there are still exceptions,
33
OTP is One Time Password. This flow was described in chapter two.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Operators in Spain have just started performing pilots of this flow with
selected merchants and will probably fully deploy this towards the second
quarter of 2012, while in UK, Italy, and France we have been using this
flow since three years».
2. Human Error: Some aspects of the flow may vary by market, thus
affecting the purchase conversion. In France, for example, the new MPayment system introduced by operators, MPME, utilizes an eight digit
alphanumeric pincode (as opposed to the four digits that are exclusively
numeric and used in most of the world). According to a leading German
Online games publisher, they have seen drop in conversion when first
switching from MO flow to Pincode flow in France due to the increase of
human error during the purchase flow. The insertion of the pincode is
mandatory to confirm the transaction, but users tend to make mistakes if
the pincode is too long and complicated Also this flow has issues related
to the recognition of MSISDNs related to MVNOs 34.
3. Technology Performance: Many merchants prefer the pincode flow, just
because they see increased purchase conversion after switching from MO
flows. Yet this increased conversion rate could be attributed to a more
34
In October 2011 a leading German browser game publisher tested 15 days of SMS Premium (MO Flow)
against 15 days Direct Billing MPME (Pincode Flow) on the same pricepoint (3 €), these were the results:
from Oct 1st to 15th on MO Flow 92.122 transactions initiated, OK Billed Transactions is 87.3%, KO Billed
Transactions for insufficient credit is 10.2 %, KO Billed Transactions for other reasons is 2.5%. From Oct
16th to Oct 31st on Pincode Flow 103.616 transactions initiated but only 71.6% OK Billed Transactions, KO
Billed from insufficient credit remained almost the same 13.8%, KO Billed from confirmation timeout or
pincode error 10.7%, and remaining KO Billed form other 4.9% (where the Publisher argues there are
issues due to correct MVNO user recognition). The German Game publisher and its provider tested
thoroughly to exclude other issues, such as sms delivery timing of the pinocde by the carrier, but on 100
tests the pincode was delivered always within 4 seconds..
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
advanced billing technology used in the new flow (Most MO Flows are
based on PSMS technology while most Pincode Flows are based on direct
billing technologies). Direct billing in general performs much better than
PSMS.
4. Context: The merchant needs to strongly consider the entire context in
which the payment is taking place and not only the user’s experience with
regards to the payment flow. For example, two important massive
multiplayer online game companies only utilize “MO Flow with unique
code” and exclude for the moment utilizing “Pin-Code Flow”. The reason
is that, according to them, their user purchases “weapons, features,
bonuses and “extra lives” while he is playing the game on his PC (often
against other users around the world), and they do not want to
continuously interrupt the users’ engagement with the game. Instead they
want the user to keep playing and feeling involved, and when necessary
the user can send unique codes with his mobile to make purchases, without
any interruption.
5. Flow Steps Optimization (or reduction): This has been touched by all the
merchants at some point during the interview process, (even by CxOs and
high level executives). Merchants explain there is a directly proportional
increase of “completed” against “started purchase” ratio that follows the
decrease of steps the user must make in order to complete the MRP
transaction. One of the most significant examples of impact of additional
steps in the payment process is provided by the Payments Director of
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
virtual community. He Claims the introduction of what is referred to in the
industry as double opt-in (that is, the user must confirm twice his
willingness to complete the transaction) has decreased overall purchase
conversion of more than 40% in Turkey. He explains: «The flow used to
be classic “Pin-code”. Now user after receiving his four digit pin and
inserting it onto the web page, receives another SMS saying that if he
wishes to complete the transaction he must reply to the SMS writing
“evet” which means yes». The payment director explains that by adding a
step in the flow means increasing the risk that the transaction is not
completed due to three factors: «First of all by increasing the number of
steps you increase the possibilities of human mistake (e.g., how many
possibilities are there that the user doesn’t understand that he must reply
to that message, or that he sends it back to the wrong number or spells
evet wrong?). Second you increase the risk of mechanical failure (how
many possibilities are there that the confirmations SMS gets queued in the
SMSC, or is not parsed correctly, etc.?)». Third and according to him the
most important: «these are impulse purchases, the more you give a chance
to that person to think about it, the more chances you will have that in the
end the user is not really interested in completing the transaction». The
payment project manager of a major social network instead explained the
impact of reducing minor steps: «In May 2010 we introduced a small
improvement to our payment flow in Spain. In order for us to complete a
transaction we need to know the user’s number but also which mobile
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
operator this refers to. Instead of asking the user to select his “operator”
through a “radio button” next to the logo of the operators made well
visible, for example Vodafone or Movistar, and then insert his number, we
introduced number lookup. Thanks to a service offered by our provider,
the user inserts his mobile number, our provider makes a request to the
operators’ databases, recognizes which operator it refers to and proceeds
with the usual steps of the transaction. You would think that anybody can
easily recognize their operator and select it with a click. Yet this small
improvement increased conversions of four percent, that is on 500.000
euros a month of revenue an additional 20.000 euros, and cost us just half
a day of one of our tech developers to make some minor modifications to
our payment page». Another step reduction technique for MRP mentioned
by different people interviewed is automatic MSISDN recognition
(meaning that, because the user has already made a previous purchase, the
mobile number of a recognized acquired user is pre-filled in the web form
avoiding him to having to insert the number and possibly making mistakes
or deciding not to go ahead). Three Merchants that have deployed
different purchase flow optimizations utilizing MSISDN recognition have
registered from 5% to almost 10% increase in their purchases, and
substantial decrease of failed transactions (depending on the kind of
recognition deployed35).
35
Two merchants utilize the information of pre-registered users to auto insert the MSISDN in the web
form. By pre inserting the MSISDN for the user inside the web form, there is a decrease of mistakes (with a
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
6. Operator Policies: Finally, the selection of the flow should also take into
account operator policies and restrictions. Some operators and authorities
require double opt-in36 on MO Flows, and instead do not require this on
Web Pincode Flow. Another example is related to pricing structures. For
example, different merchants refer to the case in Spain where all
transactions above 1.42 euros require double opt-in flow, while up to 1.42
euros requires only a single MO confirmation. The payment director of a
leading Games publisher explains how they have changed the entire
pricing structure of their game in Spain just to optimize purchase
conversions in this market: «In most of western Europe we offer 2, 5 and
10 euro packages of premium features. In Spain instead we modified our
package pricing to 1.42, 3.54 and 7.08 euro just to maintain high
purchase conversions on the lower price points».
5.1.2.2. WAP Site, Mobile Internet Site and Mobile App Store Purchase Flows
There are a plethora of solutions for Merchants wishing to let users make
purchases on their mobile stores. These can be divided into two main categories of flows:
5% to 10% decrease of uncompleted transactions) . Another merchant instead has reduced even further the
steps for the user. This merchant, a social network, is utilizing what they call “One Click” flow. This social
network offers two different kinds of services to its users. One service is based on a weekly subscription
model, where the user is charged a certain amount (generally between 2.00 to 3.00 euros in most European
countries every week.). However, to access specific features, the user may want to make other single
purchases of other services besides his weekly subscription. For all the users that are registered for the
weekly subscription, the system for all future single transactions will offer what the merchant refers to
“One Click” purchase, where the system just asks the user if he wants to be charged for the purchase on his
phone, and by clicking Yes the transaction is completed (thanks to the MSISDN authentication made
during the user’s previous subscription and the association of that MSISDN to his account). This merchant
did not disclose the exact decrease in the amount of failed transactions, but did say it was much higher than
the 5% to 10% quoted by the other two merchants.
36
Double Opt-in is
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Mobile and Wap Site Purchases (these purchases take place on a mobile page hosted
remotely and accessed by the user through his mobile browser) and Mobile Application
Purchases (these purchases are made by the user when interacting with applications
installed in his device or on the store of the vendor). The flows in terms of user
experience are the following:
1. Operator Billing Automatic recognition flows: Via the WAP APN and
special implementations on the Mobile Internet APN, the operator or
provider are able to recognize the MSISDN of the user that is requesting to
make a payment and directly charge this amount to his phone bill or
prepaid credit via mobile direct billing or PSMS.
2. Operator Billing Manual Confirmation flows: The user follows the same
flows utilized for web purchases (pincode, MO, and so on).
3. Operator Billing Android in-app purchases. While iOS is a closed
environment that does not allow other payment systems except for its own,
the Android market allows merchants to utilize other payment systems.
Some providers, such as Fortumo and Zong, have developed SDKs that
allow merchants to introduce a mobile payment flow within an Android
application. The flow is “oneclick”, as the Android OS can recognize and
communicate to a remote server the MSISDN. The user interacting with
an Android app can make a purchase just by clicking on the purchase
button (and confirming).
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
The same sub factors affecting web flows (Availability, Human Error,
Technology performance, User Context, Step Reduction,
Operator policies) are
applicable to Mobile purchase flows as well.
With regards to step Reduction and Human Error, WAP/Mobile Internet
Purchases with Automatic recognition flow is maybe the most appreciated MRP flow by
merchants. It is in their opinion the simplest flow for the end user, since it requires the
user just one or a maximum of two clicks. It can take less than a couple of seconds to
make a payment with this flow.
The difference in conversion, compared with flows that do not recognize the
MSISDN is by far higher. Merchants attribute this difference not only to the increased
number of actions or steps required in completing the process when the MSISDN is not
recognized, but also to the need to switch mobile application. While on the web, the
actions to be performed are external to the environment in which the user starts and
confirms the transaction (that is, he starts on the web page, then picks up the phone and
makes some actions, and then confirms the transaction on the web, without having to
leave the web page). In contrast, on Mobile the user must switch from the mobile site
where he is making the purchase to the application where he sends or receives the SMS,
and then go back to the mobile site to complete the purchase. This switch of applications
is what merchants believe to be one of the major barriers for successful conversion. The
use of automatic recognition, and its high performance, opens many opportunities to
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
merchants. Some are switching from OS-based applications to web apps based on
HTML5 technology37,38.
5.2. Payment System Reputation (Op. 2)
Merchants believe it is very important that the MRP system have an excellent
reputation among end users.
Figure 11: Factors Affecting Payment System Reputation
37
HTML5 gives the merchants the opportunity to create interactive microsites with some dynamic
functions.
38
For example, one merchant has stopped promoting its iOS app and has instead developed a microsite to
address better the needs of its target. In fact, most of his users are between 16 and 18 and thus mostly do
not have credit cards. Since he is offering virtual items and premium features that can be acquired also via
mobile, the mobile site and automatic recognition flow address much better suit his needs. Users can access
the mobile site from any phone and purchase items for a few euros in just one click and be charged to their
phone bill.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Users are less likely to be motivated into initiating a Mobile Remote Payment
transaction unless they are sure that the system is safe, that it is not known to be utilized
for scams, and that refunds are made in case of error, if customer support is offered.
Three aspects (as outlined in Figure 11) emerged as critical to ensure a good Mobile
Remote Payment reputation: Payment provider brand, testing of system, and end user
support.
5.2.1. Payment Provider Brand (Op. 2.a.)
If the brand of the MRP provider is well known and trusted by the targeted
audience, by giving the brand visibility in the payment page and flow, it will attract users
and increase purchase conversion. All merchants agree that today there is still too much
fragmentation of payment provider brands, and that there is no leading provider capable
of providing a strongly loyal base of users that can clearly demonstrate to have a
worldwide recognition among users. However, some merchants have started measuring
some advantages in using some brands compared with others. Two merchants actually
claimed that they made tests by proposing the user different payment brands and that
some showed a slightly increased click rate, with maximum differences between 5% and
10% between the best and worst performing brands.
Some merchants that use multiple MRP providers in their purchase page have also
performed high level testing and have noticed that the brand does make a difference. For
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
example, a merchant tested its user behavior when selecting the payment provider. 39The
merchant did not disclose the result of the test, but did provide some key insights, giving
evidence that the brand of the MRP provider does affect the user’s intention to purchase.
The first interesting finding was that the top five global brands performed generally well
across all markets tested, but with some slight differences. One of the top global brands
had fewer clicks compared with the average of the other top four, which were generally
aligned. And at a local level (in the specific markets) there were some higher differences
between performance of the brands, with some global brands performing better, and some
local brands in Asia and Latin America also performing well.
Another merchant explains that every six months they make a «beauty contest»
for selecting the two exclusive MRP Provider for each of the 35 countries they offer their
services in. He explains that this is a structured process through which they evaluate the
offers of approximately five to eight providers for each market. MRP providers are
selected through different criteria, among them payouts and technical reliability. He
claims that, for the first time, this year they have added a new selection criteria, which is
payment provider Brand awareness in the market. He believes that by using a strong
payment brand they can increase the purchase conversion and he bases his reasoning on
two items he has measured: «First of all our “heavy users” stick to the same payment
brand they have been using, they are quite loyal, because they recognize it at first sight,
39
The test was conducted between May and July 2011 across twenty geographic markets including five
major western European countries, North America, Brazil, Mexico and some markets in south east Asia.
This merchant, like many others that use multiple MRP systems, usually highlights the payment provider
with which it obtains the best economic conditions or relationship (sometimes giving even higher bonuses
to the end user). In this test instead all brands were treated equally. Furthermore, due to some evidence that
the users have a higher tendency to select the brands displayed on the higher left corner of the page, the
merchant dynamically changed the location of the payment buttons, displaying them each time the web
page was loaded by a user randomly across the page.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
they get used to it, they know it and they probably trust they won’t have issues. Second,
many of our new players come from the competition. If they are used to paying by SMS
with a certain brand on the competitors website, they will feel more comfortable in
paying with a tool they already know on our website».
Merchants seem to select and give visibility to MRP brands based on the
following criteria:
1. User awareness and familiarity: Merchants want a brand that their users
know or recognize. Some merchants actually select the same brand/s used
by most of their competitors in a selected market so that it is easier to
monetize the user’s churning in from the competition.
2. Trustable reputation: Merchants want a brand that users recognize as
reliable and safe during the transaction. Interestingly, different merchants
admitted that they monitor their forums and communities, competitions’
forums and communities, sector blogs and communities and social media
to learn what their users think about their MP systems. Merchants are
checking to see whether there have been any frauds on a major brand and
whether the news is spreading in the community.
5.2.2. Quality of Service Testing (Op. 2.b.)
Testing the quality of the service is also very important, not only to ensure that the
Merchants is not losing opportunities to monetize but also to ensure the reputation of the
payment system. «You need to be 100% sure that your customer is not having any trouble
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
during the mobile payment process» says one of the merchants - «If for any reason
something goes wrong in a transaction and the user is convinced that he was frauded or
that the system is simply unreliable you will be dealing with different issues. First of all
your customer will probably be blaming you and interacting with your customer care for
resolving the issue.Your customer care instead cannot do much but refund or escalate to
the provider or operator. But most of all, Mobile payments are made available to users
mostly within digital contexts. These users are deeply socially integrated within your
product or through other social networks and media. It takes nothing that you can have
an unhappy user posting that you are scamming him on your product’s forum and
community posts, on his blog, on facebook and twitter. It is just so much worth it to make
all the necessary tests during the deployment phase and continuous QoS checks when the
service is live.»
Merchants say that it is not uncommon that deploying or managing MRP systems,
especially when approached with custom implementations or through back-end or low
level integrations, can be problematic. According to the different merchants interviewed,
the following are the aspects mentioned that are always worth testing thoroughly, either
directly or through the support of the MRP provider:
1. Issues related to device compatibility: Especially when deploying MRP for
purchases made on WAP/Mobile Internet stores or in-app, there can be
issues related to the correct rendering of the payment pages, and
transaction logics due to the technology fragmentation. It is best to test, at
least randomly, different mainstream mobile devices in order to ensure
better compatibility.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
2. Issues related to operators and MRP provider platform: A merchant
explains: « Even if you are integrating into a MRP provider that
aggregates different operators, if the system works, let’s say, on Turkcell
in Turkey, you need to test even Avea and Vodafone. There are just too
many issues that are operator specific, for example relate to MNP40, to
new operator deployments and system, platform or network upgrades or
even in the platform and connections that your aggregator has with a
specific partner». The MRP system should be tested on all operators
during the deployment phase. Depending on business volumes, merchants
set the frequency of other random tests on the different operators. These
are the most relevant issues mentioned:
a. Issues related to operator or MRP provider technology failures:
Merchants have mentioned the possibility of operator or MRP
provider technology failures that can seriously affect or even
totally block the MRP activity. Operators and providers are
continuously updating their systems, implementing new services,
upgrading their networks or resolving issues on other services. It is
not uncommon that when they tweak in some way their systems,
the MRP service utilized by the merchant can be affected.
b. Issues related to general Quality of Service of the provider or of
the operator in the management of the flow. Many merchants
40
Mobile Number Portability is the possibility for the user to change his contract to a different carrier but
keep the MSISDN of his current carrier. MNP has been encouraged or enforced in different countries by
Antitrust or Telecommunications authorities in order to increase competition among the different carriers.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
111
stressed the importance of checking the latency in the delivery of
the SMS containing the four digit code in the “pin-code” flow. The
payments specialist of a leading UK Social networks says: «The
pin-code has to arrive to the user right away, otherwise he will
interrupt his purchase flow and there is a high risk that he will not
complete the transaction. In our company we benchmark the
delivery of the pin-code in the following terms: under two seconds
is good, between two and four is ok, above four seconds to deliver
the pin-code is not acceptable and we will either change provider
or flow depending on the underlying cause as the impact on
purchase conversion would be dramatic».
c. Issues related to correct reporting and stats. Even while the
reporting and monitoring tools that display transactions are being
completed properly, it is not uncommon to have
problems
occurring in the flow or in the completion of the transactions. All
merchants seem to agree that it is important to test that what is
displayed on the transaction reports is what is really happening
from an end user and billing perspective. There is a remote chance,
but it did happen to a Merchant that an Italian operator had
recently updated the Billing IDs utilized in the PSMS systems and
that these had been incorrectly reconfigured by the MRP provider
due to a human mistake. The result was that, while from a
customer perspective the flow was working beautifully, in reality
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
the end users were not being billed by the operator from February
10th 2011 to March 20th 2011. The damage to the merchant was
potentially even worse than the pure loss, because not only he was
not going to get paid for all those transactions, but users (via word
of mouth) had discovered they were not being charged, the word
had spread and the number of daily transactions had increased
approximately 50% by the time the merchant identified the
problem. Luckily, the Merchant was entirely reimbursed by the
MRP provider. This issue could have been avoided if, following
the operator’s update of the Billing IDs, either the merchant or the
provider had tried to complete a transaction on a prepaid contract
and had then verified that the amount of the purchase had been
correctly deducted from the available credit. The economic impact
of this mistake cost the provider approx. 175.000 euro to be
reimbursed to the merchant, besides the total loss of related
revenues estimated in 200.000 euro (and of course an impact of
lost revenues for the operators around 400.000 euro).
However, testing of MRP systems is not always easy and cheap, as it can require:
1) For international / global deployments: The use of different SIM cards from
many different countries
2) The use of many types of handsets / operating systems for the deployment of
Mobile Browser or in App Purchase flows
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
113
Some merchants ask their providers to perform thorough testing during the
deployment phase and random testing throughout the service lifetime. Others use systems
such as the ones provided by companies such as Device Anywhere, which allows the
merchant to emulate via PC the purchasing action. These systems are connected via web
to many different real handsets and SIM cards from different operators around the world.
5.2.3. End User Support (Op. 2.c.)
End user support is also very important for ensuring the reputation of the payment
brand but also of the Merchant. Mobile operators, local telecom and government
authorities usually require specific policies for customer care, such as payment provider
24/7 customer hotline, or specific text to be used in the payment flows, etc. However, in
the case provided by a merchant it is clear that such requirements are not always
sufficient to protect the brand of the merchant and payment provider.
One merchant gave the example of an end user in Brazil not managing to
complete a small transaction for four reals. This user then posted not only on the forum of
the game, but also in comments on blogs and the like (getting quite some attention) that
the MRP provider and the game provided by the merchant were a scam. The user was
actually complaining that he had stolen from him four reals without getting access to the
new levels of the game. In reality what had happened was that, when the user made the
purchase, his prepaid mobile phone credit was insufficient (below four
reals) and
therefore his purchase could not be completed, but no amount was actually charged to
him. Yet there was no real system for supporting the end user in his payment purchase.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
The game website just provided a general FAQ without covering any possible MRP
issues and left the customer support to the community of more experienced users who of
course did not have access to the transaction database. Furthermore, the payment
provider’s page was all in English. The Merchants product and marketing managers
became aware of the situation only when it had gotten out of hand.
Merchants believe that the following practices are very important to have in order
to maintain the reputation of the system and support the end user in following through in
the transaction:
1) Very clear and available instructions: Users must know exactly what to do and
what to expect. This is even more critical with regards to subscription based
services. Users must understand clearly that they not making a onetime
purchase, but they will be charged periodically and must understand exactly
how to terminate their subscription. The instructions must be made available
to end users when they need them. For example, in the case of subscription to
a mobile newspaper, if the user subscribed through his mobile browser, it is
important that users find instructions on how to unsubscribe also on the
website of the newspaper. Or that they receive a periodic SMS reminder with
a customer care support address. In this way, if they forget completely the
name of the merchant they are subscribed to they know how to unsubscribe.
2) Language: OBMRP support should be in the language of the end user. Some
users will accept to play games, download content, interact in social networks
in a language that isn’t their native language. But when it comes to resolving
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
an issue during payment, things change. Users will get frustrated if they
cannot understand the instructions, if they must must speak to a call center
operator in a language they are not familiar with.
3) Dedicated FAQ: The merchant should provide either a dedicated section in the
Frequently-Asked-Questions or at least provide FAQs to main issues in the
MRP flow with clear instructions on how to resolve them.
4) MRP Provider: Test and ensure the kind of support the MRP provider will
give the end user in case of any issues. One merchant admitted in calling his
MRP provider’s call center to verify how issues were handled
5) Reimbursement Policy: Since most MRPs today are applied for the sale of
virtual goods (goods that do not have a high production cost) it is best to have
a customer friendly reimbursement policy, reimbursing end users even when it
is their fault.
5.3. Merchant and MRP Provider relationship (Op. 3)
Merchants have adopted different strategies with regards to their MRP providers.
Some have decided to select one provider as their exclusive global MRP hub, both
through more informal scouting processes and through articulated tenders. Other
Merchants select for different markets, different providers based on the strength on a
specific aspect within the market, such as the payout, the flow, and the relationship with
operators. Others use multiple providers in every market. Others select different providers
on even other selection criteria, such as fiscal aspects, technology capability, and
optimized flows for specific price points.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 12: Operator Billing Mobile Remote Payment Merchant Provider relationship
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
However, if the strategies differ between merchants, what seems to be common is
what the merchants expect from their MRP providers and how they see this affecting
their performance. These are economic conditions and service excellence.
5.3.1. Economic Conditions (Op. 3.a.)
The first and most important aspect that merchants are requiring MRPs are good
payouts (or at least sustainable for the business process they are putting on place). The
commissions applied by operators, as discussed in the “Strategic Phase” vary
substantially between the different markets. Even a slight increase in the payout provided
to the merchant can result in a very interesting benefit in terms of revenue increase,
without any additional effort on the merchant side. A competitor receiving higher payouts
can take advantage to reinvest this amount to grow faster. Thus it is important for the
merchant to obtain the best payouts in each market. According to the merchants
interviewed, the following are the key factors in payout negotiation:
1) Setup and Maintenance costs: Major MRP providers usually do not
apply any setup costs if the integration of the transaction system
between merchant and provider is standard. The provider will usually
also support the costs needed to support the service and be compliant
to local regulation, through such things as customer care hotlines and
an email handling center, or the cost of sending outbound SMS caring
messages, since these costs are then spread to all merchants.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Merchants can also expect to have all setup and maintenance costs
waived.
2) Market Payout Rate Knowledge: Operators are continuously
modifying their payout rates, introducing new billing systems with
different commissions, and so on. It is important for the merchant to be
aware of the situation in each market, or at least in the major markets
in which it is operating. In Italy the introduction of Mobile Direct
Billing can substantially improve merchants’ payouts passing from
around 45% of End User price VAT excl. on PSMS based systems to
55%–60% of End User Price VAT Excl. In France and in Turkey the
operator contracts are made available on the Internet. In these markets
it is easy for a merchant to investigate how much the MRP provider is
receiving from the Mobile Operator and how much of this it is keeping
for itself compared to what it is reversing to the merchant. By
investigating even further, the merchant may learn that SFR in France
is providing MRP providers a special incentive (released in the form of
higher payouts) for those who manage to attract a new international
merchant to be plugged into the MPME system. The more the
merchant knows about the market and how, regulation, mobile
operators’ or other payment institutions’ strategy is evolving in the
market, the more it will benefit from better payout conditions.
3) Flat Payout: In each market operators usually apply different payout
rates. In France on the MPME contract, SFR offers between 67% and
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
71% based on volumes (and 80% on all new international merchants),
Orange offers 70%, and Bouygues telecom offers 65%. Most
merchants want their MRP provider to provide them with a flat payout
rate. This payout rate is based on the average payout weighted on the
actual transaction volume performed on each operator. Transaction
volumes are not necessarily spread according to the mobile line market
share of the operators. One operator may have 30% of the market and
at the same time generate 50% of the transactions. This is because it is
providing an easier flow, a better billing technology, or more simply
because it is addressing a higher spending market segment. A
merchant explains: «We used to make a operator-by- operator
negotiation with our mobile payment providers. However, this is not a
common practice anymore, all new contracts signed since first months
of 2010 are based on a single flat rate per country. By requesting flat
rate payouts in each country we can rely on knowing exactly the return
for every transaction without having to worry about shifts in the local
mobile market, we leave this risk on the MRP provider».
4) Payout Rate and MRP Commissions: According to merchants MRP
providers offering operator based billing systems make 3% Gross
Profit on the transactions generated by their top merchants and
between 5% and 10% on the transactions generated by their medium
and smaller merchants. However, Global providers are not equally
strong in all markets. To increase competitiveness of the offer, there is
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
a tendency by the major global providers to make multi market deals,
in which the loss in margins in one market, where the provider is
weaker, is recovered in a market where it is stronger. Thus making
multimarket deals, especially with an exclusivity basis can support a
Merchant in obtaining higher payouts than the operators or payment
instructions can provide locally.
5) Exclusivity: By locking under an exclusive agreement, all MRP traffic
to a single provider can support the merchant in obtaining higher
payout rates. In fact, if the MRP provider can rely on a large amount of
payment traffic for a specific timeframe, those payments can support
him in accessing volume commission discounts from operators or
compensating margins with other merchant deals or in other markets.
MRP Providers that can rely on certain volumes for a fixed amount of
time can also provide a higher payout if they know that operators are
going to increase the payout rate.
6) Payout Review Process: Due to the continuous evolution of payout
dynamics in the different markets, Merchants tend to review the
payout conditions once or even twice a year. Some merchants start
formal RFP (Request for Proposal) processes, where MRP providers
provide blind offers. Others apply other sort of “Beauty Contest”
approaches, where MRP providers make bids for capturing the traffic
in the different markets, by disclosing in different rounds the best
offers received and then closing on the best proposal. Other merchants
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
are more loyal and have a deeper relation with preferred providers in
specific markets and just review the payout conditions on a periodic
basis, inquiring whether there is a possibility to improve the payouts.
Lastly, some providers lock the contracts to the payouts received by
the MRP provider—for example, defining that the payouts are X% of
what is reversed to the MRP provider from operators or other payment
institutions.
7) Discrepancy and Chargebacks: Merchants should factor in the
discrepancy rates and chargeback rates. The payments director of a
Swedish Virtual Community reports that high discrepancy rates are
quite common in Latin America, where, for example, in Brazil,
operators on average report that 5% of PSMS transactions fail. He also
points out that, interestingly, local connectivity and MRP hubs in
Brazil report an average of 10% or more of failed transactions.
Whether this is due to real technological failures or business
malpractice of the players involved, it is important for the Merchant to
be aware of this and to factor it in when planning to deploy MRP in
certain markets. Chargebacks are instead the refunds made by the
MRP provider or usually directly by the operator to the end user.
Chargeback rates vary between markets. They reach a global peak of
approximately 4% or 5% of the total transactions in Spain, UK,
Canada, Australia and Scandinavia. They are instead close to zero in
Italy, Turkey, the Middle East and Southeast Asia.
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122
8) Provider Payout dumping and other malpractices: According to some
merchants, malpractice has gotten out of hand for some MRP
providers—specifically, the practice of going under margin on one
operator or on one market, by recovering margins elsewhere or in the
future through improved conditions by operators.
Due to high
competition and increasing commoditization of the Payment service,
some MRP Providers offer unsustainable Payouts in order to maintain
merchants or increase market share, leading not only to price wars but
also to other malpractices. The more strategic and long term risk for
the merchant is that the MRP Provider operating constantly under
margin will sooner or later not be able to finance its operations and
maybe one day will not be able to reverse to the provider the cash
related to its share of revenues. But the more common risk currently
registered by Merchants is providers that offer payouts that are too
large and then recover their loss by either reporting non-existing
discrepancies (that is, failed transaction reports), non-existing
chargebacks (refunds to end users made by the operator) or ,even
worse, frauding the merchant and end user by keeping the value of the
transaction but communicating to the parties involved that the
transaction has failed. Also, reduced profitability of the merchants
means lower investment in technology and quality of service, and this
is then reflected in the overall performance of the merchant’s MRP
system. A merchant, in illustrating his approach to payout negotiation,
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
says: «We want to get back every penny possible and we don’t like
operators charging these high commissions especially in some markets
where we see the MNOs keeping 70% and more of the value of the
transaction while we are the ones investing in product development,
advertising, marketing and operating the service. So it is important to
squeeze and push for the highest payouts, as this also stimulates
providers to renegotiate with operators and other players in the chain.
But pushing it over the limit then can cause negative consequences on
the performance and on the overall market. We have seen payment
providers (even the most respected brands in the market were
mentioned) start committing systematic errors, minor frauds (such as
report inexistent chargebacks or operator discrepancies) just because
they were trapped by the payouts provided by operators, our requests
and the offers made by other competitors.»
9) Payment terms: Another aspect that merchants claim to be very
important are payment terms. Most merchants utilizing MRP sell
virtual goods, digital downloads, online dating services, and so forth.
Their business model is primarily based on investing in digital (web
and/or mobile) marketing campaigns to acquire new users, who will
then make purchases or subscribe to premium service. Thus, the
quicker the merchant can access the cash from MRP, the faster it can
grow his business. Regarding payment terms, MRP providers must
wait to be paid by mobile operators, and it seems that operators’
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
payment timing is very different based on the region. Northern
European operators and North American ones pay the earliest (within
30 days from the end of the month), and Latin American and Middle
Eastern countries take anywhere between 60 to 180 days from the
month in which the transaction was registered to make the payments.
However, Banks know that Operators, even if they pay over a long
term, do pay on time and are a reliable partner for MRP providers, thus
opening easily commercial credit lines, through which the MRP can
anticipate to the merchant payments. A merchant operating MRP at a
global level should expect (with no additional cost) its MRP provider
to pay within 45 to 60 days from the end of the month in which the
transactions were reported. Most MRPs can also provide payments
within 15 to 30 days. It is also in the interest of the MRP to pay
quickly so that its merchant can grow its transaction volume quicker.
10) Fiscal Optimization: Merchants in reality don’t evaluate the payout
rate they receive, they evaluate the actual cash they will be receiving,
netted of eventual taxes. Following are the main Fiscal issues that
merchants must deal with and the way in which they are usually
resolved:
a. Local Trade Taxes: For example, in Brazil every time there is
intermediation by a company in the value chain, there is a Sales
Tax. So for every company in the chain operating in Brazil
between the operator and the merchant there is a loss in the payout.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
It is preferable for merchants to select MRP directly connected to
the Operators41 not only for the better economic conditions they
usually receive but also for the improved fiscal aspect.
b. International Withholding taxes: Another issue is the strong
withholding taxes applied, for one example, by Latin American tax
authorities. Withholding taxes become an even greater issue for
those companies operating from offshore that thus cannot recover
the loss from taxes. For example, a merchant connecting to the
main local Brazilian aggregator will receive a standard 28% payout
on the tariff ICMS Tax excluded42, Thus on 4,00 reals + ICMS tax
tariff (around 5.20 reals) paid by the end user the merchant should
receive 1.28 reals. However, his local provider must apply a 15%
Withholding tax before sending this amount abroad, thus
decreasing this amount to about 0.95 reals. Merchants operating in
countries with complex fiscal regimes, should either select global
providers with local operations that can easily make intercompany
fiscal optimizations (for example via tax sparring) or evaluate
opening local operations in such countries themselves.
Another common practice in Brazil is for the merchant or a third party MRP provider to make a “three
party contract” (in Brazil known as “Contratto Tripartiti”) between the three parties that makes it in such a
way that the tax (approximately 5%) is applied only once.
42
In Brazil prices of anything sold on the Mobile Phone do not have VAT. But they are subject to a
Communication Tax called ICMS, which varies based on the region in which the purchase is made and the
time of the year. This tax is approximately 30% of price.
41
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
5.3.2. Product and Service Quality (Op. 3.b.)
Developing a solid and trustable relationship with the MRP provider seems to be a
key aspect that successful merchants evaluate together with the economic conditions.
Although the payout seems to remain the main driver in selecting the MRP provider, at
almost equally competitive payouts the following other important factors are also
important:
1) Operator Coverage: The merchant will select the MRP Provider that
can cover the widest audience possible. In case of operator based
billing systems, for example, in Turkey Mobile Payment was until July
2011 available only on Turkcell and Avea (combined these operators
represent 75% of Turkish Mobile users). As of the end July 2011
Vodafone launched its Mobile payment service, first on two providers.
Any Merchant using mobile payment service in Turkey should use one
of these two providers, as by not doing so, he is cutting out 25% of
potential purchasers.
2) Tariff Availability: Merchants want to be able to sell items at the price
they like. Unfortunately, especially on PSMS based systems, operators
offer only a limited amount of price points. Furthermore, usually each
price point is related to a separate shortcode used by the operator, a
code that the MRP Provider must integrate and for which it must pay
setup and maintenance fees (from each operator). It is important for
the merchant to select the provider that has a wide choice of price
points, so that it can evolve its marketing and pricing strategies
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
without having to bear technical migration costs. These price points
should also be cross operator, as it is difficult for the merchant to
explain to users why, if they purchase on TIM the price is 3 euros and
if they purchase the same item on Vodafone the price is 2.80. A
merchant explains this point: «The availability of different price points
especially in the higher range, that is above 4 reals in Brazil, in the 5,
10 euro range and above in France, UK, Germany and Italy is our
first criteria of selection in the current process of reviewing our MP
providers in these markets. We are discarding any provider that does
not have availability of tariffs in this range and we are giving a first
priority to those providers that can guarantee this kind of structure».
3) Billing Systems and Flows Availability: Merchants want to select the
merchants that can provide him access to the highest converting flows
and the most advanced billing technologies.
4) Reporting and Stats tools: Merchants want to be able to track, even in
real-time, the performance of their business. They may be deploying
strong marketing campaigns and want to understand how these are
affecting their business.
5) Easy Set-up: In general, merchants expect a rapid and easy-to-deploy
payment system. Most MRP providers offer their merchants standard
web services and related API documentation. This allows the merchant
to integrate rapidly into the MRP provider’s platform through a simple
application logic, in which the merchant requests of the MRP that a
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
transaction be completed on the MSISDN of a specific user and the
provider then communicates to the Merchant that the transaction has
been completed. Managing the authentication (for example, sending
pincode via SMS and matching it with the digits inserted by the end
user), the purchase flow, and the interaction with end user and operator
is then usually out of the control of the Merchant.
6) Service Customization: Some Merchants offer a service that is tailored
to their needs. This is due to factors such as the complexity of their
business, their idea of service, their IT strategy or, more generally,
their need to be more in control of the payment need for their MRP.
The main customizations requested by merchants are:
a. Flow control and low level integration. This was the case of a
major video streaming and file sharing provider. The CTO, who
was also in charge of integrating payment providers, requested
explicitly all his providers that his company be in control of the
payment flow. In contrast with most standard Mobile Payment
solutions offered by providers, he wanted the iframe43 containing
the payment process, the authentication and confirmation pages to
be hosted on his servers and wanted the MRP provider to offer him
just the basic aggregation of connectivity towards the mobile
43
An ifrane is An inline frame used to embed another document within the current HTML document..
Many Mobile Remote Payment flows provided on the web open an iframe (a box in the web page) that
contains the web form and the flow through which the user makes his purchase. The merchant in this
example wants to control the information displayed in the payment flow and the payment logic by
interacting directly with the provider’s billing protocols.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
operator. This type of integration is more complex and requires
effort both in development and testing phase by both parties.
However, through this type of integration the merchant has total
control of the payment flow and complete visibility of the
transaction handling. For example, the merchant would have
complete visibility of the operator’s failed transactions and could
thus match them with the ones that are reported by the provider
(therefore avoiding a situation in which the provider mistakenly or
on purpose might report higher discrepancies than those effectively
occurred).
b. Merchant branding: Some merchants want a “Whitelabel” mobile
payment flow, in which the user thinks that the Mobile Payment
service is provided by the merchant itself. This is the case of a
leading social network that self-brands and gives its own “look &
feel” each step of the payment flow and does not admit other third
party brands to appear in the process unless strictly required by
local regulation or operator policies (for example, in France the
brand of the association that regulates Premium SMS services
called “SMS+” and it must appear both in the merchants payment
page and in the authentication pages”; in other countries the brand
of the operator might be required.)
c. Service design and flow optimization: Some merchants require
some very special features that cannot be delivered through
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
standard payment flows and that are related to the service or
product offered by the merchant or to their marketing strategy.
Different examples of customizations were collected, mainly
related to purchase flows made on Mobile Internet Stores. One
merchant, a games publisher
has recently requested that its
provider develop a custom HTML5 “one-click” payment flow to
allow its users to purchase very easily new features and levels of
its game made available to its Smartphone users in the form of a
Mobile Web App. The merchant explains: «We have developed a
game to be played on smartphones that does not require the
download of an application. This game is not a shoot-them-all
game needing high synchronization or 3D graphics. So by using
HTML5 technology we let our users get highly engaged in a game
that is played directly in the mobile web browser. The HTML5
technology we used is cross-compatible to all smartphones,
reducing our development costs, but the payment systems are
different than what we were used to for our iOS apps. We asked
our partner to develop the easiest flow for mobile internet
purchases made by any smartphone in Italy, France, Spain, Brazil
and Mexico. Our partner is developing custom “One-click” and
optimized flows that will really optimize the purchase conversion».
d. Integration into other systems. Some merchants require their
provider to make specific customizations so that they can integrate
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
information being passed by during the transaction process into
other systems in use by the merchant. Three very specific examples
were made by the Merchants: 1) A leading German games
publisher needed a specific customization of the reporting system
so that all the details of the transactions could be passed into its
ERP systems to improve the efficiency and precision of their
internal financial reporting processes. 2) An online social network
requested to integrate transaction information to their CRM and
data-warehouse in order to correlate information on transactions
with their current customer database. 3) Another merchant
requested for its MRP provider to pass details related to the visits
made to the payment pages in order to track the conversion of its
online marketing campaigns.
7) Service Performance & Reliability: The merchant wants to know that
he can absolutely rely on the availability and the performance of MRP.
Merchants are selecting their providers on the basis of:
a. Continuity and disaster recovery: Almost all merchants at some
point in their interviews illustrate the importance of having the
MRP system up and running 24/7/365. The first reason is that, of
course, if the system is down they are not making revenues from
that channel (for some of the merchants interviewed, MRP is
among the main source of revenues of their business or of a
specific product lines). Furthermore, as mentioned even in the
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
strategic part of this research¸ the MRP is utilized greatly for those
business models that have low production direct costs, such as
virtual goods. In these business models the cost of scaling is zero
or almost zero44, but these business models can be subject to high
marketing costs. A merchant explains his view about payment
systems reliability in the following way: «We have a special kind
of online super market. We buy the product only once, but we can
sell it to the users as many times as we want. However, where we
do spend a lot is in bringing the users to the supermarket. What
happens if we spend a lot of money to bring thousands of users to
the supermarket, many of them want to purchase the product but
when they get to the cashier, the cash register is broken? We
cannot afford to have unreliable systems because we invest
important sums invested in online campaigns through search
engines, affiliation networks and other to attract users. It is
difficult to suddenly block these campaigns, so if the MRP isn’t
workin,g we risk not only to not make money, but actually to lose a
lot of money»
44
The following example was reported even in the strategic phase: One merchant, a Virtual Community,
illustrates the concept with a very clarifying example: «Our two main costs are product staff and
advertising. We spend a lot in creating storyboards, community engines, brainstorming features,
interacting with the community. The economies of scale of what we produce are instead incredible. Users
access to our community for free and purchase features and virual items to increase their community
experience. Once we’ve produced a new feature, it costs us zero to sell one or ten thousand of these
features in one day.»
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
b. Stress performance: A German browser Game explains that during
weekends they organize tournaments and contests among users.
During these battles some users make multiple purchases in very
short times. Specifically, on Saturdays and Sundays they have very
high peaks of transactions, where in just a few minutes they can
register the same amount of purchase attempts they totally receive
between Monday and Friday. These peaks can stress the MRP
provider’s or the operator’s systems with risk of delays or failures
in the transactions processing45.
8) Advisory and Know-how: Some merchants explained how their
relationship with MRP providers goes beyond the simple providing of
a transaction technology, and that the MRP providers, over time, have
proven to be excellent business advisors and technical consultants.
According to the CEO of a major social network, the main reason lies
in the business model of the MRP provider: «MRP providers’ revenues
and margins are directly proportional to the transactions our services
are capable to generate. It is in the interest of the MRP provider to
support us to grow its merchants’ business, and due to the fierce
competition out there, this support will return higher results rather
than focusing only on attracting new merchants. Some MRP providers
have a very good knowledge of the market, of what is new, of what
45
The key issue seems to be cues in the delivery of MT in the SMSC. This is one reason that UDR or other
Mobile Direct Billing technologies seem to perform better than PSMS based MRP
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
competitors are testing, what we can improve. It is always great to get
their opinion. In our key markets we select MRP providers with a
strong presence there, that is, with offices, people, good operator
relations also in order to leverage this know-how. Some MRP
providers have an incredible technical know-how when it comes to
Mobile related technology» Merchants have claimed to ask their
merchants for the following services:
a. Market advisory: General information about the market, the key
trends,
the competition, the
operator
policies, the local
technologies, socio-demographics, etc. and support in selecting
which priority to give to the launch of different international
markets
b. Business model and service design: Support in defining new
business models and services supported or based on mobile
payments but also including Custom Mobile service engineering
and development
c. Policy and compliance advisory: Support in understanding local
telecom authority regulations and operator policies related to MRP
d. Tax and fiscal: Support in understanding tax implications related to
international MRP deployments
e. Marketing optimizations: This includes end user purchase
experience optimization, such as support in optimizing the
purchase conversion rate by obtaining advisory on the MRP
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
discovery and flow optimizations, and also price structure
optimizations supporting in defining the best price structures and
billing policies
f. Business development: Support in identifying key partners, such as
suggesting media and advertising agencies…
9) Project management and technical Helpdesk: The capability of the
provider to support the merchant in the integration and technical
management phases is critical.
10) Customer care: The capability of the provider to offer (in local
language) hotline and or email customer support compliant to
regulation and operator policy.
5.4 Optimization of Price Structures and Billing Policies (Op.4)
All merchants gave great importance to the pricing of services that use or are
based on MRP transaction systems. Merchants explained how the price is determined by
a number of factors, some of which are strictly related to the MRP itself in some way
impacting the normal equilibrium of price determined by demand, offer and competition.
Furthermore, besides the price, merchants will select the most appropriate billing
policies, especially when these are related not to single transactions but to subscription
based models.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
Figure 13: Optimization of Price Structures and Billing Policies
5.4.1. Price Structures (Op. 4.a.)
Merchants deploying MRP must know that there is a limit to the freedom of
pricing products and services that is strictly related to the MRP system itself.
Furthermore, within those limits, the definition of price is not only defined by finding the
correct equilibrium between demand, perceived value of the offer, and competition. The
following factors also characterize price definition in a OBMRP enabled market:
1. Regulation: Merchants must consider that payment systems are subject to
specific international and local laws and that these laws have an impact on
pricing structures. MRP is currently mostly adopted for the sale of digital
goods and this adoption does not require, for example, the limitations
imposed at a European Level by the Payment Services Directive.
However, for those merchants that offer via MRP physical goods and
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
services or that utilize electronic money wallets, the price has to be
structured within the limits of the Payment Institution License or
Electronic Money License utilized by the MRP provider. This structuring
can mean limiting the single transaction of a user to a total of 25 euro and
a monthly spend of maximum 250 euro for merchants operating within the
boundaries of a basic electronic money license. Other local regulations,
applied and enforced by either banking authorities or telecommunication
authorities, have been mentioned by merchants that describe how
substantially today from a regulatory point of view MRP must be deployed
for business focused on micro-transactions.
2. Operator Rules, Policies and Technology Limitations: Operators also set
specific policies that are primarily aimed to protect the end user and
minimize fraud, but that also protect the marginality46 of its business. The
key limitations in defining the price/s that the merchant must consider are
the following:
a. Maximum tariffs: These define the real pricing boundaries within
which the merchant can operate. The service or product that the
merchant sells via MRP must be designed to fit a microtransaction-based business model, where low price points and high
commissions on each transaction are sustainable. In fact, through
the information collected directly from merchants, it clearly
The carrier’s two most profitable service are Voice Traffic (Mobile Phone Calls) and SMS. The carrier is
thus interested in growing into the Payment sector, thus generating volumes on MRP transactions, but
doesn’t want to cannibalize the users’ spend on Voice and SMS, that are terrific profit generators.
46
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emerges that the maximum price per transaction operators allow is
quite limited. Furthermore, there is a second level of complexity
the merchant must deal with— that there are important differences
in terms of minimum and maximum price points available based
on the market, the operator and even the technology being used.
For example, in France the maximum price (VAT included) for a
single transaction based on PSMS technology is of 4.5 euros across
all operators, but on the new MPME (Mobile Direct Billing)
technology it is 9 euro (VAT included) for Orange and SFR and 8
euro for Bouygues telecom. In Italy, instead, the maximum price
per transaction is 2,40 euro (VAT included) on PSMS technology
cross operator and up to 15 euro (VAT included) for transactions
based on direct billing. In Turkey there is no pre-defined maximum
price on PSMS technology, since the operator will evaluate case by
case. However, the highest deployed is 108 Turkish lira (VAT
included). On the newer mobile direct billing instead the maximum
price used to be 35 Turkish lira (VAT included) but was recently
upgraded to 65 Turkish lira (Vat included by Avea and Turkcell)
but not yet modified by Vodafone. Besides the aspects described in
the “strategic phase”, the maximum price point is a topic seriously
considered when deploying MRP systems. More specifically,
payment directors study with their providers the possible options
for increasing the limit. An important games publisher illustrates
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the impact of price availability: «In Italy we operate on 2.40, 5.00,
and 10.00 euro price points. Ninety-one percent of our revenues
are generated on the 5 and 10 euro price points, with the 10 euro
being the highest generator of revenues. Until a couple of years
ago we were operating only on the 2.40 euro price point on PSMS.
You can imagine what
the impact of Direct Billing with the
possibility for us to offer prices up to four times higher has meant
for our business» Another interesting description is given by the
COO of an important social network: «Our users can buy different
packages of premium services. We design these packages to be
offered at different prices. We registered that in general terms,
across our different markets, our users just tend to buy the next to
highest package. That is, for example, if we offer let’s say a
“bronze pack” for 2 euros, a “silver” one for 5 and “gold” one
for 10, most of our users will purchase the 5 euro “pack”. Now
what is interesting is that we recently measured this phenomenon
in a couple of markets: if we offer let’s say a 15 euro platinum
pack most of the purchases will shift from the 5 euro to the 10 euro
price point. In our opinion, our users are making impulse
purchases, price is quite inelastic and higher price point
availability increases our business performance.». The availability
of higher price points is not only a decision process in adoption of
the MRP system, but becomes a key operative factor, as payment
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managers scout the markets continuously to increase the price
points through new technologies or approval of operators of new
pricing policies.
b. Flow limitations: The available MRP pricing options are
sometimes also related to the underlying technology and operator
policies, and this can have a consequence on the flows utilized for
the purchase. For example, a German games pulisher explains
why: «In Italy is 2.40 euro per transaction is the maximum price
allowed on PSMS. We in general prefer MO Flow, especially in
those contexts where we don’t want to interrupt the gaming
experience. Yet on Mobile Direct Billing there is no short code the
user can send an SMS to, so in order for us to offer higher price
points we need to accept the trade-off of opening a web form in the
middle of the game screen for the user to insert his MSISDN and
pincode to authenticate the transaction»
c. Fixed vs flexible price points: Merchants defining the pricing of
their services must in some cases consider another strong limitation
of the MRP systems. Merchants are usually offered by their MRP
provider a pool of price points they can select to apply to their
services.47 A games publisher illustrates this point with a clear
47
This is due mainly to regulatory issues, to the technological limitations of the billing technologies
deployed by the carrier and also by cost optimization strategies adopted by the MRP providers. In some
markets, for consumer protection purposes the price of a service based on PSMS is associated to specific
numbers of the short code. So the user knows that if he sends an SMS to 48xxx he will be charged 1.00
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
example related to the Spanish market. In Spain they wanted to
introduce a mid-tier premium service to be priced between the 7.08
euro that they currently use for our highest offer and the 1.42 euro
price they have applied to our lower end offer. Their only options
were 3.54 euro, 3.56 euro (offered by only one provider), and 4.06
euro. Another very interesting example is the one offered by the
payments manager of a virtual community: «We have registered
positive effects in changing the price of our services to the .99
form—for example, shifting 5.00 euros to 4.99 can provide
significant increase in sales. Yet while this is possible for credit
card, it is quite complicated when it gets to MRP. Sometimes the
availability of price points then determines the pricing adopted of
the entire service independently by the payment tool being adopted
because we can’t say something like this costs 9.99 euros if you
pay with credit card and 10.00 euros if you pay by mobile».
3. Cross Market Price Point Availability: This key topic must also be
considered when determining the price of a service. The diversity of
maximum tariffs and fixed price points (available not only between
geographic markets but also related to the different operators within a
specific market) impose even larger constraints in the pricing strategy of
euro, while if he sends the SMS to 45xxx he will be charged 2.40. PSMS based billing platforms need to
associate specific price points either to the shortcode being used or to the service (and thus be configured
manually each time). Furthermore, the operative cost of configuring new price points, but especially of
maintaining dedicated price point short codes by aggregators, is the reason most aggregators just provide a
selection of the possible price points offered in a specific market.
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merchants adopting MRP systems. The payment manager of a virtual
community explains: «If you think of it from our end user perspective it is
already quite complicated to understand why in a specific market our
customers that have an Operator X and Operator Y contract can buy
goods up to, let’s say, 20, and those of operator Z can only purchase the
lower and mid-tier packages, up to 10. But what is even harder is to
operate in those more emerging markets where sometimes it is difficult to
find the same price point available on all operators. Let’s say that in a
specific four operator market we want to introduce a virtual good to be
sold for a price around 3.50 euro. But that three operators offer 3.25,
3.50, 3.75 (because their fixed price points go up of .25 euro) and one
offers either 3.40 or 3.60 (because its fixed price point configurations go
up of .20 euro). How can we explain to our customers that the same
service is being sold at a different price depending on the operator they
use? In this case we used the 4.00 euro price point and had to change the
item previously sold at 5.00 euro to 6.00 euro class and the ones sold at
7.00 euro to 8.00 euro. The issue related to availability of cross market
price points completely redefined the pricing structure of our services in
that market»
4. User Credit Availability: Another point that merchants must take into
consideration when utilizing MRP is the credit availability of the payment
tool itself. In many markets it is not uncommon for mobile users to adopt
pre-paid contracts, thus topping up—through scratch cards, ATM
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
machines or other methods—the available credit for making calls, sending
messages, utilizing operators’ services and also of course making Mobile
Payments. This means that a post-paid user can make all the purchases he
desires up to the limits imposed by operators policies or regulation. Prepaid users can make purchases up to the amount currently available in
their pre-paid balance. The penetration of pre-paid versus post-paid varies
significantly in the different markets, and this factor is taken into
consideration by merchants when determining the optimal price structure
for a specific market. Some merchants try to gather the following
information when defining the price structure within a market: pre-paid vs
post-paid ratio, average user spending per month, pre-paid top up price
options, and average and percentiles of daily prepaid credit availability.
Merchants then use this information especially to:
a. Define the lower end or entry level of their premium offer:
Merchants want to be sure that in high pre-paid penetrated market,
they make available an offer that can be purchased by those users
with a lower balance. One virtual goods merchant explained that,
when a transaction fails due to insufficient credit, they always
propose automatically to the user a lower price option: «For
example, if our user tries to purchase something for 5.00 euro and
the transaction fails due to insufficient credit, the system
automatically proposes him to buy something else worth 2.00 euro.
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
In this way if the user let’s say had 4.20 euro in his prepaid bill, he
can complete his purchase without any problem».
b. Define the pricing and policies for subscription based services:
These services rely on the periodic charging of the user. If the user
does not have enough credit within his pre-paid balance, the
service cannot be provided and the transaction process cannot be
completed. The payment director of a social network that offers
both subscription based services and single transaction purchases
explains his point of view. He believes that both single transactions
and the registration phase to a subscription service are made with a
higher consciousness or willingness to complete the transaction
and therefore there is higher likelihood of the user having enough
credit. The user in fact is aware of the price and usually considers
his balance in order to make the purchase. The subsequent
renewals of the transaction in a subscription service, because they
are based periodically, have a lower rate of preparation. The user
might be off on holiday, or not considering to access the service we
offer him that week, or might have just finished a long
conversation on the phone that wiped out most of his credit. As the
payment director said: «This is why besides all other market
factors and the billing policy, the correct pricing itself of a
subscription based service takes into serious consideration the
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
penetration and characteristics of prepaid users in the specific
market».
5.4.1. Billing Policies (Op. 4.b.)
Strictly related to the pricing strategy to be applied by the merchants is also the
billing policy. Regulation authorities, Operators, MRP Providers and the merchants
impose or can define specific rules for the management of the transactions and the billing
in order to protect the system from fraud, to reduce the stress on the network and systems,
but also to optimize the transaction success rate (and therefore the merchant’s business
performance). Following are the key factors that merchants consider either when
evaluating billing policies that they can apply or when understanding the impact of rules
they are subject to that are imposed by operators and telecom authorities:
1. Multiple Transaction Limits: Operators and MRP providers usually define
limits to the number of trabsactions that can be performed by a specific
MSISDN. These rules are usually quite different based on the market, on
the operator and on the experiences of the MRP provider, and they are
aimed at preventing fraud. The typical fraud is that a user obtains a postpaid MSISDN either through a stolen handset or through a fake ID and
then performs a large number of transactions. For this reason the merchant
consider some limitations of the amounts of transactions that can be
performed by the end user—usually on a daily, hourly or minute basis.
Users who commit frauds have also utilized software to automatically
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
submit hundreds or thousands of transaction requests in order to increase
the amount of the fraud and trick the operator’s billing systems.
2. Subscription Related Polcies: The following policies apply to subscription
based services, where there is an automatic periodic renewal of the MRP
transaction:
a. Fragmented billing: Some operators allow (and MRP providers
thus can offer) what is referred to in the market as fragmented
billing. The example was provided by a social network that in Italy
provides one of its services for 3.00 euro a week. Three of the four
operators in Italy allow the Merchant to fragment the billing of the
service by charging the user 2 euro and then 1 euro every week.
The sum of course is always three, but the impact of billing in
fragments can be very high due to the high penetration of pre-paid
cards in the Italian market. The Payment Director explains: «It is
much easier to find a user that has sufficient credit to be charged,
let’s say, 1 euro on Tuesday and then 2 euro on Friday than
finding a user that has enough balance to be charged 3 euro all
together on a Friday».
b. Retry policies: Another aspect considered is the amount of billing
attempts that can be made in order to charge the user for a
subscription based service. If the user is subscribed to a periodic
service—for example, weekly—and the user in a given week
doesn’t does have sufficient credit for the transaction to be
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completed, operators, MRP providers and merchants define
specific rules to define how many times the MRP system will
attempt to charge the user for the service. The user in fact may
have just finished his credit when the first attempt is made, but
then have topped up his balance when another attempt is made. So
by increasing the number of attempts, the merchant increases the
possibility of success of
the transaction. Operators and MRP
providers impose specific limitations on retry policies in order to
reduce the stress on the network and systems and to not be too
aggressive with the user. It is not uncommon, especially on PSMS
based MRP, that long queues of billing attempts clog the MRP and
Operators platforms. Also, an overly aggressive retry policy means
that whatever the user tops up is very likely wiped out by his
subscription. It can also mean that the user is not really happy with
what he is purchasing. Finally, it can mean that the credit is being
utilized for MRP which is less profitable for the operator than is
Voice service.
c. Renewal policies: Many subscription services offered by MRP
providers to merchants are based on an unlimited renewal model.
This means that users are charged periodically for the service they
subscribe to (for example, access to a social network site or access
to the premium section of an online news paper) until the user
“Opts out” (expresses his will to unsubscribe). However, some
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
operators impose specific limitations to the automatic renewal of
the Merchants customer base to be charged. For example, in
France, any user that has seen all transactions fail for more than 60
days consequently is automatically unsubscribed from the service.
Some merchants in order to avoid claims and to be sure their
customer base is active and still interested in the service apply even
stricter policies than the ones defined by operators: «In France we
unsubscribe users after 30 days of unsuccessful billing. We offer a
service where people pay to connect and meet each other. A user
might be on holiday, or just less interested in taking advantage of
our service for a period. But if we can’t charge him for more than
30 days we think it’s likely he is not that interested in our service
anymore and automatically cancel his subscription».
When it comes to pricing of services and deciding the billing policies to apply, it
appears very clear how the approach is conditioned by the MRP tool itself. Merchants
must operate within the boundaries of a micro-transaction-based business model and
within the many constraints imposed by the tool. Yet these constraints or factors do not
condition the business to a level that makes the business model itself unsustainable.
Merchants seem to operate their pricing strategy in the search and fine tuning of the best
equilibrium within the constraints here described. As merchants begin to analyze and
understand the impact of such constraints, they adapt and fine-tune their pricing strategy,
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Mobile Remote Payment: An Exploratory Study of Merchant Adoption
and lastly scout and adopt the newest price and billing opportunities from operators to
succeed and to win over competition.
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Chapter 6: Discussion and Conclusions
This study was conceived at the end of 2009, when the use of Mobile for making
online payments had recently become quite popular. It was mostly during 2009 and 2010,
that the use of operator billing for charging products and services other than traditional
mobile content (such as ringtones or mobile games) became a reality for companies such
as news publishers, video streaming and download providers, online games publishers,
social networks, virtual communities and public transportation companies. During these
years many businesses understood the full potential of deploying a new payment system
that makes the purchasing process within specific contexts (especially in the online or
connected environment) very simple and accessible for the end user. This new payment
system was not only capable of driving sales, but that allowed some of them to
revolutionize their business model passing from free (advertising funded business
models) to “freemium” or premium (pay per use, pay per access) business models.
Merchants adopting Operator Billing systems saw the carriers withhold a large portion of
the value, for example in Latin America up to 70% of the value products sold. Yet the
benefit they obtained was high enough for them to adopt the system anyway, making this
one of the main payment channels for some of their business lines or even for their entire
business.
Despite the rapidly growing adoption by merchants and users of Operator Billing
Mobile Remote Payment that today is still the predominant method for mobile payments,
scholars and researchers have concentrated their efforts on Proximity Payments and NFC
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technologies that today are still at an embryonic stage of market development and that
according to specialized research firms such as Gartner (2011), will still take a few years
before becoming mainstream. As outlined in the literature review, there is not much
literature specifically dedicated to Mobile Remote Payments, especially if narrowed to
Operator Billing. A study dedicated to exploring in depth Operator Billing Mobile
Remote Payments was still needed, and by studying merchant adoption, this research
provides a specific perspective or angle (the one of the merchant) for providing an
organized and detailed description of such an important phenomenon.
6.1. Summary and Discussion of Main Findings
The main purpose of this research was to investigate Merchant Adoption of
Mobile Remote Payments focusing on Operator Billing systems. More specifically, this
study was not limited to exploring only the “strategic phase” of adoption (that is
understanding the decision process that leads the merchant to the adoption of the payment
system). The scope was instead extended into the “operative phase” in order to
understand how merchants were deploying and managing such systems. The research
conducted on a sample of 15 multinational companies that have successfully adopted and
deployed Operator Billing Mobile Remote Payments provided significant insights both
on the decision to adopt and on the management best practices.
By extending the scope of the study into the “operative phase”, very useful
information and data was collected on how merchants are managing these payment
systems, the issues they face and benefits they perceive. This provided deeper insights
and stronger evidence for findings in the strategic phase.
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Figure 14: Merchant Adoption Framework of Operator Billing Mobile Remote Payments
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
153
The key result of this study is a framework (Figure 14) that integrates the findings in the
strategic phase and in the operative phase that describes the full adoption process of Operator
Billing Mobile Remote Payments by merchants.
The model first describes 15 factors that will enable, drive or inhibit the merchant from
adopting such systems. Secondly, the model identifies four macro-factors and different sub
factors that merchants will consider when deploying and managing these systems.
Concerning the strategic phase, it emerges clearly that despite the high penetration of
mobile devices and the high availability of the very basic technologies utilized for Operator
Billing Mobile Remote Payments in almost all geographic markets, and the low deployment
costs, these systems today cannot be adopted by every type of merchant. There are specific
constraints or enabling factors that make this system suitable for a merchant. These systems
today are especially adequate for businesses or product/services that 1) use the web or a
connected environment as their main source of commerce and distribution, 2) have low variable
costs, 3) have very low price structures (up to 5 to 10 euros max depending on the geographic
market they are addressing).
With reference to the first point, acting within a connected or online environment is a key
characteristic of the remote payment system itself. Literature provides different examples of
operator billing mobile remote payments for bus ticketing or vending machines. Yet even for
these products and services, the merchant will need an enabling online environment in order to
authenticate and enable the payments (for example in the case of the bus ticket to deliver the
coupon). Furthermore, EU regulations are quite restrictive regarding the use of Mobile Remote
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
154
Payments, requiring an “electronic money” or a “payment institution” license for the sale of any
product or service that is not digital. Compliancy to such regulations for sale of digital and
physical goods decreases some of the beneficial factors of current Mobile Remote Payment
flows and thus decreases the appeal of this system according to some merchants.
With reference to the second point, the high commissions applied by operators today
make it impossible or at least economically unsustainable for specific types of merchants to
adopt operator billing systems. This applies to any type of business, even online. For example
companies offering premium video and audio content streaming or downloads have very high
rights and licensing costs that can reach up to 70% of the end user price. If the operator for
example keeps even 20% or more of the transaction value it becomes clearly unprofitable for the
merchant. On the contrary, businesses that have very low variable costs, and that can scale their
sales with very low incremental costs and investments, seem to be very suitable for operator
billing systems. For example, online news publishers have virtually no incremental costs in
distributing an additional digital pdf copy to an online user, but can strongly benefit from the
increase in sales provided by this payment tool.
Operating within very low price structures is of course another factor that limits the
adoption only to specific merchants. Low price points are imposed by regulatory authorities and
as operator policies, but are also a structural aspect of a system based on operator billing (for
example the high penetration of prepaid mobile users in many markets, or the need of the
operators to protect themselves from cannibalization of end user spending on their more
profitable voice services). Merchants that adopt Operator Billing are those that can sustain a
business model made of many low price transactions. Some merchants have even succeeded in
redefining their price structures in order to suit operator billing. One of the merchants
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
155
interviewed explained how it passed from a “one shot” payment of 19.90 euro that gives the user
a 30 day access to the online service to weekly subscription model that charges the user 4.99
euro every week, providing the user unlimited access until the subscription is active.
Concerning the adoption drivers, the first five factors identified (St. 6., St., 7., St. 8., St.
9., St. 10.) can be grouped into factors driving business growth. Merchants see the adoption of
Operator Billing Mobile Remote Payments as a way to develop new business models and offer
new services. Merchants have profited from this system to re-design their business models from
free to premium because credit card and other forms of online payment were not suitable for
their business. Other businesses are adopting the system to monetize existing content or service
assets, or to design new services that leverage mobile payments. Online publishers, as well as
content and service providers are designing new premium offers based on micro-transaction and
subscription models, that can easily be purchased by their customers. The possibility of
addressing new user segments, currently “uncarded” or “unbanked”, such as younger age groups
and users from emerging markets is also seen as a key growth factor. The simplicity of the
payment flows and the high availability of the payment tool (the mobile device) by the end user
is seen as a good way to drive impulse purchases. The impulse purchase factor seems to be much
appreciated by online games publishers. Merchants also see in “increased availability” (St. 10.)
another important adoption driver. Operator Billing Mobile Remote Payments enable payment
on new platforms through which they intend to target their users. For example, this systems
allows merchants that were primarily distributing their games or apps on the iPhone platform, to
address new platforms both on mobile (such as feature phones or android smartphones) and on
the web. Unlike from the first five drivers, the last factor motivating adoption is not directly
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
156
related to growth or increased sales. Low implementation costs (St. 11) are an adoption driver of
this system. The low infrastructural costs and the appealing offers made by providers to increase
their market shares, push merchants into almost effortless testing of this service. Merchants
claimed that most tests and pilots were successful and that then became a reality in their daily
business.
The high commissions still represent the most important barrier. Besides the need for the
merchant to have a sustainable model that can suit the high commissions applied by operators,
merchants cross evaluate the benefit of this system compared to other systems and usually define
specific thresholds of commission structure upon which they are willing to adopt the system.
Furthermore these thresholds determine not only if the merchant will adopt the system, but also
to which degree they will be adopted. The merchant will decide how convenient it is to give
strong visibility of the payment system or to promote its services in a specific market if payouts
from mobile are very low. Today the limitations in terms of pricing structures represent another
barrier. As operators are now opening more price points and increasing the maximum tariff
limits, merchants increase their adoption of the system.
In terms of “operative factors”, this research identifies: Optimization of the End User
Purchase Experience, Payment System Reputation, Provider Relationship and Price and Billing
Optimization of Price and Billing Policies as the four macro-factors that merchants consider and
leverage when deploying and managing Operator Billing Remote Payment Systems.
First of all merchants need to improve the end user purchase experience by optimizing
both the discovery phase (Op. 1.a.) of the payment system, where the user must be able to easily
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157
find, identify and understand that he may purchase via mobile, but also the purchase flow (Op.
2.a.). Merchants give importance to the reputation of their payment system, by selecting the
payment provider brands (Op. 2.a.), by testing the payment service thoroughly (Op. 2.b.), and by
providing end user support (Op. 2.c.).
Merchants also consider the relationship with their payments provider a very important
when deploying and managing their Operator Billing Mobile Remote Payment systems. The high
commissions applied by operators push merchants to push their providers to the limit in order to
increase payouts. However, the merchant – provider relationship goes beyond purely economic
conditions. Merchants see their payment providers as those companies managing complexity,
and as being responsible for making for making everything compliant to local regulation and
carrier policies, providing key insights into local markets, adopting new billing systems and
proposing new price points as these are made available by operators. This could be a valid reason
why complexity identified by Mallat and Tuunainen in 2008 as inhibiting adoption was instead
not identified as a factor in this study. The management of complexity has shifted its place in the
value chain, and it is now responsibility of the payment provider to provide easy and globally
scalable operator billing payment solutions to the merchant.
Optimization of Price Structure and Billing Policies (Op. 4.) is the last macro factor
identified as strongly considered in the deployment and management of Operator Billing Mobile
Remote Payment systems by merchants. Merchants need to define the pricing of their services
not only based on their cost structures, demand and competition, but also need to consider other
important aspects such as regulation and carrier policies, purchase flow implications and prepaid lines penetration (thus average available pre-paid credit).
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6.2. Theoretical Implications
This study provides a new model describing merchant adoption of Operator Billing
Mobile Remote Payments. The framework presented is a conceptual tool for comprehensive
analysis and study of the factors affecting the decision to adopt and how to adopt such payment
systems by merchants.
The findings in the strategic phase are quite similar to those produced by Mallat and
Tuunainen in 2008. Proliferation of Mobile, Viable Payment Infrastructure, Merchant
Knowledge and Merchant Need as identified by Mallat and Tuunainen as pre-requisites to
merchant adoption of Mobile Payment have also been identified as pre-requisites in this study.
However, the narrower focus on Operator Billing Mobile Remote Payment in this research led to
the identification of a new Pre-Requisite: Adequate Business Model (St. 3.). This study sees the
adoption of Operator Billing Mobile Remote Payment as something possible only for specific
types of businesses. At the moment it is impossible to imagine these systems applied for example
in the sale of cars. Within adequate business models, there are different drivers and barriers that
will then contribute to the adoption of the system by the merchant. Another important difference
is that while Mallat and Tuunaninen identified high commissions and costs of implementation as
a barrier to adoption, this research produced a different result. In this study the high recurring
commission applied by operators is a barrier as identified in the previous research by the Finnish
scholars, but the costs of implementation are instead a driver, as they are particularly low for this
type of system. Another difference is that “complexity” was never mentioned, and thus was not
categorized as a factor in the decision making process. Neither were “lack of charging models”
or “lack of standard solutions” ever mentioned directly. However, these three factors can be
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159
considered as sub-factors driving the “low cost of implementation” (St. 11) and also the prerequisites within “Viable Payment Infrastructure” (St. 2).
The extension of the model into the operative phase provides a first attempt to describe in
a holistic and well-organized manner, not only “why” merchants adopt Operator Billing Mobile
Remote Payments, but also “how”.
6.3. Managerial Implications
This study provides a complete and organized model that could be utilized by merchants
in the process of deciding whether or not to adopt Operator Billing Remote Payment Systems
and what factors to consider when deploying and managing such systems. In the “strategic
phase” the model provides a set of factors that can be easily readapted into a decision support
tool. Verifying if the business or service idea complies with the pre-requisites would provide
managers with a first step in the decision making process. Then, rating the importance of each
driver and barrier, and the positive or negative effect it would have on the business or service
idea, could provide a sort of scorecard to rate the decision to adopt Operator Billing Mobile
Remote Payment.
The operative phase, of course, puts together many different factors that merchants
consider when managing their Operator Billing Mobile Remote Payment Systems. The factors
described in this study, of course are an aggregation of all the ones identified during the
interviews. Probably no merchant considers or gives relevance to all the factors. Furthermore,
these factors are those considered important by merchants, but this doesn’t mean that they are
approached in the same way. Merchants for example consider pricing or purchase flows as a very
important factor, but may have different ideas on to how to optimize these, based on their
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160
business strategy, their services, their experiences and the markets they are addressing. However,
the operative factors (and related sub-factors), identified and described in this research can
provide managers deploying and managing Operator Billing Mobile Remote Payment systems a
thorough check list of topics they need to consider.
6.4. Limitations of the study
This study presents two important limitations, the first one is related to the sample on
which the research was conducted and the second is related to the method. In order for this
research to provide as much information possible on the “operative phase”, and more specifically
to identify within the operative phase what factors were really driving the successful deployment
and management of Operator Billing Mobile Remote Payments, the sample was restricted to
companies that have not only adopted this type of payment system, but that have also managed
to develop a successful business that makes use of it. It is possible that companies that did not
deploy Operator Billing Mobile Remote Payment systems have identified or perceive other
barriers that merchants that have adopted the payment system did not describe. This could be
another explanation of why, items like “Complexity” and “High Infrastructure Costs” identified
by Mallat and Tuunainen in their study do not appear as negatively conditioning adoption in this
research.
The second limitation is that the results of this research were not confirmed through a
quantitative study. More specifically a quantitative empirical analysis would allow us to better
validate the factors and sub factors identified and possibly also measure their intensity.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
161
6.5. Direction for future research
Researchers and scholars are producing a flourishing Mobile Payments literature with
new contributions that look into new and interesting aspects of Mobile Payment. Merchant
adoption remains one of the most scarcely covered topics. Still, much research is needed in
understanding why and how merchants will adopt mobile payment systems. The literature review
and the results of this study clearly show that it is not possible to generalize Mobile Payment
systems, especially when researching merchant adoption. The payment systems have specific
constraints, contexts in which they can be utilized, applicable business models and so on. Due to
the plethora of mobile payment systems available today in the market (proximity vs remote,
operator billing vs credit card / bank, etc..) exploring Mobile Payment adoption by merchants of
specific systems can provide key contributions to the overall knowledge of these payment tools.
It could be interesting to re-propose the framework identified in this research on Mobile
Proximity Payments or on Mobile Remote Payments that do not make use of Operator Billing.
Concerning the adoption of Operator Billing Mobile Remote Payment by merchants, this
study offers some insights into aspects that could be further studied in detail. The almost
maniacal attention given by merchants to topics and words such as conversion rates, click
through, purchase step reduction, one-click, double opt-in suggests that merchants have already
identified key parameters and standards for measuring the performance of their payment systems
and compare such performance with other payment systems. Future research could investigate
and standardize the Key Performance Indicators (KPIs) used by merchants and provide a
taxonomy and description of the most relevant ones utilized. Such research would then become
pivotal for comparative studies between different payment tools.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
162
More specifically related to the operative phase of merchants adoption, the factors that
emerged regarding the price structure (Op. 4.a.) could also provide a first insight for future
research. A study that provides a comprehensive model for the definition of price within an
operator billing mobile remote payment environment, and that thus considers factors and sub
factors such as Maximum Tariffs (Op. 4.a.2.1.), Flow Variations (Op. 4.a.2.2) imposed by
carriers, cross carrier price point availability (Op. 4.a.3.), Prepaid Card Penetration and available
credit (Op. 4.a.4), would provide a valuable managerial tool, and would also provide new
theoretical insights in the relation between price and payment tool.
This study produced insights related to other players in the Operator Billing Mobile
Remote Payment value network that could be also further investigated. For example it is quite
clear that the commissions applied by operators is very high and remains today probably the
main barrier to adoption. However it was interesting to see how much the commissions applied
by operators change in the different geographic regions (Payout median = 0.470; mean = 0.473;
standard deviation = 0.165; minimum = 0.073; maximum = 0.821). Future research could
investigate the effect of Mobile Payments on the cannibalization of other operators’ services
such as voice and the overall effect on profitability. If operators decrease substantially their
commissions, the overall adoption by merchants of the operator billing systems would probably
increase by enabling new business models (St. 3.) that have higher variable costs, and reach new
thresholds of commissions at which merchants are willing to adopt and promote the systems (St.
12.). Are low commissions, even comparable to those of credit cards, a sustainable and profitable
business model for mobile operators? Is the model proposed by Turkish operators and described
by merchants in this study, where the commissions vary based on the type of good sold, a viable
business model that could be utilized by other operators globally? Also on the operator side,
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
163
from a more technological perspective, merchants identified the importance of the billing
technology adopted and how this affects the overall performance of their payment system. Future
research could be conducted to make a comparative analysis between PSMS and Direct Billing
or other billing technologies performance.
This study also provided some interesting insights about the end user. It is clear that at a
general level the simplicity of sending an SMS or inserting a phone number and a pincode in a
web form is a clear driver for a user to adopt Mobile for a micro transaction, especially if
compared to perceived security issues but also increased complexity, of the flow of credit card
purchases. But this study provides insights that can open future lines of research with specific
topics related to user interaction with this specific type of payment system.
Mobile Remote Payment: An Exploratory Study of Merchant Adoption
164
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Appendix 1: Glossary
o 3G: Third-generation digital mobile phone system standardized by ITU-T. Also
known as IMT-2000. Data rates include 144 kbps for fast-moving terminals, 384
kbps for slow-moving terminals and 2 Mbps for stationary terminals. European
operators use UMTS (Universal Mobile Telecommunications System), an
international standard that added modulation schemes.
o 4G: Fourth generation is the term used to refer to the next wave of high-speed
mobile technologies that will be used to replace current 3G networks.
o Aggregator: An aggregator is a mobile telecoms company that acts as an
intermediary between companies (i.e. content and brand owners) that want to
interact with end users (through their mobile phones) and the mobile operators.
Mobile aggregators reconcile the payments for those messages, from the
operators, on behalf of clients. Also known as a mobile transaction network.
o CDMA: Code division multiple access (CDMA) is a channel access method
utilized by various radio communication technologies. It should not be confused
with the mobile phone standards called cdmaOne and CDMA2000 (which are
often referred to as simply ‘CDMA’), that use CDMA as their underlying channel
access methods.
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o CDMA 2000: is a hybrid 2.5G / 3G technology of mobile telecommunications
standards that use CDMA, a multiple access scheme for digital radio, to send
voice, data, and signalling data (such as a dialled telephone number) between
mobile phones and cell sites.
o Context or Transaction Context: is the total of situational circumstances in
which each of the three processes of the transaction – agreement, payment and
delivery 6 take place.
o Direct Billing (or WAP Billing): Direct Billing refers to payments for mobile
content made over the mobile internet (or WAP). Similar to Premium SMS,
Direct billing allows charges for content and services to be added to subscriber
mobile phone bills rather than to credit cards, but does not use SMS technology.
o GPRS: General Packet Radio Service is a packet-switching technology that
enables data transfers through cellular networks. It is used for mobile internet,
MMS and other data communications. In theory the speed limit of GPRS is 115
kbps, but in most networks it is around 35 kbps. Informally, GPRS is also called
2.5G.
o FI or Financial Institution: A financial institution acts as an agent that provides
financial services for its clients or members. Financial institutions generally fall
under financial regulation from a government authority. Common types of
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financial institutions include banks, building societies, credit unions, stock
brokerages, asset management firms, and similar businesses. Financial institutions
provide a service as intermediaries of the capital and debt markets. They are
responsible for transferring funds from investors to companies, in need of those
funds.
o MNO: Mobile Network Operator is a company that provides mobile phone
service and has its own frequency allocation of the radio spectrum, and it has the
entire infrastructure required to provide mobile telephone service.
o Mobile Number Portability: From a mobile subscriber perspective, mobile
number portability (MNP) allows subscribers to switch operators while
maintaining their MSISDN. MNP is available throughout most of Western Europe
but is not available to mobile subscribers in the majority of other countries. MNP
on SMS services has made it impossible to determine the network of an MSISDN
by its prefix.
o Mobile Originated SMS (MO SMS): A mobile message routed from an enduser and delivered to client or application.
o Mobile Originated SMS Premium (MO PSMS): Payment method via SMS
where the intended payee originates the payment by sending an SMS
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o Mobile terminated SMS (MT SMS): A mobile message routed from client or
application and delivered to an end user (A2P).
o Mobile Terminated SMS Premium (MT PSMS): Payment method via SMS
where the intended payee closes the payment by receiving one or more SMS
messages.
o MSISDN: Mobile Station Integrated Services Digital Network is the full phone
number of a subscriber, including the national country code.
o MVNO: A Mobile Virtual Network Operator is a company that provides mobile
phone service but does not have its own frequency allocation of the radio
spectrum, nor does it have all of the infrastructure required to provide mobile
telephone service.
o NFC: Near Field Communication is a short-range high frequency wireless
communication technology which enables the exchange of data between devices
over about a ten centimetre (or four inches) distance. The technology is a simple
extension of the ISO 14443 proximity-card standard that combines the interface
of a smartcard and a reader into a single device.
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o Payment: A payment is a transfer of wealth from one party to another. A
payment is usually made in exchange for the provision of goods, services or both,
or to fulfil a legal obligation.
o Payment Institution: A legal person that has been granted authorisation in
accordance with the Payment Services Directive (PSD) to provide and execute
payment services throughout the European Community. It is envisaged, but not a
requirement, that a payments institution would be an entity providing as its core
business payment services, as distinct from other banking services. However, the
PSD does allow for hybrid institutions, such as telecoms providers, who in the
course of their business may also provide some forms of payment service (and in
turn are to be regarded as payment institutions).
o POS: Point Of Sale. It refers to a location where a transaction occurs, which is
oftentimes a retail shop or the checkout counter in that shop.
o Premium Sms (PSMS): An SMS message for which the sender pays a higher fee
than normal to cover the expenses for a good or service delivered.
o PSD: Payments Service Directive. It is a law imposed by the European Union
which intends to create equal legal conditions for payments in the EU. The
consequence is that every cross6border payment in the EU can be treated as a
domestic payment.
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o Short Code: A Short Code is a "short" mobile telephone number (typically 5-6
characters), which can be used to direct SMS and MMS messages from mobile
phones. Short codes are easier to remember than long numbers and are typically
used for television voting, signing up to subscription services and one off
payments for mobile services.
o WAP: Wireless Access Protocol is an international standard for applications that
use wireless communication. Its most common application is to enable access to
the Internet from a mobile phone or a PDA. WAP sites are websites written in or
converted to WML (Wireless Markup Language) and accessed via the WAP
browser. WAP websites are now considered outdated as most modern phones
have web browsers with HTML support.
o UMTS: Universal Mobile Telecommunications System (UMTS) is one of the
third generation (3G) cell phone technologies, which is also being developed into
a 4G technology. Currently, the most common form of UMTS uses CDMA as the
underlying air interface. It is standardized by the 3GPP, and is the European
answer to the requirements for 3G cellular radio systems.
o USSD: Unstructured Supplementary Service Data (USSD) is a capability of all
GSM phones. It is generally associated with real6time or instant messaging type
phone services. There is no store and forward capability that is typical of ‘normal’
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short messages. Response times for interactive USSD based services are generally
quicker than those used for SMS.