Billing for Mobile

Harvey Kaplan
We're in the midst of an explosion in the use of mobile technology. This means there's an explosion in mobile content providers as well. For many of them, it's a journey into uncharted waters.

My purpose in these articles is to clarify those murky waters, because mobile uses an entirely new technical nomenclature that could be daunting to some providers who are just beginning. I promise to explain everything in plain English. Cross my heart.

Let's start with billing for mobile. How do you do it?

There are a variety of different ways to do it. You can use standard mobile payment options, which include premium Short Message Sending (SMS), a premium rate charge prescribed by the telephone company (telco) that you are allowed to charge the consumer. The telco handles collection of the funds, settlement of the funds, and the billing infrastructure. Usually it has a cap of about $30 to $60 a day, depending on the country you're in. About 50 percent of that money goes to the telco and/or the aggregator for access to their carrier network and the ability and convenience to bill on the cell phone. So basically you're going to have to charge either 50 percent more, or you're going to wind up eating that 50 percent.

Therefore, if you're billing via premium SMS, you can kiss 50 percent of that goodbye. Also, SMS billing is limited to about $5 a shot, so if you have a $20 item, you'll have to send five SMS messages. This has problems, because there's a failure rate in SMS, and if they all don't go through you have to decide whether to give that person partial credit, full credit or bill them again. There are a lot of questions about SMS, which is the oldest version of billing on the phone and is the most cumbersome.

Then there is Wireless Application Protocol (WAP) billing. The only difference in this billing from premium SMS billing is that you can bill on the handset for the entire amount in one shot. This billing form is more popular now.

The newest billing method is by credit card on your cell phone. It has a variety of risk levels, but it only requires the credit card number and expiration CVV2 (Card Verification Value), which is the security code on the back of the card. This comes with some chargeback risks, and it isn't the most beneficial way to secure yourself, but it is easy to bill.

Through this platform you can bill using only the customer's first initial, last name, street address number where the credit card bill goes, zip code, credit card expiration date and CVV2. Customers do not have to fill out the standard full credit card form on their cell phones. Our company has partnered on this platform with Card Biller of the Go-Go Bill Corp., which was a company I started a long time ago.

How secure is mobile billing?

It is just as secure as billing online. You can have Secured Socket Layered (SSL) pages delivered to the handset. You just have to fill out a form designed for mobile phones on the Internet. When you access the Internet on your cell phone, you are taken to a WAP page, which asks you for your credit card information and the CCV2. The WAP page is locked down in the same way it is locked down on the Internet. Both use exactly the same security protocols.

Now, you ask, can I bill people on their phone if they're accessing my website as an alternative form of payment? Yes, you can. We can set it up so if somebody from Hungary who doesn't have Visa, MasterCard or any other major card comes into your site, they'll be billed through a web-based interface that would charge premium SMS amounts for viewing your content.

So if you want to have a $20 package, we could send through five text messages at a premium rate to that phone. It only requires an Application Program Interface (API).

Now for the big question: how long do telcos take to pay?

The problem with premium SMS and WAP billing is that typically you're looking at anywhere from 90 to 120 days in terms of a payment cycle from telcos. The cycle is long because the telco gives the customer 30 days to pay the bill, following the 30 days it takes to bill them. Then the telco and the aggregator each have 30 days to pay you. I'd steer away from premium SMS billing if possible, but it's definitely the only way to pay right now for a lot of people.

Are there chargebacks under the premium SMS system?

Chargebacks are rare under the premium SMS system, because you have the telco as your partner. They don't want to lose money any more than you do. Chargebacks have become more common recently, however, primarily because telcos are also concerned with the rate at which they lose customers. It costs a telco on average between $300 and $500 to acquire a new customer. If they lose that person over a $20 charge, it isn't worth it to them.

Is it possible to keep mobile numbers in case you want to remarket them?

Yes, anyone in the mobile environment now should be aware that the numbers they keep can be remarketed if the proper features are checked off. If the customer opts to be rebilled on their cell phone, you can send a marketing message to them. If the user wants to sign up again, they just have to enter their CVV2 and their PIN, and then click "submit." After this, they can purchase again, because we already have all of their credit card information on file.

SMS marketing comes into play here because, unlike an email, it doesn't have a trigger to buy. So as soon as you send the SMS message, the consumer can click to buy right on the phone and re-up for another subscription or a cross-sell or an up-sell.

So what are the pitfalls of mobile billing?

There are a number of them. First, it's not easy to get set up with an aggregator, because it's difficult to find somebody who's reliable, able to work with you and give you the support you need. You really need to be savvy before you choose one.

You also need to know what the aggregator is doing with your data. If they're holding on to it, you need to get a copy of every phone number that comes through. There have been problems where people are sold off to other entities. It's a scam in which a customer gets a refund and free credits to another site. This third party gets paid for that referral while you lose the customer.

Telco coverage is another big thing. You should know how many countries your premium SMS provider has in its fold, and how long they've been there.

In what business is mobile billing most popular?

Content companies traditionally have used mobile billing the most. Sites providing short-duration content like preview clips and music videos are gaining momentum.

The folks who are starting to benefit from mobile marketing as a whole would be those companies that sell advertising on WAP portals. They're finding that very profitable. Getting your message to cell phones has a read rate of 20 percent. If you compare that to most other forms of marketing, this number dwarves them. Getting just a two percent response ratio makes marketers in those other forms happy. So it's definitely a marketing medium that's exploding, and ad agencies are taking a lot of revenue from it.

How well does mobile billing work for adult?

It was born from adult, and I think it's made for adult. The U.S. marketplace in terms of usage currently shows an average of 4.5 hours per month of customers surfing the Internet from their cell phones. That outpaces the UK by half an hour per month. A great many of those searches are for video content and photo content, which includes the adult content. Right now there aren't enough adult companies supplying it, so there's not enough supply for the demand. It's going to grow exponentially. We are in the middle of what I believe is a 2,000 percent growth curve toward 2010. This means the average webmaster today should not ignore mobile billing. They should have, at the very least, a web-compatible version of their site that offers mobile billing through familiar payment mechanisms.

Harvey Kaplan is executive vice president of development for BustBox Media, which is powered by Card Biller.