Mobile billing Price points vs Dynamic pricing with credit cards

One of the fundamental differences that merchants who are first time comers to mobile billing struggle to grasp is the difference in pricing in mobile billing payment methods, as opposed to traditional payment methods like credit cards and bank transfers.

When customer is paying by card or using wire transfer, merchant is free to set any price for his goods, up to a cent/penny precision, i.e. 9,99. This is possible because in credit cards (to follow on the payment methods used in this example) the authorization for payment is received by connecting to the billing system of a remote bank (which issued the customer’s card) through Visa/MasterCard’s networks. By accessing the billing system directly, merchant can charge any amount – therefore he can have a “dyanamic” pricing of his goods and services.

Mobile billing has a different history than credit cards, and in many countries it still relies on legacy technologies, like Premium SMS. These systems were not meant for billing when they were introduced, but were evolved to serve this purpose, because of a huge demand for micro-payments in all countries in the world.

Given the limitations of the smallest common denominator (Premium SMS) most of the mobile billing platforms thus use a system of pre-defined pricepoints, which merchants can use to price their services to customers.

For example a price points of 1 EUR, 2 EUR and 5 EUR are available on a mobile billing system (but not 1,5 EUR or 1,55 EUR) and thus merchant is forced to accommodate the limitations of this payment method, in order to provide services to the huge mobile billing marketplace. Moreover, if the merchant is targeting several markets, it is entirely possible that those will have different price points available.

This has technical implications as well, since most of the “payment gateway” modules in web applications are assuming dynamic pricing, and are completely inadequate for charging customers via mobile billing.

This is actually a practical reason why “credits” or “virtual coins” were introduced in many applications, because these concepts allow merchants to normalize the different price points available in different countries (and different currencies) by converting them into “virtual coins” of fixed value – thus merchants and customers receive a fair access to services, even if they pay different amounts in different currencies in different countries.

As the mobile billing is getting modernized, multiple Direct Carrier Billing (or Direct Operator Billing) systems are introduced in countries around the world. These are advanced and modern systems, similar to card authorization platforms, and they give the merchant capability of interacting with billing systems of mobile network operators directly. One of the nicer points of this is that merchants can use dynamic pricing, thus moving the mobile billing into the mainstream e-commerce from the micro-payments niche it is right now.

If you are thinking about implementing mobile billing in your business, feel free to contact us to find a best solution for your needs in your targeted markets.

SMS payments increase conversion

One thing every m-commerce merchant has to think of, is how difficult it is for someone to actually pay.

Although everyone and his son has a credit card, actually it is not so trivial to pay with it, it requires at least a minute (more like 3 minutes in average) and typing of name, address and all the card details. Of course you have to find your card first. Conversion from putting a product/service into a shopping cart, to actually paying for the product are not exactly idea for credit cards.

With SMS payments, and basically most forms of mobile billing, customers can usually pay with either one click (if they are buying from their mobile – which means that the network operator can detect their mobile phone number), or at most in 3 easy steps, which do not require any information the customer does not already know by heart (mobile phone number).

If has been proven that SMS payments, having lower payouts to merchants (percentage of sales value which merchant actually gets to his bank account) compared to cards, more than make up for the difference by the great conversion ration.

With some Direct Mobile Billing services, like PayForIt in the United Kingdom, conversion rates are huge, more than 70%.

We invite you to Signup for free to PencePay and allow your customers to pay/donate/support your service or product with one click!

Use the mobile payments Widget, Luke!

The best way by far to start with mobile payments on your website or in an app, is to use our Mobile Payments Widget.

Mobile payment widget

Widget is a packaged solution for SMS payments that you can configure in our Partner Portal, which will enable you to sell to any customer with a mobile phone in 5 minutes. It can even be configured to be in the colors of your choosing, and it can be branded with your logotype.

Widget API is very easy to use, and with just a few lines of HTML inserted into your website you can start accepting payments in simple billing scenarios.

Signup for PencePay for free to start with mobile billing for your project in more than 50 countries!

Mobile payments for classical e-commerce merchants

One of the reasons why m-commerce did not take off explosively until recent years, leaving out the obvious reasons of availability of powerful smartphones and mobile broadband, is because mobile payment methods are inherently complex and not intuitively  understood by a typical e-commerce merchant.

Through the years, e-commerce became more or less the very efficient but equivalent version of the offline shopping experience. The purchase process even includes a “cart” in which you “put into” your products to buy. Inherently the purchase process is slow, but that is almost intentionally done, so that the customer has a same purchase experience he is used to in the real world.

Mobile payments on the other hand deal almost exclusively with digital products, and therefore is is incorrect to try to compare the “apples and oranges” or e-commerce and mobile payment setups.

In mobila purchase scenarios, there are some important points to consider:

  • Purchases need to be fast, fast, fast. 
  • Delivery needs to be immediate.
  • Security is NOT the first thing on the mind of a customer.

    In e-commerce it most definitely is. The reason for this is that mobile payments are typically micropayments, and customers can be mad at a problem involving a 0,30 EUR payment, but they will not be scared as when this happens with a credit card.

    We need to remember that credit cards are used by people for their daily purchases, not just online but for buying “bread and butter”. And if for some reason there are problems caused in the online card payment process (for example money is locked and the transaction did not complete properly) customer can realistically be left in a situation where he/she cannot pay for life’s necessities.

    With micropayments the small amount nature of such payments, means that if there is a problem, it is contained to a relationship of a customer with the merchant and the mobile operators, but it does not spread to the other aspects of customers life. This is the main psychological difference.

No setup fee, monthly fee or monthly minimum for mobile payments acceptance

With PencePay you can accept payments or donations on your website, blog or app without any entry barrier.

Similar to PayPal, all you need to start accept mobile payments on your website is to complete a simple signup. Everything else, like sending us information on how to payout your earnings, can wait until you get some traction, and revenue, on your website/blog/app.

With the introduction of our Widget API, anyone who can copy-paste a few lines of HTML can accept mobile payments.

From our experience it takes around 1 day for sellers to setup and test Widget integration on their website, and the following day we activate your service for real selling.

Transparent mobile payments pricing introduced

After months of work on a mobile billing technical platform, we have made a significant update of our sales policy, and subsequently of our website.

Now you can find all pricing for sms payments and other forms of mobile billing solutions on our website.

Each country has a distinct set of price points, and each mobile network operator usually has slightly different business terms for mobile payments.

All of this data is now transparently available on our website.

Enjoy!

How to start accepting low-value payments from customers

Accepting low-value payments, or micro-payments, was a topic of many scientific papers, industry conferences, books and business model attempts for two decades.

Skipping over all the debates, and looking at the real-world success of various mobile payments technologies, the following mobile payments models are proven to work in practical, real-world scenarios:

  • Premium SMS – this payment method, used since the start of SMS hype, relies on using the basically messaging systems (systems used to process “normal” SMS messages) to perform also the additional billing function. While this method of payment is extremely wide-spread (available in all countries), the technology used is limited since it was never meant for billing purposes, but for communication between the parties. Payout to the merchant is generally relatively low (although in very developed countries it can be as high as some more modern mobile payment options, discussed bellow).
  • Direct Mobile Billing – a step forward from Premium SMS designed for web/wap purchases, DMB allows the customer to pay with a simple entry of a mobile phone number and a PIN (received by SMS to a mobile phone during the purchase). System connects with mobile operator’s billing system, and generally provides the better payout to the merchant. Payout to the merchant is generally somewhat better than in Premium SMS billing.
  • Direct Operator Billing (or Direct Carrier Billing) – mobile operator trusts the intermediary party and allows it to access mobile operator’s billing system directly. Through various possible customer identification methods, customer (through a payments partner in between) is able to make a purchase against its pre-paid balance with the mobile operator, or to place a purchase “on account” until the next billing cycle with the mobile operator (typically monthly). Payout to the mobile operator is highest (even 75%) of all available mobile payment options, BUT this payment method is still only available in a few developed countries.
  • Card+ Mobile Billing / Digital Mobile Wallet – customer connects his/her credit card with a mobile phone using the services of an intermediary. Whenever customer needs to make an online purchase, unique PIN is sent to the customer’s mobile phone. This PIN is entered on the seller’s website (or customer just replies “Y” to the received SMS message) and customer’s card is immediately charged. This method of payment is also very good for preventing fraud (because one card in connected to one phone, which makes mass scare fraud extremely difficult).
  • NFC - this is the most hyped technology today, but in general it enables the customer to pay in a physical shop without the need to enter any information (PIN etc.), which makes the purchases extremely fast. But typically this payment method limits the highest amount that can be charged (without entering a PIN like in a traditional credit card payment scenario) and is used for relatively small purchases.
  • Credit cards – although payment processors and acquiring banks do not really like them, micro-payments are absolutely possible with classical credit card acceptance methods. Generally banks do not like payment bellow 5 USD because the costs of processing multitude of such payments in too high, given how the whole industry works (banks get charged fixed fee by their processors that they use to connect to the networks of card associations), and in some cases the acceptance of micro-payments by the banks is simply too expensive. Also, the whole ecosystem of credit cards related companies (payment gateways, payment processors etc.) is typically setup to process larger payments, and the checkout process is typically “slow” (compared to “native” mobile payment methods like Premium SMS, or Direct Mobile Billing).