Feature: It's paybox Time as Money gets more Mobile

This month, Vodafone announced a micropayment system and MasterCard published first details of a collaboration using P2P technology that will allow real-time transfer of funds between individuals. Meanwhile, paybox has been ahead of the game - providing a means of moving money through mobile phones, already in use across Europe... and now establishing itself in Britain.

paybox has connected the mobile phone to the bank so that it is possible to pay for services and products through the phone and, perhaps more importantly, transfer money to other people directly. Launching in Germany nearly two years ago with Deutsche Bank as a partner, the company now has a presence in several European countries. It arrived in Britain at the end of last year and the service has been in use both online and offline - at Circus, a London restaurant - for a few months now. The European E-Commerce Association awarded paybox the 'Best M-Commerce Product' at E-Business Awards 2001.

To pay for a service using paybox, users must first register. When they wish to settle a bill, the retailer enters the consumer's mobile telephone number into the existing payment system - which is integrated with paybox - instead of their credit or debit card number. Then paybox calls the user's mobile phone to request a four-digit PIN to authorise the transaction.

Once authorised, paybox informs the retailer, then debits the user's current bank account as with a normal direct debit payment. The user automatically receives a text message as a receipt of the purchase, and a further email confirmation is an option. The retailer is also sent a message as confirmation of the payment authorisation.

The company says there are now at least 500,000 people who use paybox to pay for goods and services at over 6,500 different retail outlets across Europe, both on- and offline.

The service is also impacting on person-to-person transactions. To send someone money (directly from one account to another), it is possible to call up, enter the target mobile number and how much money you want to send, then authorise with the PIN. A text message confirmation for the payment is sent out and the recipient is notified by SMS that money has been sent to them. However, if the recipient is not registered, which costs an annual fee of £14.99 in Britain offset against vouchers and special offers for members, then the money is not actually accessible. Thus, with P2P, paybox finds itself in an interesting position - both requiring critical mass and generating it through viral email marketing.

In general, the development of this kind of service raises a number of usability challenges.

First challenge is getting the idea of the new possibilities across. Barry Shrier, vp sales & marketing of paybox UK, is well aware of the work needed: 'People don't lie awake at night saying I wish I could send money using my mobile phone,' he says.

Before launch in the UK, paybox commissioned The Usability Company to test both the concept and the implementation and look at ways of increasing the visitor-to-subscriber conversion rate on the website. Marty Carroll, who led work testing the service, found that indeed users were initially intimidated because the idea was foreign to them, and that one reason for people to abandon the registration form was that they could see no compelling reason to complete it. This problem can be tackled on many fronts but is difficult to remedy in the short term. In part, paybox will be helped by the launch of competitor products and the publicity surrounding them as the idea of m-money takes hold.

But the spread of similar services will raise another problem for the user, that of their proprietary nature. This manifests itself both in design terms - there may not be a standard system for paying - and in accessibility. Combining aspects of direct debiting and telephony in one system introduces double accessibility problems. At the moment, retailers choose whether or not to sign up for the service, not which service; but as rivals appear, so will networks of companies taking one or other payment system. Eventually, like credit and debit, retailers would find it in their interest to accommodate most, unless one clearly wins out. It is unlikely that paybox has sufficient first-mover advantage with better known brands offering parts of the service so close behind in Britain, however, the company will be capable of making significant inroads. So the likely outcome is that several systems will run for a while and then retailers will move to support most payment methods, as they do at present.

But will individuals? If one can only send money to other people using the same system (either bank-linked like paybox or network-linked), then lock-in is going to reduce the effectiveness of the transfer method. Just as phone network companies have grudgingly agreed to carry each other?s traffic (for a prohibitive tariff compared with landlines), some kind of accommodation will be needed as more services appear. Ideally, it will be more like the accommodation between banks, almost invisible and not costing the user up-front.

Another issue affecting use will be perceived security. Bank transfers are seen as a reliable way of moving money whereas the internet is not. Telephones have been used for credit card transactions for years in Britain, but as the medium - not as the means - of transfer. Phone theft is high. Shrier says that with the PIN, transfers are secure. The system is closer to that in countries using cards with chips and PINs, such as France and New Zealand, who find the signature system used elsewhere primitive. He sees the service as a way of overcoming consumers' reluctance to buy across cyberspace. The company is so confident of security that it promises to reimburse retailers for any loss through fraud - not something that credit card companies promise.

In addition, users can elect to adopt an alias paybox number if they do not wish to hand over their mobile phone number. This prevents the chance of SMS spamming, or other abuse by the recipient. It also means, says Shrier, that, for instance, 'in a bricks and mortar environment, a single woman does not have to give the waiter her phone number'.

The company has also been ironing out some specific usability problems. Registering requires the user to have access to the internet and to talk into their phone before it can be completed - so it remains more complex than sign-up for many other services and cannot easily be done on the spot in a noisy restaurant. There is also the matter of perfecting the sequences that users hear when conducting a payment - each country requires a local solution. But testing also reveals that the company's main target group of 20-35 year olds see it a great idea for sending money.

In this respect, it transcends Vodafone's recently announced micro-payment (m-pay) system, which allows Vodafone UK customers to charge goods and services ordered over the internet or WAP to their mobile phone bills. Like paybox, this system works on all types of phone and contract, but, unlike paybox, it is exclusive to the Vodafone network.

This m-pay service is being hailed as the means of introducing sufficiently low charges to allow online producers to start demanding payment for services and information. It also uses a PIN for WAP as security or a username and password on the internet. The charge is added to the customer's phone bill or deducted from their prepay credit, and Vodafone settles the aggregated payments at a later date.

The other initiative of interest in this line, MasterCard's collaboration with CertaPay to allow customers to send or receive money via real-time e-mail transactions, also stops short of supplying the all-round solution of paybox.

With CertaPay's P2P email money transfer application installed, users can transfer money by logging into their online account, inserting the recipient's name and e-mail and the transfer amount, and identifying the account from which to take the funds, and can also write a note to the recipient to accompany it.

The key thing that both companies offer over paybox is a brand that is familiar and trusted in the UK. Familiarity and trust have been shown as valuable in securing use, especially where moving money is concerned. But a competitive profile may only be a matter of time for the newcomer; the potential is enormous.

Associated Link: paybox website

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