Will Cell Phones Replace Credit Cards?
Cell phones and credit
In many countries outside the U.S., cell phones have replaced credit cards. In Japan and Finland, for example, travelers rarely carry cash, checks or credit cards, but rather swipe their phones or send text messages to pay for train rides.
In the U.S., the cell phone hasn’t yet reached this capability, mostly because of carriers who cannot settle on how that service’s revenues would be divided amongst each company. One up-and-coming company, however, thinks it just may have a handle on how to make it work. Paymo is a mobile payment network and it has so far confirmed deals with AT&T, T-Mobile, Cellular One and Virgin Mobile, allowing consumers to make online purchases with their phones.
Their business model is quick and simple. When a consumer decides to purchase an item, they click on a Paymo logo, much like the PayPal logo. This takes them to the online checkout area where they enter their cell phone number. A text is sent via Paymo to their cell phone asking for a verification on the purchase. Once the customer replies, the transaction is verified and completed. The item will then be either deducted from the owner’s prepaid account or be itemized on their next cell phone bill.
Paymo in the U.S.
Paymo is used in about 45 countries, and it’s slowly working its way into the online business world. Credit card companies, banks and mobile carriers have tried in the past to work out a deal that allows for online pay tied to cell phone accounts. So far two methods have been tried in the U.S. The first allows customers to wave their phones in front of a reader for payment. The second allows them to pay via a text message confirmation process. Neither one has taken off with the American public.
Paymo, a San Francisco-based company, still thinks paying with cell phones will become mainstream in the U.S. once people understand its true value. CEO and co-founder Paul McGuire stated, “Paymo will succeed by serving cell phone and website users who don’t have credit cards. They want to buy stuff online but need an easy way to pay. And what better way than via a mobile-phone account?”
Will cell phone companies bite?
Most cell phone companies supplement their phone packages with additional items, such as ringtones, wallpapers, games, news, e-mail retrieval and web-browsing. Because of the economy, they are looking for more revenue-building ways to bring services to consumers.
Paymo believes it has the perfect solution and is hoping to woo cell phone companies into using their product. With Paymo’s proposal, cell phone carriers would walk away with 20-50percent of revenues generated by online sales. The remainder would go to the retailer and Paymo.
Paymo is no longer alone
Although Paymo does have an aggressive pay structure, it is not alone in trying to break into the cell phone payment market. PayPal has been working on the same thing for a few years now and met with the same success rate. Zong and Mobilcash are two more companies working hard make cell phones replace credit cards. With this type of competition it will be hard for Paymo to gain its market share in the US.