SMS, the most-used mobile phone application, will facilitate a ‘new’ generation of mobile payments in the next year, with the premium-rate SMS (PSMS) sector in the US tipped to exceed USD 1 billion in 2005 alone. Operators and financial entities are gearing for a market presence, with operators installing two individual billing platforms for the respective charging of pre- and post-paid subscribers. PSMS is popular with operators as it ensures their role at the center of the value chain, with the added attraction of a 30 to 50 per cent slice of all SMS-based transactions handled, according to Electronic Payments International.

Visa, for its part, is exploring SMS services in its CEMEA region, where its Visa Mobile Recharge Service (VMRS), offered by Visa issuing banks in the region, uses SMS technology to enable cardholders to top up their prepaid phone accounts. Cardholders wanting to recharge prepaid airtime use a PIN and user-name to transfer value from a Visa payment card, to their prepaid account, and can also top up the accounts held by others. In short, VMRS is one example of how banks can leverage existing customer relationships to offer value-added m-payment services, particularly as operators tend to be credit-averse.

Bank-branded mobile payment services can also serve as a conduit to merchant communities that are interested in emerging payment channels, EPI reports, particularly as consumers are most likely to use m-payment channels that are a simple extension of current channels. From the merchant perspective, SMS-based payments represent a low-cost collection and processing option, which the consumer remains in control of. Banks also stand to benefit from the potential of ‘text check’ services for credit card and other bill payments, which represents a new flavor of direct debit where consumers retain control.

(Electronic Payments International)