Vodafone first for UK mobile payments

UK mobile operator Vodafone is to offer what the company says will be the country's first direct billing of goods to a mobile phone account.

The company's m-pay bill will allow UK customers to pay for low-cost purchases of between five pence and five pounds from a number of content providers over the internet or by Wap (wireless application protocol) and they will be charged directly to their Vodafone account.

Jim Wadsworth, head of Vodafone's m-commerce division, said that the company was following the model of similar successful projects run by NTT DoCoMo in Japan.

"There's a lot of activity happening in m-commerce around the world at the moment," he said. "We've signed up 50 content providers so far, which shows there's a demand for this kind of service."

Those content providers so far include ringtone download companies, games developers and sports sites, such as Arsenal FC and the Rugby Football Union (RFU).

Wadsworth said that m-pay would be suitable for both prepay and contract accounts and would support GPRS (general packet radio services) and 3G (third generation mobile) as well as the internet and existing GSM phones.

After selection of a product, the content provider will send customer and transaction details to Vodafone's authentication page. The customer then provides authentication - for Wap in the form of a four-digit PIN, and for online transactions, a user name and password.

Vodafone, which currently boasts 13 million UK customers, adds the charge to the customer's mobile phone account and confirms payment to the content provider who in turn releases the purchase to the customer.

Vodafone will then settle the aggregated service revenue with the content provider.

"Credit and debit cards serve the high-end transactions very well, but no-one is out there catering for the micro-transaction," Wadsworth added.

Vodafone will take an "above 9 per cent" cut of all transactions and is aiming for the "stylish singles" market between the ages of 17 and 25.

Interested parties can sign up for free on www.vodafone.com (www.vodafone.com) once the service launches in early March.

Wadsworth said that plans were afoot to extend the service to pay at vending machines and for car parking, in a similar vein to existing projects in Scandinavia, and that Vodafone was confident security was reliable enough to launch.

Analysts welcomed the development as "a necessary step for a telco", but that its success depended on the level of content available.

"The major issue is whether there's actually anything there to buy," said Duncan Brown of analyst firm Ovum. "If it does take off it could be win-win for carriers and content providers alike."

Brown said that mobile payment was unlikely to challenge the banks as a preferred payment method to credit cards for large transactions, but he expected mobile transaction values to exceed £5 in the medium to long term.