Payment handling service a model for mobile commerce - National Westminster Bank plc to introduce managed service to lower payment handling costs for mobile operators - Company Business and Marketing

CommunicationsWeek International,  Sept 6, 1999  by Peggy Salz-Trautman

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NatWest's planned payment handling service for pre-paid operators could forerun mobile commerce payment models.

National Westminster Bank plc in the United Kingdom is planning to launch a managed service by the end of this year to help mobile operators in Europe cut payment handling costs. The bank hopes the service will position it to take advantage of the slew of future mobile e-commerce applications.

"Pre-paid customers understand e-commerce already...When prepaid is upgraded to allow mobile e-commerce these are going to be the customers that go out and lead the mobile commerce revolution," said Norman Frankel, NatWest's head of new media. Frankel said that pre-paid subscribers, accustomed to using cards, will quickly accept other card-based schemes.

While pre-paid services have been lucrative for mobile operators, they have also become an expense and a burden to manage. In addition to distributing the prepaid cards and managing the customer relationship, operators must keep track of the credits a user has bought and the rate at which they are used up. Since this information is stored in the network billing systems rather than on the pre-paid card, mobile operators are finding they are increasingly pushed into the transaction processing business--an area that belongs more to the core competency of a bank than a network provider.

According to Katrina Bond, an analyst with Analysys Ltd. in cam-bridge, England, such a service could take the pre-paid burden from operators. "The margins on pre-paid cards are not the highest and the customers are not the highest revenue customers," she said. "I could imagine that any service that saves costs would be attractive."

Other European banks are positioning themselves in the pre-paid value chain in advance of mobile commerce services, Bond added. In Greece, fur example, mobile operator STET Hellas Telecommunications and the National Bank of Greece have cut a deal whereby customers can recharge their pre-paid phone credits and pay monthly bills via ATMs.

Roaming problems

Pre-paid services become trickier for operators to manage if subscribers take their phones out of the country.

"Roaming can be a messy business for an operator," explained a senior manager at Mannesmann Mobilfunk GmbH in Dusseldorf, Germany, who asked to remain anonymous. When a customer telephones from outside the reach of the provider, the provider no longer has immediate access to data about the call and its cost, he said. Instead the provider must rely on data from the operator in the country in which the call is made, and then list these calls separately in the monthly invoice.

"It would be good if there were someone to do these things for us," he said. "However, we have to have the data [about the customer] in-house. Customer data and the customer relationship is a sensitive matter."

As a result, companies such as Mannesmann have long built these capabilities into their networks. But, the manager added: "I can imagine that newer operators just starting with pine-paid may not be so far along and have the need for a service that handles this task."

NatWest said it was in "serious" negotiations with a number of mobile operators across Europe, but refused to reveal any names. An executive at a major European mobile operator, who also asked to remain anonymous, said the company was considering the service. "The proposition makes sense, because the customers won't see a difference...but we will," in terms of lower operational costs, he said.

The new managed payment handling service covers transaction processing, clearing and settlement. While NatWest would not reveal further details of the service, it is likely to be a complete managed service for which the mobile operator pays a transaction fee.

Mobile commerce

NatWest has approached systems integrator Logica plc, London, to develop the new service. Kevin Duffey, Logica's group telecoms director, said the service will run transactions over established banking platforms based on Windows NT.

"The platform here functions like a switch, but rather than process calls it processes transactions," Duffey explained. "This transaction processor basically handles requests for transactions and then links to whichever financial database is appropriate."

NatWest hopes the service will position it to take advantage of mobile e-commerce applications arising from the Wireless Access Protocol (WAP) and Internet-enabled mobile phones.

"There is an extra role for banks to play in this business model...particularly with regard to mobile commerce," said Bond. Already some banks such as Expandia Banka in the Czech Republic and national GSM mobile operator Radio Mobil are working on e-commerce applications including secure transactions over the network, she said.

Operators in Europe and Asia are testing mobile commerce services that will soon enable users to conduct cross-border trade and charge the transaction to their monthly mobile bill. Frankel predicts tins will be a nightmare for mobile operators that have neither the know-how nor the resources to clear payments in one currency let alone manage multi-currency transactions. This is where NatWest plans to come in.