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Article Title:
Digital Content, Micropayments and Mobile Terminals Aren't Just Buzz Words 

Article Description:
Consumers around the world are abandoning fixed line phones in 
droves and replacing them with mobile phones. According to a 
study by research firm Mori, fixed-to-mobile substitution is 
occurring across the four major markets surveyed...

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2080 Words; formatted to 65 Characters per Line
Distribution Date and Time: Wed Feb 22 02:28:24 EST 2006

Written By:     Thomas Wright
Copyright:      2006
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Digital Content, Micropayments and Mobile Terminals Aren't Just Buzz Words 
Copyright © 2006 Thomas Wright
iMAX Business Solutions

Consumers around the world are abandoning fixed line phones in 
droves and replacing them with mobile phones. According to a 
study by research firm Mori, fixed-to-mobile substitution is 
occurring across the four major markets surveyed - the United 
Kingdom, United States, Germany and South Korea - with upwards 
of 45 million consumers estimated to now make all their voice 
calls from their mobile phone in these markets alone. This new 
generation of landline-less consumers has the potential to drive 
m-commerce to new heights in the years ahead. This wireless 
explosion also has implications for mobile merchants and their 
ability to process electronic transactions virtually anywhere at 
any time. 

One person who keeps the pulse of m-Commerce and mobile payments 
in particular is Simon Pugh, president of the Mobile Payment 
Forum. The Mobile Payment Forum describes itself as a global, 
cross-industry alliance of leading organizations from the 
wireless and financial industries dedicated to realizing the full 
potential for mobile payments. Pugh explains that "there are 
two broad categories: remote transactions that are usually 
micropayment-based and local transactions that use RF (radio 
frequency) or NFC (near field communications), which can be used 
for any size transaction but are currently associated with quick-
service retail." 

Let It Ring 

In terms of remote transactions, Pugh sees ringtones, MP3 files, 
movie theater tickets and other time-driven event ticketing as 
today's big movers. "It is a much better shopping experience to 
buy larger items over the Internet from your home or office PC," 
he says. As phones and personal digital assistants (PDA) sport 
larger screens, more memory, keypads, Internet protocol (IP) 
connectivity and faster download capabilities, it will make it 
easier to transact remotely. Yet Pugh concedes that it will take 
quite awhile for transactions to migrate from the micro level 
(under $5) to the macro level.

Bellevue, WA-based Infospace is a leading producer and publisher 
of personalized media, games and directory services for the 
mobile market. It offers the largest licensed catalog of 
monophonic (single tone) and polyphonic (16 to 24 notes using the 
Musical Instruments Digital Interface [MIDI] format) ringtones 
in North America. According to Consect, a consulting firm 
headquartered in New York, ringtones generated about $4 billion 
in sales around the world in 2004. America accounted for only 
$300 million of that, although Consect predicts the figure will 
double this year. Shane Dewing, vice president at Infospace, says 
"ringtones are all about personalization. Right now most are 
simple polyphonic snippets, but we see the future as entire MP3 
song downloads and even video ringtones." 

Infospace handles the complicated and onerous task of licensing 
music from record companies, publishers and artists, as well as 
formatting the ringtones for the myriad of handsets that are out 
on the market. According to Dewing, "40 percent to 50 percent of 
our music sales are from independent labels, so it is much easier 
for us to handle these thousands of licensing agreements than it 
is for our clients." 

Most of the major telecom players handle their downloads on a 
"post paid" basis through their monthly billing statement, often 
relying on third parties such as Qpass and Qualcomm to provide 
the technology needed to handle authentication and entitlement. 
Sprint is the exception in that they have developed their billing 
and delivery system in-house and have successfully offered a 
subscription-based service, as opposed to the other carriers who 
have focused on single downloads. Consumers also can download 
ringtones, wallpapers, screensavers, games and quizzes from 
popular online sellers such as Zingy and Jamster. 

While the post-paid model is a standard payment method right now, 
micropayment firms such as BitPass and Peppercoin are hoping 
their solutions can find traction in both the m-commerce and 
e-commerce markets. Matthew Graves, COO at BitPass, describes 
its target market as "any payment $10 or below, but we can also 
handle mid-sized payments from $10 to $25 and even larger 
payments up to hundreds of dollars." To purchase online content 
or services, BitPass "Spenders" first purchase a virtual prepaid 
debit card using traditional payment channels such as Visa, 
MasterCard, Discover, American Express or PayPal. They can then 
use these credits with BitPass "Earners" to anonymously and 
securely purchase music, photos, games, articles and other items. 
Graves asserts that the company's "good funds" model means that 
no merchant has ever been a victim of fraud. 

Similar to eBay, BitPass makes its money from the seller, not 
the buyer. The company normally makes a 15 percent commission on 
items less than $5 and pay Earners via automated clearing house 
(ACH) or Pay Pal when their account accumulates $20. "We handle 
three critical items for our users: authentication, access 
control and payment processing," says Graves. "Our goal is to 
help sellers of all sizes monetize digital content." 

Content and service providers can enable their offerings in as 
little as 30 minutes by simply uploading a single file to their 
site. Pixel]ump is one merchant that uses BitPass to sell 
ringtones, games and graphics, and delivers them via short 
message service (SMS). 

Meanwhile Peppercoin recently announced its Peppercoin 3.0 Small 
Transaction Suite, which adds subscription and prepaid payment 
capability to the company's pay-as-you-go and post-paid 
processing service. Peppercoin is partnering with Sun Trust 
Merchant Services to deliver the small payment processing system 
to merchants. "Peppercoin's solution is the only one that 
supports our merchants' needs for digital, mobile and physical 
point-of-sale (POS) transactions," says Barbara Roeber, Sun 
Trust's general manager and senior vice president. 

Mark Friedman, president of Peppercoin, is also excited about 
the possibilities: "Each year, more than 354 billion cash 
transactions occur in the U.S. for less than $5 at the physical 
point of sale, representing $1.32 trillion in aggregate revenue. 
We hope to tap into this market and move these consumers away 
from cash payments." 

'Small' Markets 

Leading markets include vending ($18 billion), parking ($10 
billion), coin-op ($6 billion) and quick service restaurants 
($110 billion). Peppercoin already has a foothold in the parking 
meter market with its signing of Reino Parking Systems, a global 
leader in on-street parking solutions. The new high-tech meters 
are equipped with card swipes, but users with cards on file also 
can pay by dialing a toll-free number and entering a meter number 
and payment amount. Additionally, users will receive SMS text 
messages when their parking time is close to expiring so that 
they can conveniently and remotely add more time to the meter. 
Users of the system can also purchase virtual parking passes with 
their debit or credit cards, thereby transforming these cards 
into virtual pre-paid cards-the next time they swipe the same 
debit or credit card, it will deduct the charge from their 
balance that is stored on the gateway. 

Not wanting to be left out of the small payments market, Star 
Networks is reducing its fees for a wide range of merchants where 
low-ticket cash transactions predominate: commuter-transit 
agencies, parking lots, news dealers, laundromats, car washes and 
cinemas. The nation's largest electronic funds transfer network 
has even gone so far as to create a new merchant category, called 
small ticket, with fee pricing intended to encourage installation 
of PIN pads and conversion of typical cash payments to PIN debit. 

While many merchants shun payment card transactions of $10 or 
less, small ticket sales increased nearly 50 percent from $23.7 
billion between 2003 and 2004, according to CardData Diamond. 
Fast food sales with average ticket sales running $11 per 
transaction hit $22.5 billion in 2004, while credit/debit card 
sales of transactions of $5 or less grew from $10.8 billion to 
$13.5 billion last year. 

On the Go 

While remote m-commerce is often associated with micropayments, 
there is a whole other side to m-commerce: mobile acceptance of 
card payments. MacAllister Smith, CEO of Pipeline Data, an ISO 
and payment processor, says that "mobile wireless has opened up 
a large new market that has not had good card acceptance in the 
past." His firm has partnered with AIRCHARGE, a software and 
hardware developer specializing in the development of commercial 
payment applications across the Palm OS, Microsoft and J2ME 
platforms, to offer wireless mobile payments. Target markets for 
mobile POS units include transportation, service industries and 
delivery firms. 

At Credit Card Processing Services, President Kevin Aniess is 
putting mobile terminals in some unique locations. "We have the 
usual clients like sales people at trade shows, but we also 
support souvenir stands at a Broadway play in Manhattan and 
at the Louis Armstrong Society in New Orleans," he notes. 

His company also targets the construction trades: electricians, 
plumbers, heating and air conditioning, handymen, painters, etc. 
While CCPS offers numerous wireless POS options, Aniess is not 
completely enamored with the technology. 

He emphasizes that "coverage and reception are not always the 
greatest, so we still recommend a good old­fashioned 
'knucklebuster' to our merchants as a safe backup." He also 
recommends Touchtone Processing to small merchants because it 
allows them ­ albeit at a higher rate - to authorize, capture and 
settle credit card transactions using a normal touchtone or using 
a cellular telephone. 

For larger merchants that can justify the cost of a dedicated 
wireless POS solution there are a slew of vendors ready to help 
them: Lipman USA, Creditel, Way Systems, USA ePay and ExaDigm, to 
name a few. Randy Wheeler, executive vice president of sales at 
Lipman, is quick to point out that his company is currently on 
its fourth generation of wireless terminals. He explains that 
diners can pay right at the table, refreshments and souvenirs can 
be sold to fans in their seats, and taxi and limo riders will 
enjoy an easier, safer payment alternative since they can 
minimize the amount of cash they have to carry. "It is also great 
for seasonal businesses, such as fireworks stands and Christmas 
tree sellers," he adds. 

Over at Creditel, Vice President of Sales and Marketing Gary 
Walker is focusing his efforts on the business­to-business market 
through its unique partnership with Nextel. "All merchants need 
are a compatible Nextel phone, a data plan with Nextel and our 
snap-on attachment, and they are in business," says Walker. 
Nextel's 'Push to Talk' capabilities and established base in the 
business market were big factors in Creditel's desire to partner 
with the carrier, which was recently purchased by Sprint. 
Creditel sells its hardware through the ISO channel, and also 
acts as a merchant processor to Nextel dealers. 

Woburn, MA-based Way Systems is taking a different approach with 
its pocket-size mobile solution dubbed the Mobile Transaction 
Terminal (MTT). Its unit, which is slightly larger than a 
standard cell phone, includes a combo magstripe/smart card 
reader, PIN pad and an IR port for communicating with a receipt 
printer. In the United States, Way Systems has a partnership with 
AT&T Wireless to use its General Packet Radio Service (GPRS) 
network, but it also targets the nascent Chinese POS market 
(where there are approximately 480 million payment cards but only 
3 percent of the 25 million Chinese merchants have a POS device), 
with its low-cost device. 

Will Graylin, CEO at Way Systems, explains that "we started with 
the cell phone platform and then designed it so that it is ready 
to go right out of the box." 

Prime Time Shuttle, a limousine company with a fleet of more 
than 3,000 vehicles, has chosen to go with USA ePay's wireless 
solution. USA ePay CEO Ben Goretsky says his company's systems 
can process transactions wirelessly with a merchant's existing 
Java-based phone over any provider's wireless network. 

With the addition of a card swipe cradle and USA ePay's $49.95 
Java­based software, merchants can quickly transform many 
Java/data-enabled cell phones and PDAs into POS terminals. Prime 
Time Shuttle experiences a high fraud and theft rate with cash 
transactions, says Goretsky, and mobile payment devices should 
help cut into that figure dramatically. 

"A new breed of POS systems" is how ExaDigm's Mike Mulcahy 
describes his company's models; they are PC-based systems running 
the Linux operating system. Through a variety of attachments, 
ExaDigm's units support the entire gamut of connectivity options: 
IP, dial-up, Bluetooth, WiFi and every cellular network. Mulcahy 
adds that the systems are flexible: "Since we are virtually a 
PC and have USB ports, you can easily add a keyboard, Webcam, 
biometrics, ID verification, PIN pad, basically whatever you 

POS device and PC convergence, ubiquitous high speed wireless 
networks, software improvements and consumers' increasing desires 
for digital content and convenient payment options all bode well 
for the near future of m-commerce. These ideas have been hot 
topics for some time, but their implementation, at last, seems 

Article by Thomas Wright, featured in Transaction Trends, 
April 2005. Thomas Wright is a freelance writer based in 
St. Louis. He also publishes a technology newsletter 
called Credit Union Tech-Talk.



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