This too has been crossposted in the main Techwhack Channel. I got an insider tip for this one and then worked on to write one on this.
Mobile payments are the next in thing. As so, the marketing crazy executives would make us believe. In Japan, there is a strong market base for credit card transactions. In the presence of a robust telecommunications system, it has made enormous strides in setting up of value added services like mobile payment gateways.
Technically speaking, this consists of a point of sale terminal at the sellers premises. All you have to do is to authorize payments from your mobile handset (by entering the credit card information) towards this point of sale terminal and the whole transaction is routed through a secure socket layer with 128-bit encryption. This would minimize the risk of fraud and the whole transaction is completed in seconds. At the same time, printed receipts provide purchase verification and charge back protection. This is indeed a win win situation for both consumers as well as the sellers.
It seems that the next wave of value added services would be through these mobile payments. Sam Pitroda (the father of STD booths- beyond this he had no other contribution to speak of) would make us believe that Indians are dying to splurge on virtual cash. However, there is no detail on the expected commissions, cutbacks and the cost of the inventory.
By all accounts, Tata Indicom is planning to set up a mobile payment system in India under “Tata Indibay”. The details are sketchy as of now and till to date there has been no mention in the press. However, it is through our trusted insider sources who claim that such a system would be in place.
This may not be taken as authentic news because we have no means to confirm about their business plans as yet. They might as well as scrap the whole deal.
The whole idea is whether Tata’s can pull this off by themselves. Specifically when they would have to install these point of sale terminals across shopping malls, busy markets et al. We all know how Tata’s have been faring in the mobile telephony scene. Not too good. Then to make it profitable, they would need to scale it up. Assuming 10% of the consumers use it and given their share in the market, it would make for a very sorry and costly investment.
The biggest hassle is that of the back end investment. Setting up secure terminals and ensuring their uptime by all times is a costly affair and whether the subscriber base would justify for such an investment. In my opinion, they could “outsource” such activity to a third party, establish industry standards and form an unholy alliance with other operators to provide the services irrespective of the consumer’s affiliations or the independent of the platform like CDMA/GSM.
Is this hard to think? Given the fact that Tata’s have sunk in money in a venture, which is not jiggling the cash registers as of now. Hence, they are desperate to scale up such value added services which would give them some bragging rights in the increasing “me too” market dynamics. It would be worthwhile to watch their venture and see them cringe.
The biggest hassle is the assumption that Indians would loose their purse strings while using credit cards. We all know as to how private banks have been working to force down these cards with their unsuspecting patrons. We also know the high usurious rates of interests, which would even make Shylock blush with embarrassment. The industry as a whole has not been able to eliminate fraud. In this scenario, how can mobile telecom payments are accepted as “e cash”? One incident of fraud, the increasingly hyperactive media plays it up and wham! The whole thing goes down the drain.
The idea behind this post is that in case anyone from Tata’s is reading this, they ought to desist from such glorified follies. I am all for a natural progression and the way India assert itself in the technology markets. However, if you are diverting funds at the cost of scaling up networks in rural India, then there is something amiss. As I mentioned earlier, Tata’s do not have the scale to make it profitable unlike Reliance, which can pull it off while lowering down the prices for all other incumbents. They have these e-ticketing initiatives on “ R- orld” which is closest to mobile telecom payments can get. Plus, the added advantage that the consumers pay for the access through R-World, which again is based on pay per use charges.
I believe that Tata’s do not have such kind of a gateway, which would be hard to convince it’s subscribers that this is a premium service, much like the ring tones, which is charged at premium rates.
There are a lot of factors, which would ultimately determine the success of this venture. I hope, they have thought about this all.
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