Using your mobile phone to pay

SINCE the inception of the mobile phone it has developed into a multifunctional, all-in-one, device. Now the average mobile phone is used, apart from its main role making and receiving calls and texts, as an alarm clock, diary, calculator, MP3 player, dictaphone as well as camera. Some time ago the possibility of using a mobile phone as a payment tool was added to the long list of activities for which it can be used.

SINCE the inception of the mobile phone it has developed into a multifunctional, all-in-one, device. Now the average mobile phone is used, apart from its main role making and receiving calls and texts, as an alarm clock, diary, calculator, MP3 player, dictaphone as well as camera. Some time ago the possibility of using a mobile phone as a payment tool was added to the long list of activities for which it can be used.

It is estimated that payments via mobiles will grow by a double-digit percentage rate this year. Analysis firm Gartner has estimated that the number of users making payments via mobile will increase this year by over 38 million people to almost 109 million globally, while countries in central Europe will register an especially steep increase, the Hospodárske Noviny daily wrote in late June. As a result, two percent of users of mobiles should use them to pay for something.

In Slovakia mobile owners can currently use their mobile devices to pay for public transport tickets or parking fees, or to buy insurance policies or donate money to charity. Strong interest from mobile users promises an upward trend and all three mobile operators predict a steep increase and extension of these services.

“The number of services and their usage by clients increases each year,” Dalibor Belovický, head of the content and premium services department at Slovak Telekom, told The Slovak Spectator. “In this segment Slovakia ranks among the leading countries in the European Union. This is not only in terms of penetration and usage but also because of the legislative environment.”

Mobile operators and providers of services which can be bought via mobiles, such as public transport companies, insurers and others, have significantly influenced this positive trend, according to Belovický. The pace of further development of these services will depend on these companies and their interest in extending opportunities for payment.

What can be bought via mobile phone

For the time being payments via mobile are carried out mostly via text messages. This is how a mobile user buys a transport ticket or an insurance policy, and pays for parking or DVD rental. Another possibility is mobile banking.

“Over the last few years we have registered a trend [towards] mobile banking as part of internet services via mobile phone,” René Parák, spokesperson for the youngest mobile operator in Slovakia, Telefónica O2 Slovakia, told The Slovak Spectator. “Applications of large international as well as Slovak banks for smart phones can serve as an example.”

O2 has already adapted to this trend and enables its clients to use internet banking services via their mobile phones.

It is hard to estimate the total number of transactions performed via mobile phones as not all operators reveal this information.

Slovak Telekom registers hundreds of thousands of transactions per month by clients of its T-Mobile services, with transactions valued between €0.80 and €3.

Blue Orange, a firm which works in mobile marketing in Slovakia, estimates that the turnover of payments via mobile phones might have exceeded €33 million last year, Hospodárske Noviny wrote.

Jozef Rapavý of A SMS, another mobile marketing company, sees the mobile phone as an all-in-one device which actually offers all the services a normal computer does, but at any time and in any place.

“Thus it is only a question of time before the mobile phone becomes a fully-fledged payment instrument,” Rapavý told The Slovak Spectator, adding that this may happen thanks to NFC (Near Field Communication)-type technology, which is already being tested. “But this is still a question of the future and of large investments either by producers of mobile devices, or merchants themselves [in the form of] payment terminals.”

With regards to SMS payments, this is the currently the simplest form of micropayment.

“Paying by text messages is not conditional on having a bank account or holding a bank card,” he said. “The only condition is to have a mobile phone and an active SIM card.”

Rapavý describes the current situation in terms of usage of services based on SMS payments as still being at an early stage. Along with mass services such as payment for public transport tickets or parking it is possible to subscribe to a magazine or a newspaper by text message, or to buy films online.

“Services based on SMS payments have gradually become established and the increased interest in this form of payment only proves that there is interest in it and that there is still a lot of room to use this system,” Rapavý told The Slovak Spectator.

As far as SMS payments go, A SMS cooperates with companies offering parking and with public transport companies. It is currently possible to buy a public transport ticket by mobile phone in Bratislava and Žilina and to pay for parking in Bratislava, Košice, Prešov, Martin and Trenčín.

Rapavý sees premium services as having great potential, such as online versions of print media or to purchase webhosting or other services via micropayments. His company is also open to the provision of services which do not have an online character, but existing demand and market trends suggest further developments will take place in online services. Responding to this demand, A SMS has already prepared a new, simpler form of SMS payment, an online system called myPay. Rapavý believes that this new system will simplify the already simple system of SMS payments in the online segment.


Paying via mobile phones does not bring any additional risks when it comes to security.

“Payments via mobiles or mobile banking bring the same risks as electronic financial applications and transactions in general, for example payment by a payment card via the internet or contactless payments,” said Parák of O2. “For secure usage they require the cooperation of all involved parties: providers as well as the client.”

Belovický of Slovak Telekom sees the main risk as being that a client does not pay their mobile provider’s bill even though that operator has already transferred money to the service provider. Another risk is a potential change in market rules, for example introduction of unsustainable fees by oversight bodies.

“But because we have provided mobile payment services for several years, we can say that these risks do not appear to be fundamental and do not prevent further development,” said Belovický.

Richard Fides, spokesperson for the biggest Slovak mobile operator, Orange Slovensko, said he does not see any risks for mobile owners, who tend to register the potential loss or theft of their mobile sooner than they would the loss of a bank card.

Positive outlook

Mobile operators expect to see growth in payment for products and services via mobile phones.

“We expect the same trend as in the segment of internet via mobile phones, which means a significant increase in usage,” said Parák of O2.

Orange Slovensko, expects an increase in these payments especially in areas in which the services purchased are used immediately. Fides, Orange’s spokesperson, sees potential in online payments for web content, electronic media, e-books, but also various fees at a community or public administration level. Parák sees simplicity and accessibility for the client as the most important factor for the growth in payment via mobiles. Belovický of Slovak Telekom sees potential for usage of mobile phones wherever it is necessary to pay smaller amounts of money.

“This will be welcomed by clients, who do not want to ‘bother’ with coins as well as sellers because payment via mobile speeds up the selling process, improves supervision and saves costs,” said Belovický.

Since the legislative and technical issues are actually 100-percent resolved, according to Belovický, the primary limit on further development is the interest of clients and the interest of providers in implementing such payment methods, at least as an alternative.

Marián Chovanec, the head of Blue Orange, listed among the obstacles to development of payment via mobile phones attempts to increase the final price when buying a service or product via a text message, Hospodárske Noviny wrote.

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