I am guessing that everybody saw that Rodger Desai and Payfone pulled of a killing with Amex, Verizon and some other folks. Amex made a strategic investment into Payfone under the pretense that Payfone would become the default one-click mobile checkout allowing end users to purchase products using their carrier bill while Payfone would be leveraging the 'SS7' layer for recon and settlement of these funds.
The following is a couple of except from the press release that dropped upon the large investment.
"On the other hand, Payfone operates on a unique IP that focuses on steering the merchant sales conversion and earning revenues while ensuring an anti-fraud processing by checking with the carrier upfront, thereby delivering an authentic payment service."
"Currently, though there are 5 billion global mobile phone users, only 2 billion of them use credit cards. This again leaves a big gap to be bridged, which widens the scope of growth for card companies"
This is funny stuff - and very nondescript isnt it - I am sure that even a seasoned spin doctor would be scratching his head - 'what now?'
A couple of things spring to mind when I read this:
a. Who ever wrote this cant describe what they are doing in a clear and rational way
b. they indicate that they can bridge the global non-card based phone population (i.e. prepaid)
The 'unique IP' payfone has is off the shelf integrations into Belgacoms, TSYS, Sybases of the world, its really not that unique, in fact the integrations are probably priced (with labor and all) at around $10-30k per integration, and most likely 2-3 can cover the globe). Now what they do have, I believe, is some SS7 infrastructure in place sitting on some obscure MNO rack on say the isle of Jersey in the British channel. I happen to know that Payfone during their sales pitch tried to peg themselves as an MNO because of said infrastructure.
For somebody who doesnt understand this MNO setup it may sound very complicated, however these obscure MNOs on the isle of Jersey have such a low consumer base that they sell their infrastructure to enterprises around the world - this is an of the shelf offering for Jersey telecom and is not hard to get. Once you have that commercial relationship in place with ex. Jersey telecom the Jersey telecom's combination of commercial agreements with other operators and the SS7 network gives some unique capabilities including HLR/VLR lookups, EMEI and IMSI correlation incl. in some cases BST triangulation - again great features, and unique in the sense that Payfone decided to leverage this in payments, but not exactly Payfone's 'unique IP'.
Secondly the gap that Payfone proposes that they can bridge with this SS7 infrastructure in order to include primarily prepaid customers around the globe encounters serious issues - not only will you have to do various auths. around a prepaid customer before they do a purchase ex. is the prepaid account active, does it have a credit line attached, are there minutes/currency paid onto the prepaid phone account (remember prepaid in the world of mobile, doesnt mean the same as prepaid in the financial sector) - but even more challenging is the fact that when these types of carrier billing actions take place, something called a CDR is delivered to the issuing carrier, these CDR files are very rarely delivered in real time - to explain that to a financial person - it would be like walking out of Best Buy with your new 42' LCD after swiping your debit card, except your bank wont know that you are buying anything until at best 1-2 hours later - and Best Buy wont really know if you have the money to pay for the TV - hardly a great model.
Outside of these couple of things there are a slew of other issues, but Tom Noyes touches on some of them on his recent blog post HERE
I am still in total dismay that payments people in the US randomly throws money after stuff without doing any sort of due diligence, in my opinion Dan Schulman and team did not do their homework and quite frankly in a world which is hurt from a recent recession that the tax payers globally paid for - that is not an acceptable behavior. On another note - hat of to Rodger Desai/Payfone (and I mean this in the most positive sense) who managed to raise around $30m before generating any commercial revenue. At the end of the day my comments doesnt matter all that matters is the perception that it was a good deal.
The following is a couple of except from the press release that dropped upon the large investment.
"On the other hand, Payfone operates on a unique IP that focuses on steering the merchant sales conversion and earning revenues while ensuring an anti-fraud processing by checking with the carrier upfront, thereby delivering an authentic payment service."
"Currently, though there are 5 billion global mobile phone users, only 2 billion of them use credit cards. This again leaves a big gap to be bridged, which widens the scope of growth for card companies"
This is funny stuff - and very nondescript isnt it - I am sure that even a seasoned spin doctor would be scratching his head - 'what now?'
A couple of things spring to mind when I read this:
a. Who ever wrote this cant describe what they are doing in a clear and rational way
b. they indicate that they can bridge the global non-card based phone population (i.e. prepaid)
The 'unique IP' payfone has is off the shelf integrations into Belgacoms, TSYS, Sybases of the world, its really not that unique, in fact the integrations are probably priced (with labor and all) at around $10-30k per integration, and most likely 2-3 can cover the globe). Now what they do have, I believe, is some SS7 infrastructure in place sitting on some obscure MNO rack on say the isle of Jersey in the British channel. I happen to know that Payfone during their sales pitch tried to peg themselves as an MNO because of said infrastructure.
For somebody who doesnt understand this MNO setup it may sound very complicated, however these obscure MNOs on the isle of Jersey have such a low consumer base that they sell their infrastructure to enterprises around the world - this is an of the shelf offering for Jersey telecom and is not hard to get. Once you have that commercial relationship in place with ex. Jersey telecom the Jersey telecom's combination of commercial agreements with other operators and the SS7 network gives some unique capabilities including HLR/VLR lookups, EMEI and IMSI correlation incl. in some cases BST triangulation - again great features, and unique in the sense that Payfone decided to leverage this in payments, but not exactly Payfone's 'unique IP'.
Secondly the gap that Payfone proposes that they can bridge with this SS7 infrastructure in order to include primarily prepaid customers around the globe encounters serious issues - not only will you have to do various auths. around a prepaid customer before they do a purchase ex. is the prepaid account active, does it have a credit line attached, are there minutes/currency paid onto the prepaid phone account (remember prepaid in the world of mobile, doesnt mean the same as prepaid in the financial sector) - but even more challenging is the fact that when these types of carrier billing actions take place, something called a CDR is delivered to the issuing carrier, these CDR files are very rarely delivered in real time - to explain that to a financial person - it would be like walking out of Best Buy with your new 42' LCD after swiping your debit card, except your bank wont know that you are buying anything until at best 1-2 hours later - and Best Buy wont really know if you have the money to pay for the TV - hardly a great model.
Outside of these couple of things there are a slew of other issues, but Tom Noyes touches on some of them on his recent blog post HERE
I am still in total dismay that payments people in the US randomly throws money after stuff without doing any sort of due diligence, in my opinion Dan Schulman and team did not do their homework and quite frankly in a world which is hurt from a recent recession that the tax payers globally paid for - that is not an acceptable behavior. On another note - hat of to Rodger Desai/Payfone (and I mean this in the most positive sense) who managed to raise around $30m before generating any commercial revenue. At the end of the day my comments doesnt matter all that matters is the perception that it was a good deal.
