Mobile top-up allows users to add value to their mobile accounts without having to purchase top-up cards, which are most often found at supermarkets, convenience stores, and newsstands. More than any other product or service currently in development, mobile top-up has all the ingredients to become the driving force behind m-payment adoption in China.
This is the fourth part of our Mobile Top-up and M-Payment Adoption in China series, following on from a post called The Solution: Find Users First, Expand Services Later .
Mobile top-up allows users to add value to their mobile accounts without having to purchase top-up cards, which are most often found at supermarkets, convenience stores, and newsstands. More than any other product or service currently in development, mobile top-up has all the ingredients to become the driving force behind m-payment adoption in China.
A logical fit
While any new technology or product is likely to face user skepticism about reliability and security, introducing a cashless payment system into a cash-dominated society has proven especially challenging, and not just in China. Mobile top-ups are an ideal way to get Chinese consumers to start seeing their mobile phones as a payment device. Paying one's phone bill is arguably the most natural "starter service" for m-payment. The current top-up cards contain a code that, when entered through a series of automated voice menus, adds the credit value of the card into the user's account. Mobile top-up works much the same way, only without the card.
The mobile top-up purchasing process, sample scenario: mobile top-up via SMS
The following scenario is for a China Mobile prepaid user purchasing through UMPay:
1. User registers with UMPay, providing bank account and other basic information
2. User sends SMS to UMPay specifying type of top-up transaction and amount desired. For UMPay, the SMS will read "1002+[top-up amount]" and will be sent to "77779+[password]".
3. UMPay requests and receives payment from the mobile user's bank account.
4. UMPay transfers the mobile user's payment to China Mobile.
5. China Mobile pays UMPay a service commission fee.
6. China Mobile adds top-up credit to the mobile user's phone account and sends a confirmation of the transaction by SMS.
Urgency and mobility
The greatest advantage for m-payment, when compared to other forms of electronic payment, is that purchases can be made anywhere there is a mobile signal. Because people do use (and, eventually, use up) their mobile account credit anytime and anywhere, mobile top-up is precisely the kind of service that users need anytime and anywhere. For most other kinds of purchases, there are few times when users require such convenience.
A simple purchase process
Many seemingly straightforward purchases become surprisingly difficult on the simplified keypad and small screen of a mobile phone. For example, a plane ticket purchase requires the choice of airline, departing and return times, and price, among other factors. One may need to conduct multiple searches for different flight scenarios, and reading the fine print before approving such a large purchase becomes much more difficult on a small phone screen. With mobile top-up, though, the only user decision is how much money to transfer to the phone account. As Figure 3 shows, users can complete a top-up transaction with just one SMS. Low-effort purchases mean fewer menus to deal with and fewer clicks until the payment process is completed. Simplicity is critical for all mobile services, and a poor first-time experience can make users wary of trying the service again, even after the initial problems have been fixed. Mobile top-up service is simple enough to make a good first impression.
Prepaid dominance increasing
Currently 67% of China's mobile users are prepaid users, and this percentage continues to grow. Most of the new subscriptions are from low-end users, who prefer the pay-as-you-go format of prepaid plans. While many other m-payment offerings only target high-end users, mobile top-up appeals to everyone. (Postpaid users, however, are unlikely to find the service as helpful, because their calling plans usually have no spending limits, and their phone bill is just one of several regular monthly bills.)
No technology limitations
Because top-ups can be conducted via SMS, WAP, and automated voice menus, even the oldest and most basic mobile phones can handle them. This is especially important given China's growing proportion of low-end users, many of whom are using older, second-hand models or bare-bones new models that offer little more than voice and SMS service.
Regularity
Most users top up their accounts at least once a month. Those who opt for mobile top-up are developing the habit of making regular m-payment transactions and at the same time dropping previous payment habits - in this case, perhaps no longer passing by a certain newspaper kiosk to purchase a top-up card. As users become accustomed to buying through the phone, MPSPs will have an easier time getting them to adopt other m-payment services.
Mobile operator incentives
China's mobile operators have many reasons to help promote widespread use of mobile top-up service, and given their dominant position in the market, operator support may be the most important factor of all. One reason is the savings mobile top-up offers over the current card-based system in place today. Current distribution networks cover most of the country are expensive to maintain. The cost of printing the cards, distributing them to tens of thousands of top-up vendors around the country, and paying vendors' commissions add up to about 5% of operators' total prepaid revenue. In contrast, MPSPs currently charge around just 3% commission for each transaction. Switching completely to mobile top-up could increase overall revenues by 2%. And as competition and transaction volumes increase, operators will be in a better position to force MPSP commission even further down.
Another major factor in favor of mobile top-up is that the operators are also the merchants. Given that there are only two mobile operators at present in China, this arrangement allows for simpler m-payment partnership networks. And with operators generating virtually all the revenues, they are much more likely to support mobile top-up than other m-payment options, for which they can get little besides the SMS or WAP communications fees.
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