Could carriers become the next credit card companies?

By on February 9, 2011
credit

I’ve been thinking about the tectonic shifts that the mobile industry is going through right now. As with every upheaval in the technology cycles there are winners, losers and surprises that come out of left field and mobile is poised for some serious surprises.

One of the things that I’ve contemplated is the crumbled wall that now surrounds the carriers pristine garden. I remember a time when you had to walk on water in order to get a J2ME app or game on a carrier deck – literally. It was the hardest thing to do but, in some cases, the only real way to scale a company and sell product.

Smartphones have put a dent in that revenue for the carriers and we haven’t even reached 30% penetration yet. So what do the carriers do as the number of feature phones dwindle taking their app revenue with them? I think they become micro lenders – a low-balance credit card.

As the ability to pay via a phone becomes easier and easier through technologies like NFC or QR Codes or SMS, the easiest way to pay could be just adding it to your phone bill just as you would when buying an app from the carrier deck.

Applying for credit

How would this work? There are a few easy ways that this could happen but the most realistic would be a small credit facility attached to your account – say $200 to start. It would be similar to a secured credit card with a cap based on your payment history with the company. The other way would simply be prepaid cards – similar to the way prepaid phones work today. If you want to regulate purchases for your children but want to make sure they always have money available to them in case of emergency, this would be an easy way for sure.

Not in that business

Carriers are not in the lending business that’s for sure. Credit card companies have been doing this forever and have the international infrastructure to implement something like this quickly but they don’t have the direct relationship with the customer like the carrier does. Most people are more inclined to pay their cell phone bills quickly lest they be without it for long periods of time – carriers leverage that addiction.

Why use the phone?

This one is easy. Sometimes cash and credit are inconvenient. I can see a day where using your phone to pay at parking machines, drink machines, coffee shops, gas stations, post offices, restaurants, public transportation, taxi’s – any place where a small transaction needs to happen – is common. This is where the convenience of the phone and the simplicity of adding a purchase to a phone bill will make sense.

Could this happen? Why not! It is during times like these where the curse of knowledge holds us back from a new path because “that’s how we’ve always done it” – maybe mobile has the ability to shake us out of our slumber.

What do you think?

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About Rob Woodbridge

I'm Rob, the founder of UNTETHER.tv and I've spent 14 years immersed in the mobile and pervasive computing world. During this great time I've helped some of the most innovative companies grow their business through mobile. If you are in need of a mobile business advisor or coach, connect with me here to schedule a 30-minute chat.
  • http://blog.urbanhorizon.com Andrew J Scott

    I imagine the Telco’s will disolve/evolve into companies which look nothing like todays Telcos. Some will get bought, some will buy other companies to evolve dramatically; but like ISPs from the 90′s they will do far more than just be a pipe. It is inevitable, the question is who will buy what when.

  • http://untether.tv Rob Woodbridge

    @andrewjscott:disqus  thanks for the comment! The carriers have to evolve. Some of their highest revenue services are being slowly eroded by innovative upstarts – think SKYPE on a mobile and AppStore for example. They’ve lost their walled garden and pipe is a commodity. What’s next? Evolution that’s for sure.

  • http://www.templeton-ineractive.com Tim Templeton

    You hit it on the head when you said carriers don’t want to be lenders. They aren’t used to the risk business model, and would have to implement actuarial tables to calculate interest rates. Also, how would they separate regular cell charges from disputed purchases? Will having a large bill discourage timely payments of the voice and data portions of the bill? Focusing only on prepay may make more sense until these issues can be addressed.

  • http://untether.tv Rob Woodbridge

    @e445859777062c45624afa1b8dab0d65:disqus Carriers could get their feet wet by offering smaller credit facilities – up to say $200 total credit. The idea would be that they become a credit means of convenience for small or emergency transactions at first. Could also see this being completely underwritten by, say, VISA, in the long run.

    Prepaid is also a good idea to start. Clean, simple and it seems to be a cash windfall for most retail establishments as well.

  • https://www.cardauthorizer.com/merchants-services.html Merchant Services

    The carriers have to evolve. Some of their highest revenue services are being slowly eroded by innovative upstarts – think SKYPE on a mobile and AppStore for example. They’ve lost their walled garden and pipe is a commodity. What’s next? Evolution that’s for sure

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