Making a call with your cash?

Few consumers realise their cellphone has become a payment mechanism. Most see their cellphone only as a personal communication device, and they do not scrutinise payments they make to premium-rate SMS subscription services. The result is that consumers are shocked by unexpected mobile phone bills.

There has been a proliferation in consumer complaints regarding mobile subscription services; for example, joining mobile content clubs and also the downloading of mobile content such as ringtones, music, videos and information. Complaints include: subscription billing without knowledge of subscribing, once-off content downloads that initiate weekly charges, the difficulty in tracking down third-party service providers and getting a refund from these companies, and the fact that networks cannot unsubscribe a consumer from a service. Clearly, there is a need for more consumer protection in the industry.

One way to address complaints about mobile payments is for consumers to begin to see their cellphone for what it is; a payment mechanism that is just like a credit card from which they can purchase items via SMS shortcodes. However, there are certain characteristics of a credit card missing when compared to making mobile payments.

One glaring difference is that while a person under the age of 18 years cannot apply for a credit card from a financial institution, parents are happy to provide their children with a cellphone. This means teens have easy access to mobile clubs and can download content. Unless bill payers are monitoring usage, it becomes easy for children to run up large bills on mobile content.

Premium-rate SMS payments include both subscription services and once-off downloads. Both use the same channel - a consumer sends an SMS with keyword to a shortcode. A consumer with a contract should see the details of this on their monthly itemised cellphone bill, while a prepaid customer will have the advertised amount deduced from their airtime.

A subscription service works on the principle of using third-party billing over the mobile networks, but instead of a once-off fee, an ongoing deduction is made from the account associated with the cellphone number that made the subscription request. This could be a daily, weekly or monthly charge. According to industry rules, consumers must be notified when they have spent R300 on a subscription service. In addition, service providers are required by regulations to send consumers regular reminders via SMS that they are subscribed to a service. A subscription service can be stopped by the customer at any time by sending an opt-out or stop request to the original service shortcode.

Yet, a premium-rate subscription service still poses several challenges when compared to processing payments using the credit card system. While both use third-party billing, the most important distinction is that with a subscription service, a vendor only needs a cellphone number to process a payment. To make a payment with a credit card, much more information is required: the customer's name, the credit card number and the CCV number.

One glaring difference is that while a person under the age of 18 years cannot apply for a credit card from a financial institution, parents are happy to provide their children with a cellphone.

Dr Pieter Streicher is MD of BulkSMS.com

Another difference is that credit card companies can electronically reverse a transaction, what is called a chargeback. Mobile subscription services do not have this ability. Service providers are not able to make an automated chargeback via the networks' infrastructure and, as a result, must manually process a reimbursement to a customer. This is a significant stumbling block in reducing consumer complaints in regard to subscription services.

Then, unlike customers with credit cards, not all cellphone users get monthly statements. Only contract users receive regular bills. However, a contract customer needs to have itemised billing to actually identify a wireless application service provider (WASP). Unfortunately, even the itemised bills of some service providers do not identify the correct WASP. A customer without itemised billing, and any prepaid customer, must request this information from a network provider. Within this current state of affairs it is not easy for a customer to manage their mobile subscription billings.

While technology is making mobile payments much easier for customers, they do need to feel the industry is protecting them from scams. While the Wireless Application Service Providers' Association (Waspa) has regulations in place, consumers need to change their mindset and treat their cellphone account just like they would their credit card statements.

They should empower themselves and check for billing irregularities and query any charges they are not sure about. If there are unaccounted for billings, then consumer should act on these and, where necessary, lodge a complaint with Waspa.

On the other hand, the industry needs to come to the party. The mobile networks need to assess what is lacking in their billing processes compared to the credit card system. The two areas that would immediately improve mobile payment services are billing transparency and chargebacks. The former will make it easier to identify the service provider offering subscription services, and the latter will enable service providers to offer refunds where appropriate.

* Dr Pieter Streicher is MD of BulkSMS.com.