Making Mobile Payments Pay
Very few people in the mobile industry will disagree that mobile payments are today’s biggest challenge for developers. Apple has solved the problem by requiring that users register their credit cards before they can use any services. But this approach only works for a very small segment of high-end users in the developed world. For ecosystems outside Apple’s, more often than not, mobile payments simply do not work. Inconvenient credit card forms that are impossible to complete on a mobile device, fragmented carrier billing solutions, and a ton of other methods have been tried, without any real success. As a result, developers on platforms like Android are able to make far less money per user than they make in Apple’s ecosystem.
As a lot of app business models gravitate towards freemium with in-app transactions, this creates even more of a problem. Unseen before in the gaming industry, ARPU (Average Revenue Per User) for social games, powered by in-app purchases, and even the most recent successes like Draw Something, clearly reveal the most powerful way of making big money: super-engaging services with not even micro, but rather, nano-transactions.
Now the problem with nano-transactions is that the value of the transaction is much-less than the effort of actually doing it (completing credit card authorisation, sending a premium SMS, or even typing a PIN code to access your wallet). Unfortunately, given the very nature of money (that requires security, fraud, data protection and regulatory etc. issues to be addressed properly) it is simply physically impossible to much-improve the user experience.
The problem can be solved, however, with the help of virtual currencies that are not directly linked to real money. As money theory suggests, a currency can successfully function if it fulfils two criteria: be backed by real value (just as old currencies were backed by gold); and be liquid (meaning it could at any time be freely exchanged into that value). Now, with the global mobile ecosystem as developed as it is today, there are lots of valuables that could be used to back virtual currencies. Perhaps the most interesting among these are consumer attention and engagement.
If you accept that already today, billions of dollars are spent in mobile marketing, this means in aggregate, mobile users are generating all that value, simply by doing things in the mobile channel, such as using social networks, browsing websites or downloading apps. In fact, if an advertiser pays ad networks, or other promotional channels, $1 per promoted app download, it means that the user installing that app generates at least that much value, simply by choosing to download the app, or put simply, just for his or her own willingness to try it out. From that perspective, every aspect of user engagement has value to it – from checking the weather on a website, to browsing an app store and downloading apps.
Now, if a proportion of that value was passed back to the user (just like all traditional loyalty programs do with points, airline miles, etc.), stored and made available for the user to freely spend, it would create a currency solution that is not linked to real money at all. From the example above, even if 50 per cent of the $1 value was passed on to the user himself, downloading just one promoted app would top-up the balance by $0.50, which is real money from a nano-transaction perspective, where individual items are priced at just a few cents/pence each.
The best part is that the virtual nature of the currency solves all the problems of the traditional money - like regulatory security requirements, high carrier taxes, inconvenient payment data collection forms, and so on. Transactions are as simple as pressing one ‘buy’ button, without any registrations and PIN codes. It’s even simpler than on iTunes, where you still have to type-in your password.
Our own virtual currency, ‘GetJar Gold’ rewards users with Gold coins for app downloads and provides developers with an SDK that enables access to user balances and Gold coins as a way of payment for in-app items. Across the board, developers using the solution have seen a 100 per cent increase in conversions when augmenting the traditional payment options with the virtual currency.
Ilja Laurs is CEO of GetJar