Amex: Payfone and Serve

Updated 7pm Eastern (last paragraph on AML)

Amex: What are they “Serving” up? Marketing Hype

NFC Times: Amex Mobile Checkout Service

Jim McArthy, Visa’s Global Head of Product gave an excellent overview of the market in his analyst call last week (see here). His quote on Serve  “Virtual pre paid card” from Revolution money… I completely agree. Serve is a small evolution for revolution money.. and for background see previous post.

What about Payfone? Well the only unique thing about Payfone is its clearing network, most likely Roamware’s inter-carrier settlement network. Roamware, Mach, Belgacom BICs , … etc have agreements with most carriers globally to allow for roaming access, payment and clearing (aka SS7, B-ICI). I love Roamware.. a tremendous company growing at 500%+ per year with a stellar team. IPO should be happening this year. None of their growth is dependent on this Payfone thing.. but it is a good idea.. ON PAPER.

While all the technical and architecture pieces are there to make Payfone viable (example all of Roamware’s carrier agreements), NONE of the carriers are anxious to let another brand and another service ride on their rails. Remember Inter Carrier Settlement (ICS) is for phone charges.. one of the biggest carrier headaches in mobile billing is customers calling to complain that Zong put a premium SMS on their bill for some gaming top up.. of course it was actually your 12 year old that did it.. The US carriers got fed up with this and all committed to billtomobile (see related post), I just had dinner w/ Paul Kim Tuesday.. tremendous executive. The summary of this post is that Billtomobile killed the Boku/Zong models.. and created commonality across US carriers. Carriers take almost 40% of premium SMS fees.. can you imagine a physical goods merchant paying 40% interchange.. ? on a Pizza?

The picture I’m trying to paint is that carriers love digital goods, they have committed to billtomobile (in the US) and are just starting to “think” about expanding on the $25 limit and physical goods. What makes Payfone think that any carrier on earth would let them lead this? This is NOT a technical problem for the carriers.. they already have all of the capability to turn on mobile payments to any merchant. They have the wallets as well. Not only would this create mass customer confusion.. it would also impact carrier led initiatives for NFC at POS.

Most of my contacts are just shaking their head at this one… Payfone? Not in the US.. no way. The carriers have complete control to shut this down. If Payfone would have just spent a little time with the MNOs they would have seen the flaw here. The only option I see for them is to give this thing to Roamware and let the carriers brand it and attempt to integrate it within their current wallet plans OR focus on merchant acquisition for billtomobile payment.


ICS/SS7 has well defined transaction types (SMS, Data, voice, …). Payfone does not just “throw” a transaction on the SS7 network without either the sending carrier and the recieving carrier agreeing to the transaction. There is first an “authorization” process before any transactions are even allowed. Example: does this customer have an international plan? are they a pre-paid? what is their limit? Voice only?

Recieving carriers can deny payfone transactions. Of course a sending carrier may be successful in “masking” the transaction so that they look like a voice charge.. but this would certainly fall afoul of both regulators and the ICS agreements. Remember this is money transfer cash out, which will ALSO be covered by numerous banking/MSB regulations. As with any money transfer business, KYC is required on both sender and reciever in most jurisdictions. Who maintains regulatory responsibility for KYC? Carriers? NO WAY.. is Payfone doing a KYC on its senders? RECIEVERS? Again, this is the beauty of PayPal.. both senders and recievers have registered and accepted terms.

There are few short cuts in payments.. this solution is technically elegant, but complicated when taking into account carrier plans and regulatory issues.


4 thoughts on “Amex: Payfone and Serve

  1. Why did two operators invest in Payfone if it’s so easy to do what they do? Are you shilling for bill 2 mobile – they are no different than Zong, correct?

    • Shilling.. had a good laugh at that one. But good question, I have had no contact with any current employee of BTM until yesterday actually.. and certainly have no ownership. Investors are Blackberry, Opus, RRE, Amex, rogers and verizon ( that we know of. To answer your question.. first answer mine “why did Citi, mastercard and Nokia invest in Obopay”? Answers are the same.. it looks good on paper.

      BTM is MUCH different then Zong/Boku. Zong/Boku depend on premium SMS. BTM is integrated into the carrier’s billing system…. (2 year effort). Zong and Boku have no carrier agreements.. they just put the transactions on the premiums SMS rails. (See my bill to mobile post for more info)

      Belgcom BICs has a service named “ping ping” ( that is basically the same as Payfone.. in place for 4 yrs. Works great in Belgium where there is one major carrier. COULD IT WORK? Yes.. certainly it could.. particulalry in Canada where the carriers collaborated on Enstream (now for sale). In US? sure it is possible.. My top question on the Verizon investment is whether it is a Vodafone front.. that would make it much more interesting.

  2. It’s early and we have to give credit to all the players for stirring things up. Why don’t you just meet with a bunch of these companies and ask them what they do and how they differ. From the research we did, a lot of companies are just connected to Q-PASS in the US. That is the real gateway to the billing system. It’s an AMDOCS product with a long history. So these other folks are just middlemen on top of middlemen. We also say that the market is currently just PC billing. So there is a while to go before there is mobile commerce on the hand sets.

    • Sorry, I don’t give credit to anyone for stirring things up. I give capital for sound investments.. call me a heretic. My views are not formed by sitting in a closed room with the phone off the hook. .. If you want to read the marketing spin perhaps you should read another blog. Venture teams make bets on people and “follow on” with other credible investors. Nokia, Mastercard, Citi are no idiots.. but yet they invested in Obopay. Qualcomm may be the smartest company on the planet.. yet they bought firethorn. This area is so hot right now that poor decisions get made as every group (venture firms, fortune 50s, … ) has to show “progress”.

      How do you compete with free? That is what this company is doing.. Have you seen what the top 5 banks are planning? I have.

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