Payfone Aims to Make Mobile Payments Pain-Free

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Prakash Hariramani of Payfone uses the word pain a lot in discussing mobile payments. Time will tell if his company's new mobile service will be a cure.

"We feel the mobile payment process is very painful," says Hariramani, Payfone's vice president and head of product.

Payfone's new payment product, 1 Touch Checkout, uses mobile identity to directly execute electronic payments while shopping. The company hopes that will improve the user experience by removing some navigation steps.

Payfone, whose investors include American Express (AXP) and Verizon (VZ), will test 1 Touch this fall to find out how the model can improve conversion rates by offering consumers faster execution when paying via mobile devices, since the consumers tap their mobile screens only a few times to make a payment. According to Forrester, mobile shopping card abandonment market wide is about 69 percent, though the research firm attributes that abandonment to a wide variety of factors from comparison shopping to saving items in the cart for further consideration.

"Entering lots of information on a mobile site increases friction. We don't want to ask people to change their shopping behavior," Hariramani says. Payfone is also hoping to attract merchants by offering minimal upgrade expense or effort. Merchants register for the service online, and do not have to install special hardware on their point of sale devices.

To use 1 Touch Checkout, consumers enroll with participating card issuers on their mobile bank sites, and link their payment card numbers to their mobile phone numbers. Consumers can include credit cards, debit and checking accounts as sources of payment.

While shopping, consumers can visit the mobile app or mobile websites of participating merchants, where they can view an item, such as a train ticket, for example. Consumers can then choose from a menu of accounts that have been registered with 1 Touch. The user can then tap on the desired account for payment, without having to having to enter a card number, shipping or billing addresses, as is required for some mobile-enabled purchases. With 1 Touch, that information is already included in the initial account information at the time of registration.

"We believe the best way to drive a mobile shopping market is to create a payment ecosystem instead of another payment mark," Hariramani says. To protect from theft, acquiring banks add a security code to authorize transactions. The security code is checked against the issuer, and if it matches, Payfone sends the name, address and transaction info via an encrypted pipe to the merchant.

The firm did not disclose the pilot's bank partners or fee structure. It did disclose that CardinalCommerce, a payment platform that enables authentication and e-commerce transactions for clients such as Verified by Visa, MasterCard SecureCode, Bill2Phone, and Google Checkout, would test the Payfone product with a limited group of merchants.

Among competitive offerings is software from PayPal (EBAY) that allows consumers to use mobile phone numbers and a PIN to execute mobile payments at Home Depot without a special app or a card download. Mobile phone numbers are also becoming a popular way to execute person to person payments. Barclays, for example, enables account to account mobile transfers via mobile number, a service also offered by PayPal and ClearXchange, the Wells Fargo (WFC), Bank of America (BAC) and JPMorgan Chase (JPM) joint mobile payment partnership.

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