The use of mobile phones to initiate payments, a common practice in Europe and Asia, has yet to catch on in the United States.
And a new program allowing parking meter payments to be made through a cell phone shows that vendors and merchants in mobile phone payment systems may have to tweak the business model if the practice is to become more popular here.
The program announced last week by the city of Coral Gables, Fla., uses an electronic payment system for all of the city's 4,573 parking meters. Drivers can enroll on the spot with their mobile phones and route the parking fees, plus a 25-cent surcharge, to their credit cards.
This differs from the system that is commonly used overseas, where people can use their cell phones to make payments, at vending machines and some merchants.
The charges are typically deducted from a prepaid chip in the phone or included in the customer's monthly phone bill.
The parking payment system was developed by Mint Inc. Frank Maduri, the Toronto company's president, said he wanted the payments to appear on the phone bill but that he could not reach agreement with any cell phone carriers. So he turned to credit card companies.
Reino Parking Systems of St. Leonards, Australia, had a similar experience with cell phone companies. Reino, whose U.S. headquarters is in Alameda, Calif., has a system that allows drivers to pay for parking meters with their cell phones. Mark Ralston, it chief operating officer, said in an Oct. 8, 2004, American Banker article that the carriers were unwilling to set rates he felt were reasonable.
Cell phone companies "treat their bill as a holy entity," Mr. Ralston said in October (he did not respond to e-mail and phone requests to comment for this article). Since last year Reino has been testing its parking system, which also drivers charge their parking fees to a credit card, in at least one U.S. city.
Mark Siegel, a spokesman for Cingular Wireless LLC, said the joint venture of BellSouth Corp. and SBC Communications Inc. often receives proposals from companies offering services that can be charged to the cell phone bill, and turns down many of them. It has no parking-services partners and such services are "not our focus at the moment," Mr. Siegel said.
When Cingular gets these requests, Mr. Siegel said, "The first question we ask is, 'Is this something our customers will want? And oh, by the way, will we make money on it?' " If the answer to either question is no, he said, Cingular's answer is no.
Users of Mint's system can enroll at the meter by placing a phone call and providing a credit card number; when they need to pay for parking again they can call the parking system, which will recognize them through caller ID and automatically charge their card for the parking fees. The 25-cent charge goes to Mint, and the city picks up the tab for the card transaction fees.
Many merchants, especially Internet retailers, have complained that the interchange fees for accepting cards can eat into their profit margins for low-cost products. However, William Carlson, the parking director for Coral Gables, said the city has found the Mint system more economical than the older one.
"Think in terms of the labor it takes to collect the coins from those parking meters every day," he said. "The transaction fee of the credit card is certainly less."
Coral Gables had already installed machines that enabled drivers to use payment cards for parking, but with those systems people had to swipe their cards in exchange for a ticket, then walk back to their car to place the ticket on the dashboard. The machines also allowed motorists to pre-pay for parking, but sign-up had to be done in person.
Mr. Carlson said he expects the cell phone version to be more popular, because "there is a convenience factor."
More than 500 people have enrolled in the Coral Gables system. Mr. Maduri said the system is also in use in several large Canadian cities, including Toronto, Vancouver, and Victoria, but mainly at paid parking lots.
Having the system available at every meter in the city has made the Coral Gables project much more successful, he said. Enrollment was higher in Coral Gables than in Canada, he said. "It's gone crazy on the subscription side."
John Gould, a director of the consumer lending and bank cards practice at TowerGroup Inc., the Needham, Mass., market research unit of MasterCard International, said the United States is about five years behind Europe in the use of mobile phones for payment.
Culture is one reason, he said. "Credit cards and debit cards in Europe are not nearly as common as they are in the United States," he said. And in Asia, cell phones are "as ubiquitous as is your wallet."
But the systems will become more common in the United States, Mr. Gould said. Cell phones are "just another logical extension for moving from paper to electronic payments," he said.
Mr. Maduri said that he has not given up on working with cell phone carriers and that eventually he expects to come up with a way to route the payments to the phone bill. "It will be there, but it will be a step-by-step process," he said. "It's going to take some time."
