– Not so Rosy for MOBILE Payments

The rosy picture painted in my precious post about doesn’t seem to be that rosy. Based on reading fine print on’s website and some number crunching and deeper analysis, it might become more expensive to acquire new customers and retain customers if you use unless you get a phenomenal increase in conversions.

Airtel + BOKU can reach a huge user base of mobile customers in India. However, it seems like talktime currency can not be used to make payments. So the overall user reach (especially in smaller regions) reduces tremendously.

Postpaid customers – If postpaid users are going to be charged in their bills then service charge, recovery and fraud management will become an issue.

Broadly there are some more important issues to think of:

1) Customer’s Perspective: In the bill amount the user has to pay ~10% service charge. Which means that if they spent Rs. 100 they actually have spent Rs. 110 which they will realize in their 1st bill.

Merchant’s Perspective

1) Airtel + BOKU is charging some ridiculous amount of 25% – 45% fee to allow such transactions. If we go by industry standards, online payment gateways accepting credit card/debit card/Paymate(mobile), ITZ Cash cards etc… all these guys charge not more than 10%. Which means in the case of BOKU, the merchants will have to compensate nearly 25% to 45% of the cost of payment made by users. Which is ridiculous.

2) Merchant’s Perspective: If BOKU says that these numbers add up and it’s volume game and more conversions will help in driving revenues and break-evens then it means that by adding BOKU your conversions need to go up by atleast 10%(this number varies for various industries) till you break even.

3) After careful consideration and number crunching it looks like your existing customers who are already using credit or debit cards to make online payments should actually NOT move to this Mobile payment option as in the earlier case the merchant is compensating for 10% of the fee, however, with BOKU the compensation increases steeply.

BOKU Vs Merchant VS Telecom Provider
1) Credit period and liquidity – Telecom providers are asking for a credit period of 90 days before they release payments. Which means the merchant’s liquidity will get hit. They are willing to reduce it over a period of time to 30 days or 60 days. However, this is ridiculously high as compared to almost 24 hours time frame provided by Online payment gateways.

2) Money recovery from customers – Recovering money from post paid users for wrong charges on their bills might become an issue as they will have to handle fraud complaints and resolutions.

What BOKU can be helpful in is… converting new users. Making payments for the 1st time when the user is not sure about using their credit cards.

Unless Telecom carrier’s and BOKU’s combined cost doesn’t come down to something similar to other online payment gateways, this looks like a flashy new system to me which will take it’s own sweet n slow route to become what they want to become.


One thought on “ – Not so Rosy for MOBILE Payments

  1. Another point which I missed was Margins… unless you have a very high margin business…something like Virtual Gifts in facebook… this might not be a great option.

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