An effort to provide a pan-European mobile payment service was aborted just weeks before it was slated to launch.
Simpay, a joint venture established two years ago by Orange plc, Telefonica Moviles, T-Mobile and Vodafone plc, pulled the plug after T-Mobile withdrew its support. The platform was due to launch this month in Spain and was to be deployed in other European markets later this year.
“Simpay’s operations will be scaled back with immediate effect,” the company’s Web site read last week. “Member operators will be able to exploit Simpay’s intellectual property rights at a national level, although international interoperability remains a goal.”
The business was established to enable wireless transactions of about $12 or less, with charges appearing on phone bills or deducted from prepaid accounts. Simpay would execute the transaction and take a cut of each purchase. But analysts said such a standardized billing platform could be prohibitively costly for carriers, particularly compared with established payment systems like premium short messaging service.
“The cost of getting a digital purchase onto the bill (of a wireless carrier) is still fairly high,” said Joseph Levine, a Yankee Group senior analyst. “When you look at the revenue splits there, you have more people who potentially need to get paid.”
Simpay initially planned to offer its payment system in 20 countries by 2004, but was plagued by delays nearly from the start. It looked as if the initiative was gaining steam in recent months, though, and carriers Amena and Proximus joined the fold earlier this year. Indeed, executives were plugging the business at CTIA Wireless 2005 in March, and there was talk of U.S. carriers adopting the platform in short order.
But the group announced the delay of a service launch in April, and whittled the scope down to just one country, Spain. T-Mobile, which was rumored to be wavering in its support, finally backed away from the table to develop its own existing technology, sealing Simpay’s fate.
While the relatively low activity in the m-commerce space is partially to blame for Simpay’s collapse, analysts say the announcement leaves the door ajar for other players to handle transactions for carriers. Europe seems especially well suited for such an effort, given the vast number of carriers and the potential for international transactions. As users become accustomed to using their phones to buy video clips and digital music, that opportunity will increase, according to Michelle de Lussanet, principal telecoms analyst with Forrester Research.
“With Simpay out of the picture, banks have more breathing room to plan their own entry into the world of mobile payment,” de Lussanet wrote in an executive summary on Simpay’s demise, adding that the system was “doomed from the start.”
And if such a universal payment platform was doomed in Europe, there probably isn’t much U.S. demand, where several massive carriers own the market and international transactions are rare.
Simpay said the carriers that supported the effort “will make known their individual plans in due course,” and whatever technological advances the business made in the last two years are likely to be used by member carriers as they build their own m-commerce platforms. The failure of a cross-carrier, pan-European platform highlights the challenges of getting operators to cooperate.
“Part of the difficulty of Simpay was getting a number of competing wireless carriers to sit down and work together,” explained Levine. “It simply lost some momentum.”
The failure is sure to slow efforts by carriers and finance companies to get consumers to use their phones as mobile wallets, conducting contactless payments for subway fares and movie tickets. But modern networks are a lousy place for widespread adoption of such applications anyway, according to de Lussanet.
“The mobile channel isn’t suited for large-scale payment collection,” wrote de Lussanet, “because it’s too unreliable and too expensive.”
