Pay by Cell – The battle is joined

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Pay by Cell – The battle is joined

John Regan of Parcxmart, a debit card supplier, questioned the effacy of pay by cell phone in the post prior to this one.Niel Podmore of Verrus responds:

I was interested to see two comments from Parxmart in as many
days. Clearly the “dog days” of summer have hit New Haven early this year but I
think it’s worth clearing up some of the points that have been made: 

Pay by Cell is about value and choice to both consumers and
cities and since it is software based it represents a step change in reducing
the costs of collecting payments and operating in real time. 

Most, but not all cities charge a convenience fee when consumers
pay by cell because there is extra value delivered including a  text
message reminder before parking expires, the option to add parking time
remotely subject to any by law restrictions, a parking receipt by email and
online parking statements.  This is not a surcharge or a tax it’s an
optional fee for service, a model we are all familiar with and can make our own
minds up about whether it provides value. It’s not a compulsory fee that is
paid by everyone, the choice of paying “inconveniently” at the meter without
any extra fees or services always exists, not everyone has a cell phone or wants
to use it to pay for parking, however many do .    Providing
choice and options is a well understood by most people running a service
industry today. 

Better still in the case of pay by cell the service does not
have to cost the city anything because it is funded by the fees consumers
choose to pay.  So it’s a service that improves the efficiency of parking
operations,  provides value to consumers who choose to use it and costs
the city little or nothing.  Furthermore the pay by cell phone company is strongly
motivated to ensure the service is reliable, consumer friendly and delivers
value because if it doesn’t no one will use it,  and they won’t earn any
revenue. 


Some cities however recognize that pay by cell offer value to then as well as
consumers because it saves them money in capital, operating and maintenance
expense by reducing or eliminating meter infrastructure and upgrades. London is
a good example of this,  where one side of the street is pay by meter the
other pay by cell.  In this case there is no fee charged to the consumer,
it costs the same to park on both sides and the city pays a fee to the pay by
cell operator but also enjoys the considerable savings of eliminating the many
costs associated with meters.

Finally I would note that far from mobile payments being ahead
of their time we will process over 10 million mobile phone parking payments
around the world in 2008, so there are plenty of consumers and cities out there
who can see the value.

I would be interested to understand more detail about the costs
associated with purchasing, operating and maintaining smart card schemes. I
have heard that they are expensive to operate and distribute, require equipment
upgrades, provide little extra value to consumers and cost the city on an ongoing
basis up to 10% of their parking revenue without delivering any real value to
the consumers, other than putting another card in their wallet.

John Van Horn

John Van Horn

2 Responses

  1. Sorry it took so long to respond Neil. I am out selling city customers, I do not live in New Haven, and I dont think anyone who does thinks of their summer as “dog days”.
    Regarding value, I dont see any value under your present business model for consumers to use their cell phone when paying for parking on-street unless they are in a jam and without cards or cash or coins. Perhaps in London everyone loves paying extra? Since you are very clever let me show the readers what the press says about how you must pay for the use of your cell phone as follows and the whole article is linked for everyone to read:
    “Once signed up with a free pay by phone account, users simply call the toll-free number from the registered phone and key in the location number (posted on the meter or on nearby signs) and the amount of parking time desired. The appropriate total, plus a 35-cent service charge (including the text message reminder cost), will be charged to the credit card”
    http://www.paymentsnews.com/2008/05/pay-by-mobile-p.html
    That doesnt sound very “optional. So am I to believe that if I dont want to get your message(which no one needs anyway)I get the payment service for free? Plus it is free for the city? I think someone is paying somewhere in this value chain?
    I believe in choice too and as a consumer if I had to choose between cell minutes plus fees, and cards which are at no cost to me I would be happy to choose cards everytime. I would also remind you that ten million transactions after so many years worldwide is quite small. Putting that in perspective, in one city Parcxmart will do more than 650K transactions in 2008 versus your ten million in the entire globe. I guess consumers still like cards even smart cards.
    Regarding costs of smartcards when cities buy new meters the cost to include a smart card is marginal. And of course the consumer doesnt have to pay per transaction – which is truly valuable and convenient to the end user who by the way is paying the city and everyone else in this business.
    You also avoided the issue of privacy and identity theft based upon all the information you store on consumers for payment at parking meters – including license numbers. Perhaps that should be disclosed during enrollment? I had to dig down into NA Terms on the bottom of the page of your website; I think everyone should read this section it is quite remarkable what a cell phone payment services provider can do with your name, address, phone, cc/debit card, and card information. Do you sell the names?
    In closing, your fees and business modelactually takes revenues away from cities while smartcards/debit/credit cards provide incremental revenues back to cities. This is well documented and most consider the incremental gross revenue lift at about 30-35 percent on cards. In one city we went from $.72 to $1.46 per transaction. Now that is value!
    Therefore, the fees the city pays to deploy a smart card are essentially free, the merchants enjoy accepting less expensive smart card processing costs by a factor of 30% – mayors love that, and the parking public goes into their stores which is good for local economic development. Other software features are also available such as loyalty programs, the power of local currency, instant couponing, and transportation services. Finally, cities are able to brand their vision on each card issued.
    Thanks for your response.

  2. London sounds like the way to go Neil. I recommend changing your business model ASAP. So you then admit your business model should not charge the consumer a transaction fee – which is the way it ought to be everywhere. I agree. Thanks for your objectivity.
    This is why I agree. Your surcharge is essentially a tax on top of a parking tax which is voluntary of course(we dont have to park) but this is truly bordering on double taxation without representation. We dont like that in this country:) For example, do the city councils know that you can pay your firm on a $1 parking transaction an additional $.35? Wow imagine bringing that one up with the mayor at the local merchant association meeting?
    I would also appreciate it if you would answer my questions regarding privacy issues, surcharging against Visa/MC rules, and your right to sell or pass on my personal information to any third party?
    FYI, I also heard the city must purchase all new handhelds, and figure out how to educate their staff on making sure they dont ticket the cars that did pay. I heard this is an issue? Do you want to respond to that too? Also what happens when the enforcement server goes down and the enforcement officers lose connectivity with all their new handhelds?
    We could go on for quite awhile I am sure. I guess we wont be having any partner synergy meetings in the near future though? It is a shame because I will admit Vancouver is one of the most stunning of cities in all of North America. Have a good week.
    JR

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