Google has updated its Android Market Developer Distribution Agreement to pave the way for in-application carrier billing with the goal of making the mobile payments process easier.
According to a Google blog post, the update to the Android Market DDA is in preparation for some work the company is doing on introducing new payment options, which it thinks developers will like. Carrier billing could simplify in-application purchasing so that the Android mobile payments process is as easy for consumers as Apple’s iTunes.
“This is really important, because the reason why iPhone trumps Android in terms of consumers actually buying stuff within apps is that it’s a lot easier on iPhone, because they just have to enter their iTunes password,” said Michael Schneider, CEO of application-development platform Mobile Roadie, Los Angeles.
“The closest thing on Android is PayPal and it’s not user friendly,” he said. “Adding an in-app carrier billing option could equalize things between iPhone and Android in terms of buying things within applications, which is certainly great for us,” he said.
It is always best to give consumers various payment options to make the experience as seamless and convenient as possible.
The problem with carrier billing it that it has always been expensive, with carriers typically taking a 50 to 60 percent cut.Mr. Schneider said that the success of Google’s carrier billing initiatives will depend on the split.
“I’ve heard rumors that carriers may go down to 30 percent, and if that’s true, it’s great, because Apple charges 30 percent cut on all iTunes purchases [so it would be comparable],” Mr. Schneider said.
“If [Google] can make it just as easy to make in-app payments, which I think carrier billing would, and at the same cost [as iTunes], it would make a big difference for ecommerce inside Android apps,” he said.
More payment options for developers, consumersGoogle’s Tim Bray said the following in the “Adjustment to Market Legals” blog post:
In the spirit of transparency, we wanted to highlight the changes:
• In Section 13.1, “authorized carriers” have been added as an indemnified party.
• Section 13.2 is new in its entirety, covering indemnity for payment processors for claims related to tax accrual.
These new terms apply immediately to anyone joining Android Market as a new publisher. Existing publishers have been notified of this change via email; they have up to 30 days to sign into the Android Market developer console to accept the new terms.
The updated terms appear to indicate that mobile subscriber billing is about to get a big push in the United States.
That could ruffle the feathers of some financial services companies such as banks, Visa, MasterCard and eBay’s PayPal.
“This has not been a very significant mobile payment model in the past, although some players—Boku, Zong, Danal—have been making progress in offering solutions for this space,” said Red Gillen, senior analyst at Celent, Boston.
“Perhaps even more importantly, the implication is that mobile carriers are going to take on a bigger role in the payments market, thus competing with banks and payment brands such as Visa and PayPal,” he said.
“If the mobile subscriber billing model takes off, you can expect these traditional payment players to squeal, and I wouldn't be surprised if they raise the specter of regulatory intervention.”
Effect on the mobile ecosystemThe updated terms open up a few key unanswered questions: Which mobile carriers will participate? What is the mobile carrier "cut" of the payment? Who holds the credit/payment risk? Will this level the playing field between Google and Apple?
“However, these issues have been addressed in other cases—for example, mobile digital content downloads—so I expect the details will be forthcoming,” Mr. Gillen said.
As is the case with both the bricks-and-mortar and online marketplaces, any way to expand consumers' payment options ultimately leads to more sales.
The bottom line is that adding in-application carrier billing options will help developers, brands, retailers and publishers monetize Android applications.
“For consumers, carrier billing will increase their opportunity to do more in-app purchasing, because it will appear on their mobile phone bill,” said Margaret Glover-Campbell, vice president of marketing and public relations at Multiplied Media, Calgary, Alberta, Canada.
“I think everybody is trying to move that way, because everyone is on their mobile devices all the time now and the mass adoption will continue to grow,” she said. “Make something easy for consumers and they’ll adopt it.
“There are different levels of comfort for different consumers as they see how trustworthy a new method of doing things is, adoption will grow—this means more options are available to them, but it won’t take away from any of the other current mobile transaction mechanisms.”