Haiti Earthquake Puts Mobile Payments in the Spotlight

While a disaster of massive proportions, the Jan. 12 earthquake in Haiti nevertheless is boosting online giving and mobile payments in particular as U.S. donors seek the fastest way of putting their donations to work in the stricken country. As of 9 a.m. Eastern time Monday, more than 2 million donors had given $21 million in $10 increments to the American Red Cross's Haitian earthquake-relief effort, according to Tony Aiello, chief executive of mGive, the technology platform of Mobile Accord Inc. Founded in 2005, Denver-based Mobile Accord works with 200 non-profit groups to raise funds via mobile devices. While they've received a huge amount of publicity, mobile payments have been slow to take off in the commercial world for a variety of reasons that include merchant acceptance, difficulty in using older cell phones for payments, and disputes between telecommunications carriers and payments companies about revenues and technology. But the Haiti disaster shows what the mobile channel is capable of?generating payments very quickly. “Today, with the Haiti donations, that's huge, by any measure a huge event in mobile payments,” says consultant Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC and a former executive with First Data Corp. and ViVOtech Inc. Donors to the Red Cross paid by sending a text message to 90999, the specific number for the agency's earthquake relief donations. Other charitable groups are using text-message systems to raise relief funds for Haiti too, says Aiello. Individual carriers also are taking various measures to speed up payments to relief agencies after a donation is authorized, Aiello says. At least one company, for example, was fronting the money to agencies almost immediately rather than waiting for donation transactions to settle. The major payment networks also have announced fundraising efforts and waivers of interchange on donations. Save the Children Federation Inc. has a single online earthquake-relief donation page featuring the checkout logo of PayPal Inc., Amazon.com Inc.'s Amazon Payments, and Google Inc.'s Google Checkout. And Apple Inc., operator of the iTunes music software and online store, over the weekend sent an e-mail to registered iTunes users asking for donations to the American Red Cross, which could be made by simply clicking a button for a specific amount ranging from $5 to $200. Donations would be charged to the user's registered credit card. The earthquake-relief efforts are likely to keep electronic payments in the spotlight in the coming days and weeks, but whether the cooperative spirit generated by the disaster will spur long-term solutions to commercial deployment of mobile payments is far from clear. The phone carriers, for instance, normally charge 40% to 50% of the payment amount in fees for payments routed over their networks. (Carriers are waiving them for the Haiti donations as they have since 2008 on donations to non-profits, according to Aiello.) Those lucrative telco fees are a major impediment to the use of mobile phones for payments. The telcos also typically put $20 limits on payments to third parties, refrain from acting as creditors, and can take days or even weeks to settle transactions, says Ablowitz, a board member of mobile bill-payment provider Billing Revolution. That Seattle-based company is backing a one-click, credit card-based mobile-payment system (Digital Transactions News, Sept. 24, 2009). Technology issues also are a flashpoint. So-called near-field communication (NFC) chips, or stickers with NFC capabilities that attach to phones, would facilitate two-way contactless communication of payment data between cell phones and NFC-enabled terminals. Some telcos say the optimal tactic would be to integrate NFC functionality into the chip that controls the phone, the SIM card. But many payments executives don't believe SIM chips have sufficient security. Still, experimentation continues. The FinVentures banking technology blog claimed in late December that Visa Inc., AT&T Inc., and First Data Corp. were working on a service that would have an NFC sticker for cell phones and would link to an AT&T prepaid account. And the Cult of Mac blog claims Apple is working an iPhone enabled for contactless payments.