Valista Looks to Strong U.S. Growth in Wake of Partnership with IBM

Looking toward a breakthrough year in payments processing for online and mobile digital content, Valista Ltd. has signed a marketing and technology deal with IBM Corp. that it says will help it recruit its first major North American client since America Online Inc. The unnamed telecom operator, currently a client of IBM's Service Provider Delivery Environment platform, will begin using Valista's transaction-processing software by year's end, predicts Craig R. McDonald, vice president for North America for the Ireland-based processor. “We hope it will be a reference account we can showcase [to other carriers],” he says, adding he can't be specific about whether the account is a wireless or wireline company. Under the terms of the IBM deal, announced late last month, Valista's transaction-processing and campaign-management software will be integrated into the SPDE platform, which IBM sells into the telecom industry as a means to accelerate the launch of new products and services. McDonald says the IBM alliance will help Valista exploit a burgeoning market for mobile and online content in the U.S. While consumer demand for such premium services and content as games and ring tones has been booming overseas, McDonald says that demand is beginning to take off domestically as well. Also, new content, such as videos and clips from hit TV shows, are beginning to come on stream. “There's real evidence we're hitting an inflection point,” he says. “This is becoming a real and measurable business for U.S. [phone-network] operators. We're seeing exponential growth.” The number of U.S. wireless subscribers for voice and data combined more than doubled, to 51 million, between 2002 and 2004, and is expected to reach nearly 70 million by 2007, according to the Yankee Group. McDonald argues that the network operators can be a “trusted” third-party provider to content distributors, bringing them processing services through companies like Valista that rely on the operators' own billing systems, which offer efficiencies that can undercut the acceptance costs of credit and debit cards for small-value payments. Ring tones, for example, typically sell for anywhere from $1 to $3 each, making it hard for providers to clear any profit after paying interchange and other costs. “Up to this point [digital-content] merchants have been left with little alternative other than credit cards,” says McDonald. “[Operators] have the ability to be very competitive from a rate perspective with the card associations at any price point, but particularly at the low end.” Beyond payment efficiencies, he adds, operators can also help distributors sell content to their subscriber base with various discounts and other offers, campaigns that Valista's system also helps manage. “There are a whole lot of benefits the operator can bring to the merchant to reach a captive audience,” he says. Last month, Valista introduced what it said is the first system capable of handling payments for multiple content merchants selling to the same customer through a network operator or Internet portal (Digital Transactions News, May 18). AOL, Valista's first U.S. client, began processing on Valista's platform earlier this year. Overseas, the company's client base includes Vodafone UK, NTT DoCoMo, and France Telecom's w-HA. Valista was formed in 2003 out of the merger of two payment-software companies, Network 365 and iPIN, that derived most of their business from Europe and Asia.