Universal Mobile Payments in a Fragmented App Market

By Jay Emmet, General Manager, OpenMarket for Wireless Week

In the world of mobile apps, Apple is the undisputed market leader. In fact, Apple was responsible for approximately 99.4 percent of all mobile apps sold last year, according to Gartner. With the iPhone’s incredible popularity among consumers and the easy navigation of its App Store, Apple has succeeded in driving widespread adoption and demand for its platform, while keeping purchased content exclusive to its products.

But Apple isn’t alone in its efforts around mobile apps. Many others have emerged to stake their claims in this rapidly growing and profitable market. RIM, Palm and Nokia are among the most prominent to create off-deck app stores of their own. Unlike Apple, they tend to offer a more branded experience in addition to proprietary offers and apps. However, as more third-party and off-deck application stores emerge, fragmentation in the app industry is an increasing problem for mobile providers and a confusing issue for consumers. Mobile subscribers are demanding more options and, above all, an easy purchasing process when it comes to apps.

Is a Worldwide App Store the Solution?
Many organizations have recognized the problems surrounding fragmentation in the app market, as well as tremendous opportunities. At this year’s Mobile World Congress, 24 mobile operators joined forces with the GSMA and handset makers Samsung, LG, and Sony Ericsson to propose a new open marketplace for mobile applications – the Wholesale Applications Community (WAC). Seen as a challenge to Apple’s dominance in the app market, the WAC plans to create an open platform for delivering mobile applications across various mobile handsets.

Many are skeptical about how the WAC will impact the broader ecosystem – from off-deck app stores, to developers, to consumers. In some respects, this is a strategic or commercial issue rather than a technology one. Others question whether such a proposition is even possible. At a basic level, operators have different commercial habits, pricing models and appetites for risk. It is also noteworthy that companies with their own operating systems – such as Google, Microsoft and RIM – have yet to participate. While a common app community would ease the process for developers, it doesn’t address the major discords and particularly the challenge of harmonizing payment functionality.

The Challenge of Mobile Payments
The market is demanding consistency from the mobile app industry. As carriers, developers and subscribers consider a worldwide app store, these changes may also lead to more off-deck app stores, and the need for a streamlined, consistent payment mechanism that can make the user experience simple and seamless. An app store without a consumer-friendly payment methodology will never appeal to the mass market. While the ubiquity of credit cards makes them a potential option, consumers are wary of entering this type of personal, financial information and the process of inputting these details can be cumbersome. PayPal and Google Checkout are other alternatives but, much like the Apple App Store model, they require users to create an account connected to and funded by a credit card before making purchases. Even third-party payment mechanisms cannot achieve necessary subscriber mass to be successful. The opportunity and power of operator billing is tied to the relationships that these companies have already established with consumers.

The BOBO Opportunity
Mobile operator billing offers app stores the fast, straightforward, secure and wide-reaching payment method they need. It enables consumers to make purchases easily on their mobile devices and have the full cost charged directly to their monthly wireless bill. BOBO, or billing on behalf of, is the most advanced form of mobile operator billing and can significantly streamline the purchasing process to a just a few clicks within the app store. This simplicity is a key contributor to consumer satisfaction, as well as the addition of customer service support through an app store call center, which takes this burden off the mobile operator. BOBO can further benefit operators when they extend this functionality to approved partners in order to realize new monetization opportunities.

BOBO enables a streamlined mobile purchasing experience for consumers, straightforward payment functionality for off-deck app stores and builds on the established billing relationship between operators and subscribers. As the mobile app space continues to evolve, mobile operator billing is the only payment method that can offer scale and support growth for the commercial success of app stores.

There is a growing need for a sophisticated billing mechanism that can support the mobile purchasing experience. Mobile apps have been immensely popular – a startling $4.2 billion market in 2009, according to Gartner. In order to sustain this growth, players in the app market must address this critical issue and BOBO will play a key role in the future of mobile purchasing and billing methodology.