Telstra muscling in on the money system
Date: 11/04/2001
Telstra's Dial-a-Coke ploy could be the first step towards something far bigger.
Virtual Reality by Tom Burton
The headline was cute and innocuous. Dial-a-Coke.
But if Telstra has its way, a pilot where customers can buy a can of Coke from a vending machine using their mobile telephone could well be the first small but important step in the carrier's move to become a financial services hub.
The trial involves 17 Coca-Cola vending machines at Sydney's Central Railway.
Each machine has a telephone number which Telstra (GSM) mobile users ring and use a voice prompt to buy their soft-drink.
The transaction is charged to their mobile phone account, with the location of the machine noted.
For the trial, the cost of the soft-drink is the same as using coins and no charge is made for the telephone call.
The same technology has been used in Finland and South America and, while the current consumer pitch is to use the service when you don't have change, Telstra is open about its ambitions to roll it out to other micro-payment applications such as parking, ticketing, bookings and even petrol.
From there it is not a big step to paying for the groceries or whatever using the same technology.
This scenario, if it came true, would of course see Telstra take up the banks' central role as managers of the payment system, not to mention what it would do for the local credit card business, particularly if Telstra could offer better credit terms.
Cash is still the way nearly 80 per cent of all transactions are handled, with the vast majority of them being for less than $30, so if Telstra could shift even a fraction of this business it could gain a big foothold in the payments market.
For nearly a decade there has been a stand-off in the smartcard industry as the big credit card operators and the banks argued over what standards to adopt, with neither group keen to give the other a leg-up.
The result has been there are precious few smartcards in circulation in Australia.
Meanwhile, there are now nearly 11 million mobile phones and a Sim card is, for practical purposes, a smart card by another name.
Which explains why Telstra is so keen to use its large market share to turn these handsets into mobile e-commerce platforms.
And while its Coca-Cola pilot is proprietary, those guiding the trial agree they can grow the mobile-commerce market much more aggressively if they can bring the banks and other payment providers into the system.
In the future, this would involve giving consumers a choice of payment options.
Telstra's thinking is to also bring the other carriers into the model so that the various m-commerce applications can be rolled out as fast as possible, embedding the mobile handset as the key access technology for a whole host of new transactions.
How consumers will take to Telstra charging them for many of their transactions is yet to be seen.
There are enough stories around about errors in telephone bills to suggest Telstra's system may struggle to give the reliability consumers would expect from a financial services company.
Billing though the telephone system has also been developed in the online environment where subscribers to certain so-called premium sites - mostly pornography - are being billed through their telephone account.
In this case the PC disconnects from the consumer's normal PC and dials up the service through a 1900 number.
The concept is crude but again involves using the telephone billing system as a substitute for credit cards.
But it is the mobile market where some of the big players are investing real money and where the potential lies if consumers can be persuaded to make the switch.
It is significant, however, that the current generation of phones can handle most of the data and voice requirements but the promise of so-called 3G phones could also open up the possibilities for other forms of m-commerce.
For a carrier like Telstra, which is seeing its core voice telephony business rapidly losing its high margins, it makes strategic sense to be aggressively moving into the payments arena.
With commission rates of up to 10 per cent being levied by some payment providers, there is a rich revenue stream to be tapped if Telstra can effectively migrate its huge telecommunications customer base into telephone and m-commerce.
Tom Burton is managing editor of smh.com.au and holds shares in Telstra. tburton@fairfax.com.au
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