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With the users wallet being limited and ARPU declining, mobile commerce is being seen as a means to drive incremental revenues for telecom operators in India. Intel Capital funded Mobile Value Added Services company One97 Communications announced the launch of a payment service called PayTM, which will allow prepaid users to top up their mobile accounts, and also shop directly using their bank accounts or credit cards.

Speaking to MediaNama on the sidelines of VAS Asia 2009, Rajiv Madhok, Director at One97 Communications said that the service will link a customers pre-paid account to his bank or credit card account. This way,  company can provide either consent driven or automatic transfer for a recharge every time the consumer runs out of money in his mobile account. Then there’s shopping…

Merchant Partnerships

One97 Communications has tied up with some 6-7 merchants: with Ferns N Petals for flower purchases, HomeShop18 for shopping, PVR Cinemas and Adlabs for movie tickets, the DND Toll Plaza, among others. They’ve also got Max New York Life for payment of insurance premiums, on board, and are in conversation with ICICI Prudential. Note that One97 investor SAIF Partners is also an investor in HomeShop18. (Note: see point 5 in clarification below)

Operator And Bank Partnerships

Madhok declined to name any telecom operator and bank partners, saying only that one CDMA and one GSM operator have given them the go-ahead. “Every operator is looking for solutions. How long can you keep just pushing SMS’ and reminder calls?” Madhok said.

Differentiation From Other Payment Service Providers?

With several payment companies – Paymate, MChek, Obopay, NGPay – among others, is there space for yet another payment solutions company? Madhok says that the market will decide, and feels that the deep integration that One97 Communications has into the telecom operators network – which only a few companies (mostly on-deck companies) have – works to their advantage.

Dealing With Regulatory Constraints

Churn is high in the telecom space, and the onus of informing the bank about the changes will be on the customer when he moves from one telecom operator to another. One97 is only connecting one bank account with one mobile number at present, and Madhok says that multiple numbers connected to one bank account is a regulatory grey area.

We asked Madhok about how the mobile space is impacted by regulations because of which banks are enabling extra authentication norms. He declined to disclose the companys authentication process, saying only that “the banks are okay with it. We have drawn parallel between what is on the Internet, and how the mobile is a lot different, and they’ve agreed with us.”

The RBI regulations on mobile payments are bank focused, and suggest that payment service providers have to tie up with all telecom operators within six months of the launch of service with any one. Won’t banks hesitate to tie-up with multiple service providers? Madhok said that the company “spoke to banks like ICICI and HDFC etc, they were very excited by it. We know how to handle bulk transactions. We’re getting a certification from companies like PWC, and they know we are secure.”

Update: Vineet Kaul, Sr. Vice President (Business) at One97 Communication writes in with the following clarifications. (Editor: about the vendors mentioned in point 5 below, MediaNama accurately reported what the company had told us during the interview; there was no misquote)

1. The service is device agnostic / medium agnostic. To start with we will launch it over voice (multi lingual IVR). The objective here is to achieve mass penetration. Voice as a medium will allow us to do just that. As far as other mediums are concerned, PayTM will be made available across – xHTML/WAP, Device portal etc

2. PayTM will be made available on voice as a medium of choice (to be made available across languages), is a differentiator in itself. And if you add our deep operator integration and merchant integration to this, it surely creates enough value for us to have got into this space. Moreover, we don’t look at things from a very immediate perspective. Our decisions are more long term and i would like to assure that we have certainly thought through this ecosystem. Some of the things are best left undisclosed. Having said that, once we deploy on an operator ecosystem, the difference will be there to see.

3. PayTM is a white label application and would be available for use once we deploy it on a operator network. As Rajiv had mentioned, we have a go ahead from two carriers and soon it will be made available over these networks. Screen shorts are not available as we will go live with the voice client for the application. And i am not sure if posting of a few screen shorts could anyway give enough information on the usability of the application.

4. Our corporate website is going for a revamp and that is the reason more information was not available on PayTM. While our corporate website is getting up and running, more details on PayTM are available on www.paytm.in

5. Currently we have partnered with a wide array of merchants including Ferns n Petals for Flower Delivery, Multiplexes like Fame Cinemas for Movie Ticketing, and Suvidhaa for Utility Bill payments and Travel Booking. Customers that have been mentioned are our enterprise customers and at this point they may not necessarily be our customers for PayTM. Having said that we have discussed potential mobile commerce related opportunities with some of them and we see no reason for our current relationship not getting extended for PayTM.