By Fran Heeran

If advertisers and content providers want to take full advantage of the mobile channel, they need a more appropriate payment mechanism than Premium SMS.

Premium SMS has been the primary method used by content providers to allow the purchase of content not found on the wireless carrier's portal. It is a popular method for end users to consume services such as chat and voting.

The reasons why Premium SMS has become so popular and successful is that for off-portal content and service providers, it provided a simple, easy to integrate method of placing a charge on a subscriber's bill. It has allowed these providers to charge across operators in a given region through a single integration point, typically an SMS aggregator.

With the emergence of short codes, Premium SMS provided a simple, easy-to-use mechanism to advertise services and allow consumers to engage and purchase content through a simple text message to an advertised short code.

When Premium SMS charging first emerged, much of the content being purchased was itself SMS-based and delivered via the SMS channel -- ringtones, wallpapers and logos. So the interaction with the consumer was a relatively seamless process of sending an SMS message to request the content and receive it via a return SMS message which also triggered the charge to the subscriber's bill or prepaid account.

Despite its success, Premium SMS, as a model for payments, has its limitations which are now widely recognized within the mobile industry by content providers, advertisers, operators and aggregators.

While SMS still has an important part to play in the content value chain in the discovery of content and interaction with the user, content owners need to ensure they offer a payment mechanism that will once again restore trust with consumers by providing transaction visibility and traceability.

The shortcomings of Premium SMS have given rise to great dissatisfaction among users and unscrupulous charging among rogue content providers.

Looking at the large number of lawsuits that have been filed against mobile operators in the United States, it is evident that a transparent way of informing the consumer about a charge is required. Premium SMS has failed in this area because it's very difficult for the carriers to block messages to the phone.

But if a direct-to-bill model is used instead, it allows operators to enforce the opt-out and prevent unsolicited charging by rogue content providers.

The industry needs to move away from messaging as a charging mechanism because it does not provide the level of transparency that is needed by all the key players in the content value chain.

Centralized advice of charge helps to solve the problem of unscrupulous content providers.

In this instance, the carrier intervenes requesting that the content provider presents a screen to the customer to make sure they inform them properly of what they will be purchasing.

This also creates a record that the customer accepted the terms and conditions and therefore cannot claim they did not agree to the purchase. This helps to eliminate fraud on both sides.

In addition, Premium SMS does not provide a reliable transactional mechanism for authorizing and capturing payment requests. The lack of transactional reliability can give rise to a significant amount of revenue leakage.

Because of these issues, the preferred payments model for the evolution of the mobile content market can be a direct-to-bill payments model.

Using a direct-to-bill service that leverages a payments platform, content providers are able to charge consumers more accurately and provide appropriate security, fraud protection and transparency into transactions for all parties.

Such a service also enables payment for emerging, media rich content and services that Premium SMS cannot support such as in-game charging, where you give a game away for free but charge for tools used to play it, e.g. ammunition and other accessories.

As the premium mobile content market continues to grow and new media rich applications evolve, a more collaborative payment mechanism is needed than Premium SMS which will enable content innovation and the introduction of promotional programs, joint discounts, and loyalty programs.

This kind of advanced merchandizing will increase revenues for the content owners by incentivizing users to purchase more. Signing up to a subscription or buying one product and getting another one for free are examples of advanced merchandizing.

Many countries in Europe are using direct-to-bill as a way to charge for mobile content and have recognized its advantages -- less chargebacks and lower operating costs for aggregators.

For the operator, it significantly increases revenue and reduces revenue leakage. For the consumer, it means access to more interesting content and less instances of fraud. For the content provider, it means visibility into transactions, a reduction in refunds and the ability to offer new and exciting media rich services.

With the need to seize merchandizing opportunities to attract and retain customers, new and exciting content and services must be rapidly created and revenue settlement between the service providers and the content providers must be seamless.

Direct-to-bill charging allows content providers to differentiate themselves in an increasingly competitive market by seizing the opportunity to deploy more innovative models which enable advanced merchandizing while guaranteeing flexible payment options and customer satisfaction.

Fran Heeran is chief technology officer of Valista, Dublin, Ireland, and San Mateo, CA. Reach him at