High hopes for small change

DOT.LIFE - how technology changes us
By Mark Ward
BBC News Online technology correspondent

One measure of how digital our lives have become is not how much money we spend via the net and mobile phones but how little.

You could pay that with a mobile

While many of us are happy to use a credit card online, spending tens, hundreds, and occasionally thousands, of pounds, parting with just 50p is less common.

Yet, in the real world three-quarters of payments are in cash and almost half, 46%, of the spending we do in shops involves notes and coins.

Much of this shop spending is the normal day-to-day stuff - a chocolate bar here, a greetings card there - which involves few pence or a pound or two; known in the trade as "micro payments".

Only when we start using our mobile phones to pay for a newspaper, bottle of water or macchiato will e-commerce have reached a significant milestone, argue the pundits.

No spare change? Not to worry

It could take a while

"It's quite a mess at the moment," says Anil Malhotra, co-founder of Bango which acts as a middleman between customers, mobile operators and firms offering paid-for content like ringtones and icons.

Bango and companies like it exist because the mobile operators have been slow to agree on a common system for micro payments.

"It's quite hard because you have to figure out how to do it with each network," says Mr Malhotra.

Big and small spenders

The advent of reverse-charge premium rate text messages has helped but, until recently, these were only available in bands that meant everything had to be priced in unwieldy increments of 50p or £1. Nor were the operators helping by claiming a large share - up to 50% - of each transaction, says Mr Malhotra.

Royals don't carry cash - how about handsets?

Despite the fragmented payment systems, spending via mobiles is starting to take off, albeit only for extra mobile phone content. About £500,000 worth is bought via the Bango system every three months, the firm says. Now reverse SMS can be used to charge for almost any amount.

The highest amount that one person spent on content for their phone in one day is £126, says Mr Malhotra.

The stuff on offer includes the usual ringtones, icons and screensavers, but is slowly expanding to include the likes of games, mobile-formatted guides such as Exchange and Mart, and inevitably, pornography.

Increasingly phones are also being used to pay for things online too.

Vodafone's m-pay bill system has been running for more than a year and others are starting to spring up alongside it. The m-till system launched this month uses reverse text messages as a way to pay for internet content from the likes of Guardian Media Group and Tony Wilson's Music 33.

Malcolm Glen, head of business development at m-till, says it had worked hard to make its payment system easy to register with and use, making it "the closest thing to the cash in your pocket".

Mobile money

The big hurdle now is getting people to use it, says Mr Glen.

Are they spending your money?

In the past, many micro payment systems have foundered because they have not won over enough people to make them viable.

"There's a real education process to be undertaken. We are not about to see overnight a huge shift to micro payments not least because people are used to getting a lot of information for free," he says.

One initiative that might help this education process is the Simpay system that is backed by the UK's four main mobile operators.

This aims to unify payment systems and make it possible to pay for almost anything - including a cup of coffee - with your handset. Soon the Simpay logo could be appearing alongside the signs for Switch, Visa and Mastercards at cash desks up and down the country. The system effectively turns phone handsets into flashy wallets.

"On the internet there is no direct access to funds," says Mr Malhotra. "They have to be acquired some other way through a bank account. But on the mobile phone you have an instant way of paying your bill."