Mobile Giving Outpacing Mobile Payments

In the days that followed the 7.0 magnitude earthquake that struck Haiti on January 12, it was heartening -- but not all together surprising -- to see people in the United States and around the world lend their support through an influx of charitable giving.

What was surprising, however, were some of the ways in which they were giving. In the first three days following the quake, Americans donated over $11 million dollars to Haitian relief efforts via text message, according to the Mobile Giving Foundation (MGF), a Bellevue, Wash.-based non-profit organization that enables mobile giving in the U.S. and Canada.

By the first week in February that number had ballooned to over $35 million, validating the mobile channel as not just an alternative method of payment but as a method that will be integral to any organization's future large-scale fundraising strategy. What remains to be seen, however, is if the growing popularity of mobile giving will lead to increased adoption of mobile payments in other areas.

Many of the mobile donations were sent to the American Red Cross, which leveraged Denver-based Mobile Accord's mGive solution to facilitate payments, and to the Yele Foundation, through a partnership with Miami-based mobile donations vendor Give on the Go. Programs from those organizations and many others allowed individuals to text a keyword to a designated shortcode with their cell phone. The texts trigger fixed donations, usually between $5 and $10, with the expense tacked on to users' mobile phone bills.

In all, approximately 14 percent of all donations to Haiti relief efforts were made via text message according to a survey by the Pew Research Center. That's slightly less than the 20 percent threshold some experts use to determine whether a given technology has reached critical mass, but it's still a giant leap forward. The last time Pew undertook such a survey was for the 2004 Indian Ocean tsunami. At that time, the center did not even consider it necessary to ask participants about text-based donations.

But while mobile donations are quickly approaching critical mass, the mobile payments arena as whole has been slower to develop. "This happened quickly, in a matter of days," Celent senior analyst Red Gillen says of the emergence of mobile donations, "whereas mobile payments in general have been talked about for years."

The difference, Gillen says, is that the mobile donations required no additional software, hardware or functionality that didn't already exist on virtually every mobile device. "It's important to keep simplicity in mind. All the pieces were in place. Nothing new had to be learned. This payment method was part of consumers' existing understanding of how mobile phones work," Gillen explains.

The same cannot be said for many other mobile payment initiatives, outside of mobile giving. Some require new hardware that contains a contactless payment chip while others require the user to download a software application onto their device. In addition, individual payees or merchants often need additional hardware or software to receive payments. "A lot of mobile payment schemes that we talk about have some of those new elements to them as a requirement," Gillen says.

If simplicity is the key to wider adoption of mobile payment technology, then perhaps banks and other players should focus their efforts on peer-to-peer payments that allow individuals to transfer money to one another. As Bank Systems & Technology has previously reported, mobile phone giant Nokia (Espoo, Finland) is partnering with various banks to launch initiatives in several developing countries that allow users to send money to one another via text message, using simple software that comes standard on their mobile devices.

But even if those programs do succeed overseas, the barriers to adoption could be greater in the U.S., where a strong infrastructure already exists for other methods of electronic payment. "We don't see as much growth here in the U.S as we do in developing countries because we have cards and ATM machines that work very well today. If you go to Africa or South Asia, where card and ATM networks really aren't in place, there is a lot more interest in mobile payments." Gillen says. "In industrialized countries, we have so many options in place already that it's a higher hurdle to clear."