Mobile giving doesn’t REALLY work and here’s why

With the recent and quite misfortunate event of the Haiti earthquake, we witnessed the immediate adoption of “mobile giving” – that is, making a donation via your mobile phone.  For those unfamiliar with this process, a mobile user (usually on a post-paid mobile plan), can send a “keyword” such as QUAKE as a text/SMS message to a “shortcode” (a 5 to 6 digit number) which then sends back an SMS with the details of the donation as well as a request that you confirm the transaction (usually in the form of a short keyword/letter like “Y” or “YES”).  The mobile user is then charged the amount to their next mobile bill which they at the end of the current billing cycle.

And therein lies the rub… See, the mobile subscriber has 30 days upon receipt of his mobile bill to actually make the payment.  He may or may not contest the charge depending on who actually made the transaction – her husband, child, friend, or dog maybe?  Regardless and if the payment is actually made, the phone company (Verizon, AT&T, etc) has to then figure out which merchant the payment should go to (and make sure they take their “fee” for facilitating the transaction through their platform).  This process takes another 30 days or so and the money usually ends up in the hands of a party known in the mobile marketing world as the “aggregator” – termed this way because they aggregate connections across the two handful of major carriers out there.  The aggregator then takes their fee and pays out the actual company providing the service to the various charities and NGOs of the world.  Wow, that was a mouthful (forgive me for not using separate paragraphs).

If you do the math and add up the time periods as money changes hands, you end up with a cumulative term of about 75-90 days before the money ends up where it ought to.  Compare this with credit card transactions which moves money in a matter of 24-48 hours on average.  Add to this that a grand total of about 35-40% in fees is racked up through the literally “trickle-down” process, and the $10 transaction evaporates pretty quickly.

You’d think that these figures would prompt a near-immediate backlash – and you would be right.  In fact, the carriers knew the backlash was imminent and so they were quick to proactively mention that all fees would be waived and the amount transacted in a much shorter period of time.  Good for them considering mobile giving was on pretty much every television station both major and cable network for the “Hope for Haiti” special with celebrities touting the method as the fastest way for watchers to donate.

The problem with this picture is that for all other charities that the company mGive provide mobile giving “solutions” to, the terms are exactly as I describe above (75-90 days with 40% fees).  Most subscribers who will more than likely be familiar with the system will equate the process to the Haiti fundraising initiatives when this will not actually be the case.  It’s estimated that the Haiti earthquake mobile giving initiatives pulled in over $12 million; at 40% fees spread across all facilitating parties involved, this would mean a staggering $4.8 million in fees alone.  Crookish I’d say.