Ben Aris in Berlin -

Ever been in a gypsy cab careening through some emerging European capital, already 15 minutes late for a meeting, when you discover that your phone has run out of money? Upaid thinks there is a market in the hair-wrenching frustration that a lack of proper payment systems in the east causes.

Upaid, an international company headquartered in Paris but with most of its existing business in Brazil, announced Tuesday, October 30 that it has signed up the remaining two big mobile phone providers in Serbia. The firm hopes to use the Balkan country as a test-bed, and then show-case, for a service it hopes to spread throughout all of Central and Eastern Europe.

"We need to find the rocket for this service, like eBay was to PayPal," says Terry Trench, senior vice president of commercial operations at Upaid. "We think that the lack of sophistication in the emerging European markets makes them perfect places for a service like this."

What Upaid does is allow a subscriber to top up their mobile phone bill by simply sending their bank a text message saying how much they would like to pay. Western European economies have poked at mobile payments, known as m-commerce in the jargon, but most have pushed it away as impractical and unable to compete with cash, credit cards or direct debit. But as both of the latter barely exist in emerging Europe and no one has enough to the former, Upaid's service was met with instant success when it first launched in Serbia last October.

The company has already signed up Mobile Telecoms of Serbia (MTS), the country's largest mobile phone operator, and 10 of the leading banks. Now it has signed similar deals with the remaining two leading mobile phone companies and has another four deals with banks in the wings. Together these deals will cover almost all of Serbia's 4.5m mobile phone subscribers and 85% of the bank card-holding population.

M-people

The system is very simple. A customer goes into his bank and says he or she would like to register for the service and hands over their phone number. As the bank already knows the customer, security checks are unnecessary. The bank sends the customer a text message with a code and whenever the customer wants to pay, he replies to this message with an "R" in the message the amount they would like to pay. The transaction takes, at most, a few seconds to complete. And, bingo, you can call your party and say you'll be late.

Since its launch, the service has proved extremely popular, mainly because something as simple as paying your phone bill in Serbia is such a pain in the neck. Trench says that 80% of Serbia's mobile phones use pre-paid cards, as opposed to 20% in the west, and the average user has to top up their phone five to six times a month. In other words, the average Serb is running to a kiosk more than once a week to buy a new card for their phone. "Once someone tries our service typically they don't use another method of payment," says Trench.

Terry Trench

Upaid's service has been a hit because bank services that are taken for granted in Western Europe have yet to arrive in the east. While debit cards are now widespread, banks still offer "plain vanilla" consumer products that don't extend much beyond ATMs and the ability to use a card in a shop. Credit cards are still a thing of the future, which means banks' customers are forced to do most of their transactions in cash.

Upaid has big hopes for the Serbian experiment. The smallness of the country was one of the things that attracted the company to the Balkan market, where it was easier to persuade a big operator in a small pond to sign up. MTS is the leading provider of mobile phone services with some 35-40% of the market. Having now signed up the other two operators - Mobilkom's VIP and Telenor's Mobi63 - Upaid is able to offer its service to almost all the people using a phone in country of 8.2m people. It has also tapped into the bank sector where the 10 leading banks have 5m customers and have issued 2.2m Visa-branded debit cards. VIP is the most recent addition to the phone market but has taken in 100,000 subscribers in only two months of operation. With a customer base and financial partners already in place, Trench says the phone top-up service is only the tip of the iceberg.

"What we are doing is building a platform for the future of m-commerce. Recharging phones is the only way into the mass market and to get to a national level with very high volume and low margins," says Trench. "Later we will go on to other kinds of payment like utility bills, but these are lower volumes and you need a national reach to make them work. The future of payments is where the customer pushes payments and controls the process, not pulled payments like with direct debit."

Send comments to The Editor