Mobile Lottery Payment Mechanisms

The cellular operators are struggling in a world that is vastly different to the one they had previously known. Kenny Lomas spoke to Eitan Haimovich, a mobile software entrepreneur to talk about what has changed, and what must change.

When Apple unveiled the iPhone to the world it came with the slogan, ‘This Changes Everything,’ and they weren’t kidding.

The iPhone’s arrival has radically changed the whole cellular landscape, and the cellular networks no longer have a stranglehold on the market like they once had.

Eitan Haimovich is the Founder & C.E.O. at Cell 2 Bet, a mobile software company that has developed a revolutionary new system that allows consumers to purchase lottery tickets on their mobile without the need for registration or credit cards.

It isn’t just the Lotteries that stand to make a profit if Cell 2 Bet’s technology takes off; the cellular networks also stand to make a substantial profit for little effort on their part in return. It seems like a no brainer for the cellular networks, and they’re in desperate need of finding additional revenue streams.

It hasn’t always been this way however: “The cellular companies, until today, they used to be the guerrillas of the market. Nobody would play with them. When usually the content provider would come and say ‘look I want to sell my song.’ I’m Sony for example, and I want to sell my song to you. They say ‘ok, you will give us 50% of the money,’ let’s say you are selling the content for one pound for example, ‘we want 50% of the money and this is our integrator and you’re going to have to pay another 25-30% of the money,’ and you will be left with 25% of the money. They behaved like guerrillas.”

This was the way it was for a very long time, until their dominance was eventuall challenged by an electronics behemoth: “Now, the market is changing on them, why? This nice guy with small company called Apple came, with a phone called iPhone. And the iPhone changed it all because Steve Jobs came to AT&T and said ‘screw you, you’re going to sell my phone, and you’re going to give me the ability so that people can surf through my phone, and they’re going to take down from my App Store, and you’re not going to get anything. You’re going to charge for the internet but you’re not going to get a dime from what I’m selling on my App Store.’

This change of paradyne is a huge shake up for the cellular operators.Where as they used to earn a significant percentage from any ringtones etc. sold on people’s handsets, now they’re now getting anything, and it isn’t just the App Store that is hurting their pockets.“ I’m talking about the App Store but it can be that you’re surfing on your iPhone or Blackberry and you go to a gambling website, and you’re not paying anything to the cell phone company because you are paying the gambling website. You gave them 20 dollars, you want to play.

“The cellular operator didn’t get a dime, you pay them just for the internet package and that’s it. And now you paid 20 dollars, you lost all your money, but the casino got your money, and cellular operators didn’t earn anything. The only thing they are obliged to do, is to improve the internet structure on the cellular, and this is costing them billions and billions of dollars.”

And this is something that the networks are simply not ready for, but with such a high number Smart phones, predominantly iPhone’s, in circulation, the bandwidth has taken a huge hit and this investment is something that is crucial: “Today in America, not in England, let’s say 25-30% of the cellular owners have an iPhone. From the 100%, just 30% have an iPhone. These 30% users of iPhone get 75% of the cellular bandwidth AT&T. So what will happen when we have 50% of iPhone owners? They will have more than 100% bandwidth structure. This is a huge problem, why, because AT&T has to put billions of dollars into the infrastructure.”

These huge problems for the cellular networks will force them to find revenue from other sources, and this is where Eitan comes in: “We give the lottery the ability to sell lottery tickets straight through your cell phone and again you don’t need to use your credit card. We know how to charge you the money to your cell phone bill. And this is the uniqueness of my start-up.”

The idea sounds simple, though Eitan insists this is not the case, but it’s surprising that a similar system isn’t already in place, but for one reason or another, it isn’t: “What’s happening today in England with Camelot, with Camelot today, you can buy a lottery ticket with a cell phone, but you have to do pre-registration, you have to call someone at Camelot to go to the website, and put in your credit card, and do registration, and just after that you can send your lottery ticket through your cell phone with the SMS.”

This long winded system is clearly restricting the amount of people that use the service. Eitan explains: “This is the killer. This is the killer because today Camelot sells something like 16 million pounds a year through cell phones. Maybe it is a bit more, or a bit less. But all of their sales equate to around 12 billion pounds a year or something like that, maybe more. It’s such a small fraction through the cell phone, and we believe it’s because of the registration.”

Eitan’s idea sound’s simple, but he insists this isn’t the case. Perhaps this is why a similar system has yet to be implemented: “Can I tell you it is easy? No. If it was easy then there would be another 20 Cell 2 Bet’s. This is a new game; this is a new appeal to the cellular operators. We’re going to do our first implementation next year with a big lottery, and we’re discussing with a few more others lotteries around the world that have shown interest in our technologies.

“In the end it will be the biggest platform, even for gambling, and for lotteries. The cellular will be in their pocket, it will be their wallets, without a credit card. Because in the end the cellular operators will have to start earning money in different ways and this is one of the biggest ways for them to make money, through charging and collecting money through everybody.”

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