• TechCrunch , Tuesday, January 13, 2009 11:46 AM

Increasingly, users are choosing mobile SMS payments to make micro transactions on social networking and gaming sites, but sky-high transaction fees are curtailing growth, says TechCrunch's Michael Arrington.

Part of the problem is that carriers are making so much money on scams that give users a "free" ringtone when the fine print actually mentions a monthly charge--the carriers make close to 50% of the fee--that they see little incentive to change things for the better. To foster a market of legitimate transactions, those fees need to drop dramatically, Arrington says, adding that the social nets themselves should get directly involved in those negotiations.

"Lots of merchants and application developers would love to take mobile payments, but paying 40% or more of the transaction to the carriers is a non-starter." Arrington adds that merchants selling items with an actual margin cost simply aren't going to allow mobile payments by SMS (virtual items are another matter, however). If the carriers were to lower their fees--or if the government forced them to--"a very rich ecosystem could blossom, and the carriers would get the majority of the value created."

Read the whole story at TechCrunch »