A new government policy directive requiring handset users to provide their real names has initiated a debate about whether it will really be effective in stopping mobile spam and telecom fraud. In my opinion, it's an important step in China's efforts to establish a strong and competitive telecommunications policy.

The new policy is expected to strengthen mobile payment systems and the paid-data services sector. At the same time, it may hasten the long-awaited process of allowing mobile users to transfer phone numbers when switching carriers. Such transfers would make the industry more competitive and fair.

The majority of mobile phone numbers, about 60 percent, are without user identity information through a prepaid-card business model.

That makes it difficult for carriers or banks to collect phone payments and to check up on the payment histories and behavior of people who use mobile phones.

This is understandable. In China, people are often wary about giving out personal information amid fears that it will be disseminated. There have been reports that unscrupulous employees at some banks, telecom companies and even hospitals have sold customer information to advertising firms.

Registration required

Starting from September 1, new mobile phone consumers were required to register their identity card numbers or other valid documents when buying pre-paid SIM (subscriber identity module) cards from mobile phone operators.

Within several years, China also plans to register identity information for more than 800 million current mobile users, according to the Ministry of Industry and Information Technology, China's telecommunications industry watchdog.

With the new "true identity system" in place, start-up mobile payment services are expected to take off.

Simply put, those services allow users to pay-by-swipe using mobile phones in front of machines or by inputting mobile numbers on websites, similar to how credit cards are used.

By the end of 2010, more than 150 million mobile phone users will have used mobile payment services, and trade volume in that sector is forecast to surpass 2.84 billion yuan (US$417.6 million). In the next three to five years, the volume will grow 40 percent annually on average, according to Beijing-based research firm Analysys International.

I think that there are two "catalyst" milestones in the sector to speed up the popularity of the relatively new mobile wallet.

In March, China Mobile announced it would buy 20 percent of Shanghai Pudong Development Bank for 39.8 billion yuan, becoming the second-biggest shareholder in the joint-stock bank.

That was a clear signal from the world's biggest mobile carrier that it supports the concept of mobile payments. Since then, chip design and other related sectors have developed systems to become "technology ready" for the change.

The new policy is expected to help build a mobile credit record system, based on high-level security with public security's database. I call it "system ready," which goes beyond technology only.

With the system, both consumers and shoppers gain access to a new credit system, and that sets up a launch-pad for the whole mobile payment sector to take off.

It's similar to what happened in the online auction market.

About 10 years ago, online shopping was a risky gambit for online shoppers.

Then Alibaba.com launched the online payment tool Alipay and a related credit-record system. That removed a major roadblock to development of online buying.

The new "true identity system" is just like Alipay, applied to the mobile world.

Under the new mobile credit system, people will find it easy and safe to pay via their phones.

Chinese telecommunications carriers and service providers - which are offering various services, such as customized ring tones and recent-release movies - will benefit from it.

Through smartphones with bigger screens, people will be able to buy clothes or food through mobile shopping websites, and more importantly, undertake the payment process with their handsets.

From my personal experience, mobile shopping has advantages compared with online shopping. It allows mobile phone users to buy products while on the subway or a bus to and from work.

People needn't open bank accounts on computers in their offices, which is not a safe practice and is prohibited in some companies.

Another advantage is earlier payment, which means faster delivery times.

Meanwhile, the easy-to-use new payment system will also attract more shoppers, including older people and those who are not so tech-savvy and worry about online viruses, Trojan attacks, fraud or the complicated processes of verification on computers. (Remember the portable USB key to your bank account?)

Bundling bank accounts with bona-fide user identification will encourage more consumption paid via mobile accounts.

Telecommunications carriers such as China Mobile, China Telecom and China Unicom can easily charge partners commissions and service fees for mobile payment services. The partners, say a shoe store or a cinema, will be willing to adopt the new pay system, I bet.

The new system is a boon for telecommunications carriers anxious to find new income streams.

Among Chinese carriers, non-voice income contributes up to 50 percent of total revenue on average, lagging behind that of overseas carriers, which are realizing 70 percent or above.

Number portability

Last but not least, a mobile "true identity system" will hasten the process of number portability nationwide, which allows people to change carriers without having to change mobile numbers.

The move, which has been tested in Tianjin Municipality and in Hainan Province, is a necessary step for industry growth and market competition.

China Mobile now has more than 70 percent of users in the domestic market.

The carriers face a big challenge if they can't find the data of pre-paid users who don't provide identity information.

For example, if a prepaid China Mobile user wants to transfer to China Unicom, the latter carrier would have difficulty checking key information for the user, such as whether he has paid bills on time and whether he has used phones to do unethical things such as sending spam messages.

The carriers could easily retrieve such information if their databases were linked, but that's a costly process and pretty unimaginable among fierce market rivals.

Now China Unicom has an easier method.

It checks the user's identity information regarding payment and behavior records. People can continue to use current numbers if they don't have bad records. Very fair!

In my opinion, China should upgrade the new policy and enact it into law, including provisions to protect users' rights and privacy. A mobile phone network using true identities really makes a lot of sense beyond just preventing spam messages.