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Summary:

Verizon Wireless is tapping Payfone, an emerging mobile payment platform, to offer its customers a way to pay for online items via their cell phone bill. The deal illustrates the kind of scale Payfone is putting together with its new payment service.

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Verizon Wireless is tapping Payfone, an emerging mobile payment platform, to offer its customers a way to pay for online items via their cell phone bill. The deal follows up on an investment Verizon made in Payfone and should help merchants and consumers warm to the idea of using Payfone for e-commerce payments.

Payfone works by offering consumers a way to complete their online transaction by entering in their cell phone number and having the purchase placed on their carrier bill. Verizon users will be able to conduct their purchases through smartphones, tablets and PCs. They will also be able to link their Payfone account to a credit card or debit card for larger purchases that exceed transaction limits set by carriers or regulators. And the service will have a way to intelligently route payments to the right funding source based on rules and preferences. The partnership expands the way Verizon users can pay via carrier billing following a previous deal the carrier had with BilltoMobile.

Payfone continues to emerge with key partnerships that give a glimpse of the promise it brings. In April, it announced it was partnering with American Express’ new Serve payment service, providing a carrier billing component to Serve’s platform. It also raised $19 million from American Express, Verizon Investments Inc., Rogers Communications, Opus Capital, BlackBerry Partners Fund and RRE Venture after raising $11 million last year.

Payfone is becoming an attractive option because of its deep integration into the SS7 signaling layer that cell phone carriers use to communicate between networks. By leveraging the existing cellular infrastructure, Payfone is able to offer added security, payment authentication and one-click payments. And it means less billing disputes and chargebacks for operators, which lowers the cost of the service for merchants.

And now, by being able to offer not only a secure system but also multiple options for payment beyond just a carrier bill, it can rely on intelligent routing to ensure that transactions are converted. So if a user can’t or won’t pay with their carrier bill because the purchase exceeds preset limits, Payfone can offer to complete the transaction with another linked account.

That potentially makes Payfone a more flexible option for merchants, who won’t lose out on as many transactions that get abandoned for payment reasons. Merchants will have different rates on transactions with fees higher for carrier billing, though much lower than traditional premium SMS payments. They’ll have also have different, likely lower, rates for credit and debit purchases.

Right now Payfone isn’t attempting to tackle offline payments, something many are looking to NFC to help facilitate. Verizon is also pursuing NFC with its Isis venture with AT&T and T-Mobile. Rodger Desai, co-founder and CEO of Payfone, said he’s hoping to bring that same simplicity of NFC to online payments through a variety of devices, using a cell phone number as the key.

“The ultimate form of acceptance should be a phone number,” Desai said. “With the right security behind it, it can be the easiest way to buy something.”

Desai said Payfone is in the process of lining up big merchants and brands to carry the Payfone payment option. He expects that some of the earliest companies to offer it will be ticketing and travel companies. In the coming weeks and months, Desai said, Payfone will be announcing many more carriers, merchants and financial institutions as partners.

Keep an eye on this company. It’s taken a while to get its product out, but it’s done a lot of the quiet work to build a very robust system that could be an important piece of the puzzle as e-commerce becomes m-commerce.

  1. Other services like boku will fizzle out

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  2. What stops someone unauthorized from using my phone number to pay for something?

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