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Summary:

EBay is getting more serious with its mobile payments ambitions with PayPal, announcing today that it is buying Zong for $240 million. The move bolsters PayPal’s existing payment system and allows it to offer users an additional way to pay via carrier billing.

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EBay is getting more serious with its mobile payments ambitions with PayPal, announcing today that it is buying Zong for $240 million in cash. The move bolsters PayPal’s existing payment system and allows it to offer users an additional way to pay via carrier billing. Mobile payments are a vast and growing opportunity for PayPal, which has built its business off mostly online transactions and person-to-person payments but is increasingly looking to enable payments by phone.

Zong, which was backed by Matrix Partners, Advent Venture Partners and Newbury Ventures, works with 250 carriers around the world to enable transactions that are placed on an operator bill. The systems is used to facilitate payments for digital goods and services in 45 countries.

The pickup signals how PayPal is bulking up to take on the mobile payments market. It recently said it expects to do $3 billion in mobile transactions this year and has hit 100 million accounts. It said it has more than 8 million customers making purchases on their mobile phones through PayPal, with $10 million in mobile payments a day.

“Commerce is changing. With mobile phones, we walk around with a mall in our pockets. PayPal helps to make money work better for customers in this new commerce reality — no matter how they want to pay or what device they’re using,” said Scott Thompson, president of PayPal. “We believe that Zong will strengthen this value by helping us reach the more than 4 billion people who have mobile phones, giving them more choice and security when they pay.”

EBay has been on a buying spree as it sharpens its mobile and local ambitions. It recently bought Magento to launch to a commerce platform. And it previously bought WHERE, GSI, RedLaser, Milo and others to help the company move into local commerce. It shows that e-commerce is increasingly turning into mobile commerce and that the big opportunity is in tying together online and offline actions and purchases. While online commerce is big, the larger market by far is real-world transactions. Those are increasingly influenced by smartphone-wielding consumers, and now the next step is to facilitate more transactions through the phone. It’s a market that Google, Square, the carriers and a host of others are vying for.

The purchase of Zong suggests that we’ll see more acquisitions and mergers as the mobile payments market heats up. Juniper Research just predicted that mobile payments will be a $670 billion market by 2015. Others competitors like Boku could be ripe for acquisitions as companies look to prepare for the boom in mobile payments. The Zong acquisition is expected to close in the third quarter of this year.

  1. This is all great. 4 billion users , 250 carriers etc …well done. Just one key issue is not addressed : Carriers are not here to take the charges collection risk. If you want to charge goods and other items to telco’s bill, someone has to bear the collection risk (and costs).
    For postpaid subscribers …getting paid, even for a carrier (specifically in emerging markets ) isnt obvious.
    For prepaid subscribers …buying airtime vouchers come with a real cost for carriers ( distribution network commissions – 4 to 7% ), huge recharge discounts offered to users at recharge etc …of of which they need to recover.

    Transforming 4 billion mobile subscribers into financial services users isnt that obvious, in emerging markets.
    We have covered some of these challenges at Willstream blog : http://blog.willstream.com/?p=52

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