This is a big win for Spain-based Telefónica, which is trying to get as many partners as possible to plug into its BlueVia billing API. It’s previously managed to get Google, Facebook, Microsoft and BlackBerry to agree to play along, but Samsung is the first major phone manufacturer to sign up. It also happens to be the world’s top phone manufacturer, having shipped 70 million smartphones in the first quarter of this year.

Carrier billing makes it easier to sell smartphones to people, particularly in emerging markets, who lack a bank card. Telefónica has 315 million mobile customers around the world, and is particularly strong in Latin America. The fact that Google Play is already plugged into Telefónica’s billing API means that, without this deal, Samsung was risking its cardless Android customers finding it easier to buy through Google’s storefront than Samsung’s.

As Lee Epting, vice president of Samsung’s Media Solutions Centre Europe, said in a statement:

“Samsung is committed to ensuring that our customers have choice and convenience when purchasing content on our devices. Our partnership with Telefónica Digital allows us to deliver yet another easy and convenient purchasing experience to our Samsung Hub and Samsung Apps customers.”

The “direct-to-bill” option will roll out first to Telefónica’s O2 business in Germany, during the coming months, then to its other operating businesses in a phased deployment.

We’re going to be seeing more of these carrier billing arrangements in the future, and that’s a good thing for all concerned. Not only does it mean more apps and content will be sold, benefiting their producers, but it also means the telcos themselves aren’t shut out of the value chain.

And, if the carriers manage to be involved beyond the provision of basic data services, it may stop them complaining about returns on their network investments and trying to do heinous, net-neutrality-shredding things like charging content providers for their traffic. Everyone’s a winner.

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Juniper Research has just put out a report about mobile content business models and, according to the UK analyst firm, just 6 percent of content downloads now come from these portals, with the rest being attributable to third-party stores, chiefly Apple’s App Store and Google’s Play store. Frankly the 6 percent figure is surprisingly high – report author Windsor Holden told me the portals in question belong to “China Mobile and two or three others”, and even those are “going to wither away over the next few years”.

And the real money isn’t even in app sales, as Holden explained:

“Only a small proportion of apps are monetized at the point of sale. On the App Store it’s at the 10 percent mark, and it’s around 3 percent on Google Play. Where the apps are really making money is in terms of in-app payments and in-app billing. If you look at the highest-grossing apps… none of them are predicated on the pay-for-download model.”

In selling all those virtual swords and poker chips, the standard developer-OS vendor split is 70-30, meaning the carrier needs to try to wrangle some share out of that 30 percent cut. Is that just wishful thinking on the operators’ part? Not necessarily.

What carriers have to offer

According to Holden, there is still a problem that needs to be solved if even more money is going to be made out of mobile apps: in order to buy apps and make in-app purchases, the customer needs to register a bank card. And who doesn’t have one of those? Kids, and a heck of a lot of people in developing countries – in these segments, the ability to buy content with pre-paid phone credit makes a whole lot of sense.

“While operators have never been the best at direct content sales, there is a growing opportunity for operators to monetize their assets,” he said. “On a number of storefronts, including those for Nokia and BlackBerry, the conversion rates when you add carrier billing go up by a factor of 5 or 6 – there’s significant uplift on second or third purchases.”

In the U.S., customers of operators such as Sprint and Verizon can do this for Android apps, and Holden reckons around 15 percent of such transactions take place through carrier billing in that country. Globally, Juniper expects carrier billing-derived mobile content revenues to soar from $2 billion to $13 billion between now and 2017.

Of course, iOS is not part of this party, as Apple doesn’t share like that. However, Holden said, the flow of second-hand iOS devices into developing nations may eventually mean Cupertino is missing out on an opportunity — would it rather share revenues, or not make any?

Welcome evolution

This shift towards giving operators a slice of the pie is, in my opinion, a good thing – not because the operators deserve it by virtue of existing (a stance they’ve taken many times before), but because it rewards them for the use of assets that only they can provide.

We can see an analogy in the slow but steady emergence of carrier apps that exploit the good old mobile phone number. In that case, the operator’s asset is its ability to manage identity — my colleague Kevin Fitchard reported just the other day on an interesting new carrier initiative called OneAPI that shows how serious they are about expanding this role. In the case of app and content sales, the carrier can capitalize on the existing billing relationship it has with its customer — this makes the smartphone game more lucrative for the carrier while making life easier for the customer (see also: carriers getting a cut of Skype credit sales).

Recent years have involved so much struggle on the part of the operators against newer, more nimble players in the mobile value chain, but carriers are starting to find a comfortable and rewarding new position in that chain. In time, this evolution of their role may reshape the mobile ecosystem yet again.

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“Listen up Verizon Wireless customers: Pay for Google Play apps, books, movies, music, magazines and more right on your Verizon phone bill. Look for “Bill my Verizon Wireless account” as a payment option when shopping in the Google Play Store on your phone or tablet.

Rumors about a carrier billing partnership between Google and Verizon first surfaced earlier this week when Droid Life published an internal Verizon screenshot that hinted at a launch this Thursday. It now looks like most Verizon customers won’t be able to make use of the billing option that quickly. The feature will be rolled out over the next few weeks, according to the Google+ announcement post.

Google has been ofering carrier billing for Sprint and T-Mobile for some time.

Photo courtesy of Flickr user [401(K) 2012].

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An example emerged this week in a partnership between two of the largest carrier groups in the world: Telefónica and Telenor. Telenor is shoehorning its own network APIs into Telefónica’s BlueVia developer program, which presents developers with a potential audience of nearly 400 million customers.

The two operators aren’t creating a new operating system or runtime environment. Instead they’re starting out small, exposing a mobile billing API that works the same way across all of their dozens of individual carrier properties around the world. That means developers can design smartphone, feature phone and even mobile web apps, but they can all tap into a single unified interface for charging in-app purchases to the customer’s bill.

It doesn’t solve the problem of developers building once and deploying all over the world, but 400 million customers is nothing to scoff at. We’ve seen other operator collaborations in Europe though not to this scale. The three largest French carriers have formed a program called YouConnect using Alcatel-Lucent technology that allows them to expose a single unified API for subscriber data to m-commerce app developers.

Like the French operators, Telefónica is bringing outside help to cement these disparate APIs together. Last year, it signed a deal with mobile payments provider Boku to handle the back-end integration across its different properties. That probably explains why carrier billing is the first API to have a big impact for BlueVia, with Google, Facebook, Microsoft and RIM already tapping into it.

Telefónica said it would expose more BlueVia APIs shortly, though it didn’t identify which ones. In addition, Telefónica extended an open invitation to carriers around the world to join it in Telenor in building its common API platform. It’s still far too early to tell, but maybe Telefónica can accomplish what the WAC couldn’t.

Photo courtesy of Flickr user John Picken

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This is important for Facebook because it means a quicker payment experience, which translates into higher conversions. Compared to traditional carrier billing, which can take up to seven steps, including a confirmation by text message, Bango payments are quick and often don’t require confirmation. Bango said its payments yield a conversion rate of 77 percent compared to 40 percent for traditional carrier billing payments.

Bango is able to do this because it stores all the payment data for users across all the app stores, websites and operators that use it including BlackBerry App World, Google Play, Opera Mobile Store, Electronic Arts, CNN, and 90 operators. When one of the 150 million existing “billable identities” makes a Facebook payment, they can forgo the identity verification process. Bango will also be providing providing payments for Amazon and is a technology partner for MasterCard’s PayPass mobile wallet.

For Facebook, better payments means potentially more revenue apart from ads. The social network has been scrambling to find new and better ways to monetize, especially on mobile. Facebook has been working to improve its advertising on mobile, by letting developers promote their apps to mobile users. And last week, it started testing out targeting ads for third-party apps and websites.

The streamlined payment system will only work for digital content on Facebook for now. But it could be part of a bigger play to bring Facebook payments to the real world.

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The deal helps complete Boku’s U.S. coverage after similar agreements with Verizon, AT&T and T-Mobile. Boku also announced that it has integrated with Deutsche Telekom in Germany, so it’s now handling direct billing with every major carrier in Germany, France and the UK. Users can place transactions on their cell phone bill with Boku by entering in their cell phone number and authorizing a purchase through a text message.

This broad coverage will allow Boku to offer a consistent experience to merchants, who can be more confident that almost all of their customers will be able to use Boku. Ron Hirson, Boku’s president, said the company’s expansion can also help merchants start to think beyond just digital good sales. He said 2012 will be the year more merchants start using Boku to sell things like tickets or news subscriptions.

Carrier billing is still hampered by fees set by the operators that can be in the teens, way more than a 2-3 percent credit card fee. Hirson doesn’t expect those rates to rival credit card fees soon, but he said they will come down even more and should precipitate a lot more sales via carrier billing. He said the U.S. market will start looking more like South Korea, where 20 percent of commerce happens via carrier billing.

While Boku is still known primarily as a carrier billing provider, the company has also moved into the world of in-store payments. In February, the company showed off Boku Accounts, which will allow operators to set up payment accounts for mobile users that will work in physical stores using MasterCardcards, NFC stickers and NFC-enabled phones. Hirson said merchants will ultimately be able to offer payments through both direct carrier billing and Boku Accounts with the underlying accounts tied together. Users would likely get a better deal if they tap a stored value Boku Account.

“The two enginees will work together,” Hirson said. “You will have different payment tools but you can use the same account to pay.”

Boku is growing fast, having just raised $35 million from NEA and Telefonica. The momentum has helped it attract some key hires including Jon Prideaux, former EVP for Visa Europe, and Stuart Neal, managing director of international development for Barclaycard. All of this will be necessary as it competes against PayPal, which bought Boku’s chief rival Zong, and a host of other rivals in the larger mobile payment arena.

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Now, the company is loading up on $35 million from New Enterprise Associates (NEA) and Telefónica Digital, the growth arm of the mobile operator Telefónica, to help it go after the opportunity. The new funding, which includes money from existing investors Andreessen Horowitz, Benchmark Capital, DAG Ventures, Index Ventures and Khosla Ventures, brings Boku’s total to $75 million since its launch in 2009.

The money is intended to help Boku pursue what founder and president Ron Hirson calls version 2 of the company. With Boku Accounts, its new white label service, it is now going after a chunk of the $9 trillion dollars used globally at the point of sale — much bigger than the $350 billion spent online. He said that will require more funding to build out Boku’s technology, enhance the experience and acquire merchants.

“The core of the business is growing nicely and now we want to expand to the global point of sale,” Hirson told me in an interview. “We have this airplane with one engine and we’ve just added a second engine.”

The funding by Telefónica is significant because it shows some of the big carrier support Boku is getting for Boku Accounts. The third largest operator in the world said it will partner with Boku to enhance its mobile wallet services, and will work to implement that across its own businesses and through Wanda, its joint venture in Latin America with MasterCard.

Hirson said that many more carrier partnerships — both big and small — are coming, with the first announcements due in the next month.

Boku Accounts offers consumers a Boku-stored value account through their carrier that will be linked to a MasterCard pre-paid card. Users also get an NFC sticker that can be tied to their account or, if their phone is NFC enabled, link that way. Users will be able to pay with their card anywhere that MasterCard is accepted, or they can pay with their phone at PayPass-enabled NFC terminals.

Hirson said while the service was intended for carriers, banks have also shown a lot of interest in Boku Accounts. He said some banks and financial services face the prospect of being dis-intermediated by payments services like PayPal: Boku Accounts provides them with the option to create their own mobile wallet service, something at least some American banks are looking at.

“Banks are expressing interesting because of the end-to-end nature of Boku Accounts. We issue the card and online offers. We’re building this for other people, so we don’t have the end goal of owning the customer. That appeals as much to banks as carriers,” Hirson said.

The deal with Telefónica grew out of a partnership started last summer, when the Spanish company chose Boku to power its payment API for BlueVia, its global developer program.

Boku is following PayPal in the march toward offline payments. It makes sense building off its existing work in carrier billing. Online payments will still go on, said Hirson, but clearly the bigger opportunity is bringing mobile payments into the real world — and with $35 million in new funding, Boku is poised to compete hard in that market.

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Boku until now has been known for enabling carrier billing for online goods, so users can pay for digital items on Facebook and other online sites using their mobile phone number. But the San Francisco payment startup is leaping into the physical world with the launch of a new white-label offering for carriers that will include in-store payments.

The new service, called Boku Accounts, will allow operators to set up payment accounts for mobile users that will work in physical stores using MasterCardcards, NFC stickers and NFC-enabled phones.

Boku Accounts is seeking to appeal to carriers looking for a digital wallet strategy, giving them a way to offer an all-in-one payment system for online and offline payments. The online payment portion is not the focus at launch but will be incorporated into Boku Accounts later. Boku doesn’t have any carrier customers to announce yet but said it will focus initially on Europe before coming to America. That’s probably because three of the four major carriers here are working on Isis, an NFC wallet, while Sprint has teamed with Google Wallet.

When it becomes available, users will be create a Boku-stored value account through their carrier that will be linked to a MasterCard pre-paid card. They will also get an NFC sticker that can be tied to their account or if their phone is NFC enabled, it can also be linked to their Boku Account. Users will be able to pay with their card anywhere MasterCard is accepted or they can pay at PayPass-enabled NFC point of sale terminals.

Users will be able to get real-time updates and alerts on their spending using iOS, Android and web apps. They can also receive targeted offers and deals from merchants and their carrier through their phone.

Boku becomes yet another payment service looking to get in on real-world in-store transactions. About 90 percent of transactions still take place offline and that’s what PayPal, Isis, Square and many others are looking to attack. We have to see which carriers actually take up Boku Accounts, but the company appears to be in a decent position to strike some deals. It is already working in 60 countries with more than 230 operators tied into its carrier billing system.

Ron Hirson, founder of Boku, told me Boku Accounts is meant to target people who want a cash replacement. And it’s a way for carriers to offer more branded services to their customers and make their phones a versatile tool for payments and offers.

“We’re delivering a platform that has real value that doesn’t wait for NFC but can incorporate NFC and offers and can be used for traditional payments,” said Hirson. “A lot of companies are doing bits and pieces but what Boku does is bring the best parts of NFC payments and cards.”

Doing in-store makes sense for Boku, a San Francisco startup backed by Andreessen Horowitz, Khosla Ventures, Benchmark Capital and others. It’s one of the top options for carrier billing but that market is constrained. With the fees for most carrier billing purchases much higher than traditional credit card fees, it confines carrier billing to being more of an option for digital and virtual goods. And with chief rival Zong swallowed up by PayPal, which is in the midst of pushing ahead with its own in-store payment system, Boku may see that it needs to join the in-store battle now so as not to be left behind.

It’s not clear how many carriers will sign up for Boku Accounts. Most of the big worldwide carriers have been testing or moving forward with their own initiatives, including a lot of NFC projects. But Boku Accounts could appeal to smaller carriers or could be a hedge for operators looking to make sure they have options in the mobile payment space, especially if NFC takes off slower than expected.

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PayPal hosted a partner event for retailers yesterday and began explaining how they’ll be able to implement its tools for in-store payments. The big reveal will happen next month at PayPal’s developer conference in San Francisco, but the company showed a glimpse of how it’s marshaling its resources. It’s important for PayPal to step up with a compelling offering because the mobile payments market is getting crowded with options like Square, Google Wallet and upcoming services like Isis from the cellular carriers and digital wallets from credit card companies.

Scott Thompson, president of PayPal, said in a blog post the company is looking to be a one-stop shop for merchants to help them address every part of the shopping lifecycle. OK, that’s a bit of jargon, but it means PayPal is going to help push out targeted advertising, help with in-store discovery and improve transactions with a handful of options.

In a video provided by PayPal, it shows how users will be able to walk into a store and check in to a location to unlock discounts and coupons. When a consumer goes to check out, he’ll be able to pay by entering his phone number. That leverages eBay’s purchase of Zong and its carrier billing capabilities, though it’s not clear how much easier or more convenient that is for consumers who pay with a credit card swipe. But it does open up the option to use carrier billing for physical goods in-store, which is good for people without a card, though the question of how large the transactions fees will be is important. Right now, carrier billing fees are still much higher than credit card fees, which might deter some merchants.

Users will also be able to scan items in-store and pay for them with PayPal without having to get in line. Customers can just flash their phone to an employee who will confirm the purchase. This is very much like AisleBuyer and it sounds like PayPal is looking to bring this to restaurant bills as well, something Thompson hinted at in his blog post. This is a cool step that makes sense for people who want to get in and out quickly.

Customers will be able to apparently pay ahead for coffee ahead of time and pick it up. Users will also be able to choose how they pay for something after the purchase with PayPal Credit, which seems to leverage eBay’s BillMeLater. All of this appears to work through PayPal’s mobile application and doesn’t seem to require any new investments by merchants. That’s a big concern for mobile payments built on near field communication, which requires many businesses to upgrade their point-of-sale terminals to handle contactless payments.

The new mobile payment tools don’t appear to include NFC payments. PayPal recently introduced person-to-person payments using NFC on Android devices, but the company told me at the time it was just focusing NFC on P2P payments. It sounds like PayPal is trying to work around the hardware constraints of NFC payments at point of sale.

Other shopping features on display included the ability to get push notifications for discounts that can be shared, which appears to build off eBay’s acquisition of WHERE. Consumers will also be able to scan an item in store and find inventory at other locations, something eBay got from its RedLaser and Milo pick-ups.

It’s unclear how soon all of this will come together and how many merchants will sign on. But providing a complete service for retailers and businesses to not only push out offers and discounts but also complete the transactions makes sense. Merchants can close the loop on transactions and understand how their marketing is doing. This is essentially what Google is trying to do with Google Wallet and Offers though it’s focusing primarily on facilitating targeted marketing, rather than taking a cut of transactions.

PayPal’s payment initiative is part of eBay’s broader commerce platform called X.commerce, which it’s building off the acquisition of Magento.

But there’s also a lot of questions to be answered. For instance, will consumers find this more convenient than a card swipe? Will PayPal make it any easier for people to set-up and manage accounts? Do all of these parts work well together in one solution? And how aggressive will PayPal be in selling this to merchants and consumers? I’ll be interested to hear more and I think PayPal can be a big contender if it gets its execution right. This is going to be a big market but it will require not only great tools but a lot of smart selling to consumers and merchants.

To hear more about mobile payments, check out our GigaOM Mobilize conference Sept. 26 and 27 in San Francisco.

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Rogers isn’t looking to build full-service physical banking locations, but will try to follow more in the footsteps of retailers that offer their own credit cards. But the move also puts Rogers closer to the action on mobile payments and in a better position to take a share of the revenue from payments made over cell phones. The new bank will be called Rogers Bank. Rogers is also reportedly looking to launch its own near field communication digital wallet soon with Visa and TD Bank.

Mobile payments, as we’ve noted, are poised become a $670 billion market by 2015, so it makes sense for carriers to want to benefit from this opportunity in emerging mobile wallets, especially as they get crunched on voice and SMS revenue and deal with exploding data network costs. Carriers in the U.S. are also looking at playing a part in mobile payments, including Verizon, AT&T and T-Mobile, which have banded together to form Isis, an NFC digital wallet platform. But after making an attempt to build their own payment network, the carriers opened to more credit card and banking partners that merchants were more familiar with.

Rogers isn’t the only carrier looking in this direction. Telefonica O2 UK also filed for an e-money license with the UK Financial Services Authority in February to become a payment service provider as part of a larger push into mobile payments. This would allow O2 to offer pre-paid accounts for peer-to-peer payments or to pay merchants for things using contactless NFC applications. In Asia, carriers like Docomo have become banks or like SK Telecom have partnered with banks. And other telcos in third-world countries offer their customers mobile payment services.

Mobile analyst Chetan Sharma said the move makes sense for Rogers and others because all carriers are trying to figure out where their next revenue stream is coming from. He said building a banking service can not only bring in revenue but also provide more services for consumers. He believes Rogers will be looking to integrate its banking service into a digital wallet that allows people to pay through their handset.

Rogers “is trying to see if they can extract more value by keeping a portion of these transactions and another impact would be to reduce churn, keep consumers a few months longer and increase the lifetime value of users,” he said.

He said the challenge for Rogers will be in seeing how serious it is in building this business, which will take a significant investment to succeed. He said the carrier will also need to work out its relationships with other banks. Sharma said it’s unlikely U.S. carriers will follow in Rogers’ footsteps because of the added scrutiny these days on banks and the necessary investment it would take to get such a service going.

It’s unclear how consumers will take to this option. Operators historically have had poor consumer approval ratings, lower than banks. So it’s not certain that operators would be trusted as a financial institution. But increasingly, consumers are putting more charges on to their cell phone bills through services like Zong, Boku, Billtomobile and others. That highlights the value the cell phone operators play because they have an ongoing billing relationship with consumers. Expect more carriers to find ways to get in on the mobile payments action. You can hear more about mobile payments at GigaOM’s Mobilize conference on Sept. 26 and 27 in San Francisco.

Image courtesy of Flickr user Jeffery Simpson. 

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