BilltoMobile is expanding its direct carrier billing relationship with Verizon Wireless (s vz) to process transactions from other payment platforms starting with mobile payment start-up Boku. The agreement allows Boku to tap into BilltoMobile’s direct billing gateway and will greatly expand the number of merchants and consumers who can use direct billing on Verizon. BilltoMobile’s deal with Boku is non-exclusive so BilltoMobile could also process transactions from Zong and other payments providers as well.
BilltoMobile last year secured the first U.S. carrier billing deal when it agreed with Verizon Wireless to process payments directly through the carrier’s billing system. The deal allows BilltoMobile to charge merchants significantly less in fees than premium SMS, which has been one of the primary ways that people charged their purchases to their phone. With direct billing, merchants can expect to pay fees in the mid-teens of a transaction cost, rather than the 50 percent they are charged for premium SMS. With lower fees, BilltoMobile allows merchants to offer carrier billing for a lower price, which can help spur on more impulse purchases of mostly digital goods.
Carrier billing is powerful because it’s easy and secure for consumers. They enter in their phone number when they want to buy something and then get a text message to approve their purchase. In a Nielsen survey last year, respondents said carrier billing is their preferred way of downloading apps, ahead of credit cards. Though carrier billing works primarily for digital goods, the potential is for the system to work for more physical items. Danal Co. of South Korea, the largest shareholder of BilltoMobile said it has processed $4 billion in payments with carrier billing with 20 percent of transactions in Korea for physical goods.
By opening up its payment system to other providers, BilltoMobile is able to leverage its existing integration with Verizon Wireless to process a whole lot more payments. BilltoMobile has relationships with a few dozen merchants. Boku, which uses a combination of direct carrier billing and premium SMS, deals with hundreds of merchants including Facebook, Electronic Arts (s erts) and eBay Classifieds (s ebay). For Boku and others, the arrangement allows it to connect to Verizon’s carrier billing system, which will give its merchants the ability to lower prices for consumers and be more flexible with their pricing.
The BilltoMobile deal provides more momentum for carrier billing in the U.S. Last October, AT&T (s t) announced trials of carrier billing with BilltoMobile, Boku and Zong. It’s likely Boku will also try to secure its own direct deals with Verizon and other carriers. But the integration work takes time. Working with BilltoMobile allows Boku and others to add carrier billing immediately.
This is one deal in what’s looking like a huge year for mobile payments. With Apple (s aapl) and Google (s goog) gearing up on the near field communications front and PayPal going all in on mobile, we’re seeing some big players position themselves to get a piece of what could be a huge pie. We’ve reported that mobile payments, in all its forms, could be worth an estimated $633.4 billion by 2014. Carrier billing is one slice of the pie and is largely aimed at digital goods for now. Because of its higher fees compared to credit cards, it won’t be able to replace credit cards in many cases and is not as well positioned right now to tackle in-store point of sales transactions. But as it grows, and fees decrease, carrier billing could be an important way for consumers to pay for goods of all kinds in the future.
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