Since Apple Inc.'s tight control of the iPhone precludes this approach, the payments firms are gravitating to Google Inc.'s Android — which itself is emerging as the handset of choice for the consumers most likely to use their phones for banking and financial activities.
On Wednesday, Zong Inc. and Boku Inc. each introduced tools that let software developers weave their payments systems into applications for Android phones. These systems could be used, for example, by a video game developer to sell additional levels to someone who has downloaded a game that was given away for free.
Executives say charging these small purchases to a phone bill would appeal to consumers more than keying in a card account number. However, analysts said the niche appeal and low price of these digital products mean there is little threat to card issuers' interchange revenue.
"People don't want to have to whip out their credit card to buy things," said David Yoo, Boku's senior vice president of strategy. When that is required, "there's a lot of drop-off" — consumers decide not to make the purchase after all.
Hill Ferguson, Zong's vice president of product and marketing, agreed, saying, "any time you ask a consumer to type anything — be it their name or a credit card or a password or what have you — it's hard." Offering a one-click alternative tied to the user's existing phone-billing system "opens up a whole new world of monetization options for Android developers, because they now no longer have to send users through complicated forms" or charge for their apps up front, he said.
Neither Boku's service, called Paymo, nor Zong requires users to type in a card number. They click a button to approve purchases within the app, and the alternative payment providers handle everything from there. The user does not need to do anything else until the phone bill arrives. (Zong also offers a version of its system that lets users keep a credit card on file, so they can charge items to cards but still use the interface for making charges to a phone bill.)
Mobile banking and payment systems are increasingly converging on the Android platform. Javelin Strategy and Research recently published findings that show Android users are more active mobile banking customers than users of the iPhone and other smart phone platforms.
"Android is the fastest-growing mobile platform today," Ferguson said. "The growth of Android has just been stellar, and we expect that to continue."
Boku and Zong said they are encouraged by the increased number of payment options on Android. "Competition is a healthy thing and certainly a sign of a market worth pursuing," Ferguson said.
Yoo said the different payment products can serve different audiences. "A lot of users throughout the world … don't have credit cards, or they're in the demographic where they don't typically use their credit cards to buy things like this," Yoo said.
The Android market is attractive to payments companies for several reasons.
Google's Android Marketplace, the digital storefront for apps that run on Android handsets, handles payments through Google's homegrown payment system, Checkout. However, Google does not require that users have a credit card on file with Checkout to download free apps. This is a problem for developers who wish to give their apps away and then charge for content updates later. Yoo said that people who want to make an in-app purchase without a pre-existing Checkout account would have to type in a credit or debit card number on the spot.
