Verizon Wireless is extending its mobile payments capabilities by allowing consumers to charge online purchases directly to a mobile phone bill.
Payfone Inc. is providing the technology for the service, which is scheduled for rollout later this year. Payfone, of New York, is "complementary to our work with Isis," a venture among several carriers to enable mobile payments at the point of sale, a Verizon representative said in an email.
"For our customers buying goods and services remotely" rather than in person, "Payfone will act as an enabling technology," the representative said.
Verizon is setting the direct-to-mobile billing limit at $25, but Payfone's technology also enables Verizon to allow users to exceed that amount by funding payments from a credit or debit card, said Rodger Desai, Payfone's co-founder and chief executive.
That flexibility helps make Verizon's direct-to-mobile billing service more valuable to consumers, said Beth Robertson, director of payments research at Javelin Strategy and Research.
"Having a backup [payment option] helps to enhance the user experience," she said.
Payfone authorizes and processes its transactions with the same intercarrier roaming network used by the mobile operators, according to the company's website.
The network enables a customer from one mobile carrier to access services from another carrier with the same handset.
Payfone sends consumers who choose to pay with their phone number a onetime text message with a PIN they enter to complete the transaction.
Additional purchases through Payfone do not require a PIN because the company is able to tie the phone's SIM card, device identification number and location into the account.
Desai said he is trying to sign merchants that often facilitate what he describes as on-the-go purchases, such as ticketing or sending flowers to a loved one.
"We're trying to get an idea about the type of merchants consumers interact with when they're out and about," Desai said. He would not say which merchants have already signed on.
Companies similar to Payfone such as Boku Inc., Danal Inc.'s BilltoMobile and Zong Inc. use direct-to-mobile billing and charge a rate of 10% to 20% of the sale, Steve Klebe, BilltoMobile's vice president of business development and strategy, said last year.
Desai did not disclose Payfone's rates but said they will be more than payment card interchange and less than premium SMS, a mobile billing method that typically charges merchants 50% of the transaction value.
Verizon can spur consumers to adopt direct-to-mobile purchases if it can show the service's convenience when buying a phone, Robertson said. "But any of the alternative [payments] out there in the online arena are generally showing low use, with the exception of PayPal," she added.
