Who Needs Banks? Mopay Pushes Broadband Bill as an Alternative

When online shoppers are looking for alternatives to credit and debit cards, Mopay Inc. hopes they will consider adding charges to their Internet service provider's bill.

The Palo Alto, Calif.-based unit of MindMatics AG of Munich this month announced it is adding broadband providers to its list of alternative payment channels.

Mopay has offered such alternatives for a decade through phone bills in more than 80 countries, targeting customers in regions with low credit card penetration.

Enrolling in such systems "may require an extra step, but it doesn't take as many steps as going to get the credit card out of your wallet, entering a 16-digit credit card number and additional three-digit code, and then worrying about fraud," says Kolja Reiss, Mopay's managing director.

"As alternative billing channels catch on, more people will move away from using cards and spread their payments across other carriers," he says.

Mopay launched with a service enabling consumers to charge online purchases to 10 mobile telecom carriers around the world, including T-Mobile, Verizon and AT&T. A few years ago, the company added the ability to charge purchases to hard-wired landlines bills. Now it has the capability to enable broadband service providers to accept payments for online purchases.

Many of the 550 online merchants offering Mopay as a payment option are in the U.S., Asia and Europe, he says. Most consumers using Mopay are in Europe and South America, with a large concentration in Brazil, where credit-card penetration is low.

Use is growing steadily, Reiss says, although he declined to provide specific figures. He expects the addition of broadband to further expand Mopay's audience.

Merchants pay Mopay approximately 5% to 20% of the purchase price, which compares with 3% to 6% for online credit card transactions, Reiss says. Carriers that route the bill to customers through monthly cell phone, telephone bill or broadband bill statements receive about 15% of the transaction fee that was paid to Mopay — a figure that has declined as competition rose, Reiss says.

"Initially, carriers wanted 40% of the transaction fee, and it has come down substantially," he says. Reiss says that "within a few years," Mopay's transaction fees will be significantly lower for merchants as well.

Merchants so far are content to pay the higher fees "because these are sales they wouldn't get any other way," Reiss says.

Fraud is "almost nil" because of the safeguards built into Mopay's checkout process, Reiss says. What fraud occurs is typically "friendly fraud, such as when a child gets ahold of a parent's account," he says.

Those consumers opting to route online purchases to broadband accounts receive automatic authentication when using the service at the home or office that matches the address of the Internet service provider's customer. When a consumer wants to bill a purchase to the broadband service provider from another location, such as a Wi-Fi hotspot, the consumer must provide his or her broadband account number and password to complete the purchase.

Consumers who route charges to a phone bill will receive a text message on cell phones or must place a call from a land line.