AT&T Inc. has signed partnership agreements with three mobile-payment companies that enable its wireless customers to charge online purchases for such digital content as games and music directly to their mobile-phone bills.
Boku Inc., Danal Inc.’s BilltoMobile and Zong Inc. each have developed systems that enable them to connect to a wireless carrier’s billing system. Consumers use just their mobile-phone numbers to initiate transactions at a merchant’s checkout screen.
This type of system can be a viable alternative payment option because “we’re leveraging a relationship the consumer and carrier already have,” notes Steve Klebe, BilltoMobile vice president of business development and strategy.
Other alternative-payments providers have failed because they required consumers to download software to a personal computer, attach a peripheral device to a PC or create a username and password to use their service, Klebe tells PaymentsSource. “That has been the bane of almost every other attempt to build a meaningful alternative payment,” he says.
Merchants might be more willing to add direct-to-mobile billing because the companies involved have worked to drive down the transaction price for each purchase, Klebe suggests.
Historically, most digital content purchased through a mobile phone has relied on a method called premium short message service, or SMS. Vendors use such messages to deliver digital content, such a ring tones, to a mobile phone. The carriers, however, required the merchant to pay as much as 50% of each purchase as a transaction fee similar to interchange.
BilltoMobile, Boku and Zong have moved away from that model to direct-to-mobile billing, whose transaction-billing rate falls between 10% to 20% of the sale, Klebe claims. The rates “are not exactly where they need to be, but more merchants are willing to accept these kinds of rates,” he says.
James Van Dyke, president of Javelin Strategy and Research, believes AT&T and others embracing direct-to-mobile billing will need to convince merchants to look past the associated costs and see the payment option as a means to achieve incremental sales.
“The majority of purchases will not be made by this method, but it will create revenue when it might not have otherwise existed” because direct-to-mobile billing gives consumers another way to purchase goods and services without traditional methods, such as credit and debit cards, Van Dyke says.
Indeed, merchants should be looking to add more alternative-payment options at checkout because consumers increasingly are using them, a recent Javelin study found.
Javelin surveyed 60 merchants and 3,294 consumers online in November, July and August. Among the consumer respondents, 55% were using alternative payments such as PayPal Inc. and Bill Me Later Inc., but only 35% of participating merchants supported such payments.
AT&T officials were unavailable for comment, and the company is positioning the agreement as a trial. However, Ron Hirson, Boku senior vice president, refers to the pact is “an extended agreement.”
BilltoMobile recently went live with Verizon Communications Inc. Klebe could not share specific transaction data but says volume has been modest. “Consumers are using it over and over again and that’s a good sign,” he says.
Boku last week announced a partnership with Vodafone Group PLC. Boku, BilltoMobile and Zong have carrier and merchant relationships in multiple countries.
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