Microsoft Builds Out Mobile Wallet Strategy with Fortumo Pact

Windows Phone 8 may often get overshadowed by the iPhone and Android handsets, but developers and retailers are increasingly willing to give Microsoft's open platform a chance.

"When Microsoft comes up with its own mobile wallet, which I'm sure they will, they'll want different ways to route transactions, especially smaller ones," says Gil Luria, an analyst at Wedbush Securities in Los Angeles. "Any handset provider is going to want to have a mobile wallet because it's such a promising new area."

Microsoft is experimenting with some interesting payments technology and making beneficial partnerships.  One of its latest partners is Fortumo, a five-year-old mobile payments company that specializes in mobile carrier billing.

Fortumo's system allows users to purchase items that are charged to their mobile phone bill. This removes steps such as entering card details or passwords for mobile commerce.

"The value added [of direct carrier billing] is helping a payment platform go around Visa and MasterCard … which is expensive," Luria says. Direct carrier billing "is an important part of the emerging mobile payments ecosystem."

With carrier billing, merchants and app developers could reach consumers in countries where credit card penetration is low.

"We're excited about this space since there are 1.5 billion credit cards but 4 to 5 billion mobile accounts," says Rain Rannu, founder of Fortumo. "So three times more people can use mobile billing to buy things than credit card billing."

This is especially important in emerging markets.

"We're basically trying to make mobile payments and billing easier and simpler for those selling virtual or digital goods… and optimizing checkout for mobile devices," Rannu says. "More and more transactions are going from computers to mobile devices."

Fortumo also works with Android.  Apple's closed system, which relies on iTunes to handle payments, excludes competition, Rannu says.

"Windows is the complete opposite of Apple in terms of openness; it allows developers to use any monetization method that works for them," Rannu says.

Microsoft beat Apple in announcing a Near Field Communication payment system, although many analysts say Apple's decision to exclude NFC from the most recent iPhone remains consistent with its strategy to hold out until technology is widespread enough to be useful.

Luria predicts Microsoft and Apple will follow Google Wallet's example of using an NFC-based app.

While phone manufacturers will get behind NFC once it becomes popular, Rannu says Windows is focusing on the payment methods people want, direct operator billing being one of them.

Only two months after the Windows Phone 8 launched, mobile-pay provider LevelUp created an app for Windows handsets. LevelUp has 1 million users as of mid-March.

Fortumo launched in Europe, and has made moves to become more visible in the U.S. recently. "We have clearly seen that mobile payment is starting to take off big time in the U.S. as well," Rannu says.

Microsoft did not respond to interview requests before deadline.