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Two mobile-payments companies have linked phone numbers to cards, moves that could enable issuers to lengthen their reach in the social-media and online-gaming markets, reports American Banker, a CardLine Global sister publication. Obopay Inc. and Zong, which already offer payment services linked to phones, say extending these capabilities could encourage consumers to use cards to purchase low-cost digital content, an area where eBay Inc.'s PayPal Inc. unit is well established. Banks are eager to gain a foothold in some of the busiest parts of the Internet, says David Schwartz, Obopay's head of product and corporate marketing. Issuers are "looking at how they can target that market and get involved in the social-networking space so transactions remain in the banking system," he says. Based in the United States, Obopay has made its mark with a mobile phone person-to-person funds-transfer service. The company already has announced that users can charge purchases to enrolled credit and debit cards by entering their phone numbers and a PIN at participating gaming and social-networking sites. The move also gives Obopay entry into a larger market beyond the split-the-dinner-check crowd. Though other uses exist for its online-payment service, gaming and social media is "a segment where we see a lot of potential," Schwartz says. "It's very synergistic with the market that we're in," the "mobile youth" group—students and young professionals ages 18 to 35 who use their phones heavily. Zong, a United States-based unit of the Swiss mobile-payments company Echovox Group, already offers a service that bills users' phone accounts for purchases of digital goods. Its Zong+ service enables consumers to use their phone numbers to charge online purchases to credit, debit or prepaid cards, potentially expanding its service beyond online games and networks. The service addresses three pain points for online merchants using its phone bill service: high transaction fees caused by carriers retaining 40% or more of the charges for virtual goods; limited price points caused by consumers reluctant to add charges of more than a few dollars to their phone bills; and slow settlement cycles that result from merchants sometimes not getting paid until consumers pay their phone bills, says Hill Ferguson, Zong vice president of product management and marketing. Zong has more than 1,000 merchant customers worldwide, including 200 in the United States, mostly operators of virtual worlds, online games and premium-content subscription services. Zong expects card payments to make its service more appealing to providers of music and other digital content and potentially even to offline transactions, Ferguson says. When a Zong user enters a cellular number in the checkout process, the service transmits a text message with a one-time passcode the consumer uses to complete the transaction.
