Telefónica O2 Germany GmbH’s customers now may purchase virtual and physical goods online using their mobile-phone number through a partnership the wireless carrier announced with Boku Inc. March 24.
The San Francisco-based mobile-payment company’s direct-billing service enables consumers to pay for online purchases ranging from 9 euro cents to 30 euros (13 U.S. cents to US$42) by entering their mobile-phone number during the checkout process, Ron Hirson, Boku senior vice president of product and marketing, tells PaymentsSource.
Consumers pay for the purchase when they pay their next mobile-phone bill. If consumers have a pay-as-you-go mobile-phone account, Boku immediately deducts the purchase amount from the prepaid account, Hirson says.
Consumers purchasing higher-priced items still may pay using Boku’s service as long as their mobile-phone account is linked to a checking account, Hirson explains. Consumers typically do so by providing the bank-routing and account information from the magnetic ink character recognition line on a personal check so merchants may settle the transactions electronically over the automated clearinghouse system.
Consumers register their checking accounts with their mobile-phone carrier and create a PIN, Hirson says. Consumers enter the PIN along with their mobile-phone number when purchasing high-priced items, he notes.
When consumers purchase something that exceeds the allowed price limit, Boku deducts the purchase amount from their checking account instead of applying it to their mobile-phone bill, Hirson explains.
Once consumers enter their phone number when prompted at checkout and complete the purchase, Boku sends them a text message verifying the sale, Hirson says. They must enter the letter “Y” in a reply text message to authenticate the transaction, he says.
“This second level of authentication assures consumers that Boku’s transaction process is secure," Hirson notes.
Boku’s service is available in 60 countries and includes such online merchants as Electronic Arts Inc., Facebook and Aeria Games & Entertainment Inc.
Consumers pay no fees to use Boku’s service. Participating merchants pay a percentage of the sale to Boku, and Boku pays about 30% of what it earns to the carrier, Hirson says. Boku charges merchants a “low single-digit” rate, but Hirson declined to comment on the actual percentage.
When merchants sell virtual products such as games and ringtones via Boku, they tend to have higher margins compared with when they sell physical goods, Bart Narter, senior vice president of Boston-based consultancy Celent’s banking research team, tells PaymentsSource.
As such, some merchants may not mind paying a higher percentage of the sale if it means consumers will complete the purchase, contends Gwenn Bézard, a co-founder and research director at Boston-based Aite Group LLC.
Moreover, many consumers may not complete a transaction because they have to fill out too much information when paying with a card, Bézard says. If consumers see Boku as an option, they may continue on with the purchase because they only have to give their phone number, he adds.
Despite the challenges for merchants, however, the payment option may be useful for the underbanked, Bézard says. Direct carrier billing is a “niche, but it could be a sizeable niche, especially once consumers realize the convenience of it,” he notes.
Boku’s direct carrier billing also is available in the United States.
AT&T Inc. in October partnered with Boku and two other mobile-payment companies to enable its wireless customers to charge online purchases for such digital content as games and music directly to their mobile-phone bills (see story).
Verizon Wireless in January also announced a partnership with Boku and Danal Inc.’s BilltoMobile to enable its customers to charge digital-content purchases to phone bills (see story).
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