Verizon Wireless has brick-and-mortar mobile payments covered thanks to its participation in the Isis joint venture. But the company soon will give its wireless customers the option to charge online purchases directly to their mobile-phone bill.
Payfone Inc. is providing the technology for Verizon’s direct-to-mobile billing service, which is scheduled for rollout later this year.
Verizon views its partnership with New York-based Payfone as “complementary to our work with Isis,” a Verizon spokesperson told PaymentsSource in an email.
Isis is a Near Field Communication mobile-payment initiative involving Verizon, AT&T Inc., T-Mobile USA and supported by Discover Financial Services (
“For our customers buying goods and services remotely using their mobile phone, Payfone will act as an enabling technology,” the Verizon spokesperson said.
The service also will extend to other wireless devices such as Apple Inc.’s iPad.
Consumer purchases over mobile Internet will not be limited to digital goods such as music and ebooks, Rodger Desai, Payfone company co-founder and CEO, told PaymentsSource in an interview.
Basking Ridge, N.J.-based Verizon is setting the direct-to-mobile billing limit at $25, but Payfone’s technology also enables Verizon to allow users to charge payments that exceed that amount to a credit or debit card on file with the wireless carrier, Desai said.
That flexibility helps make Verizon’s direct-to-mobile billing service more valuable to consumers, Beth Robertson, Javelin Strategy & Research director of payments research, told PaymentsSource in an interview.
“Having a backup [payment option] helps to enhance the user experience,” she said.
Payfone authorizes and processes its transactions using the same intercarrier roaming network the mobile operators use, according to the company’s website. The network enables a customer from one mobile carrier to access services from another carrier using the same handset.
Payfone sends consumers who choose to pay with their phone number a one-time text message containing a personal identification number they must enter to complete the transaction. Additional purchases through Payfone do not require a PIN because the company is able to tie the phone’s SIM card, device identification number and location into the account using the roaming network.
Verizon and Payfone have not revealed participating merchants. Desai is trying to sign merchants that often facilitate what he describes as “on-the-go” purchases such as ticketing or sending flowers to a loved one.
“We’re trying to get an idea about the type of merchants consumers interact with when they’re out and about,” Desai said.
Merchants are more willing to accept direct-to-mobile purchases because the transaction fee is becoming cheaper, according to industry observers.
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.
Companies similar to Payfone such as Boku Inc., Danal Inc.’s BilltoMobile and Zong Inc. moved away from that model to direct-to-mobile billing, whose transaction-billing rate falls between 10% to 20% of the sale, Steve Klebe, BilltoMobile vice president of business development and strategy, told PaymentsSource last year.
Desai did not reveal Payfone’s rates but said they will be more than traditional interchange and less than premium SMS.
Payfone believes the value to merchants that accept direct-to-mobile purchases is the ability to gain business from abroad, Desai said. A global merchant is counting on credit card sales coming from about eight countries, he said.
“Phones are in 182 more countries,” Desai added.
Verizon can spur consumers to adopt direct-to-mobile purchases if it can show the service’s convenience when buying a phone, Robertson said. “But any of the alternative [payments] out there in the online arena are generally showing low use, with the exception of PayPal,” she added.
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