April 10, 2012
Switched Access Pricing: Wireless Carriers Lure Customers to Mobile Payment Software
By Amanda Ciccatelli TMCnet Web Editor
Wireless carriers increasingly let their customers have access to tracking charges, and those charges are racked up at other online stores to the customer’s phone bill.
USA Today recently reported that BilltoMobile, Boku (News - Alert) and Zong (all owned by PayPal) are luring online businesses to try their mobile payment software as an option for customers who don't have a credit card or don’t like to be bothered with punching credit card digits on a Web page.
Hundreds of businesses, including Facebook (News - Alert), Zynga and dating website Lavalife, are among merchants that now accept direct-phone-billing payment. Despite the high commission rates, billing companies charge merchants 10 percent to 20 percent of the transaction.
The companies' payment systems are very similar because the customer gets the option to pay with a phone at the buy-now page. Users of BilltoMobile and Zong (News - Alert) must punch in a secret code that's texted to the phone immediately and charges then show up on the phone bill.
"There’s no need to type any credit card numbers," says Jim Greenwell, CEO of BilltoMobile, a Korean company whose system is accepted by about 300 merchants in the U.S.
In Asia, Europe and the Middle East, direct-phone-billing is very prevalent where wireless carriers have more sophisticated billing systems.
Although you may not be able to buy a couch on Target (News - Alert).com, U.S. wireless carriers only allow online purchases of songs, videos and data products such as Facebook credits and imaginary plants for FarmVille, an online game. The purchases are limited to about $100 a month because the carriers don't want customers facing bill shock.
In order to grow domestically, the companies will have to convince consumers who've been victimized by fraudulent billing in the past, according to mobile analyst Chetan Sharma (News - Alert).
Security concern from users who lose their phones is also a lingering issue. If a phone is reported lost to the carrier, the payment function is cut off immediately.
Merchants, carriers and the companies will also have to convince customers that charges will be itemized clearly and that refunds will be handled properly and quickly, says Steve Mott, an industry analyst at BetterBuyDesign.
"They have to accept some sort of liability. Whether that's as good as credit cards remains to be seen," he said.
Edited by Carrie Schmelkin
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