The mobile payments space just got a little bigger with the emergence of BOKU, a new company that combines Paymo and Mobillcash into one. Plus, the company has $11 million in new venture funding with which to launch its mobile payments service.
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Puzzle Pireates: Pay with your Mobile Phone |
It’s just one of the players in what’s estimated to be an $8 billion market that involves consumers buying virtual goods and games with their phones. In contrast to content like ringtones, the digital goods are, more or less, for online entertainment rather than strictly residing on the phone. And if the U.S. adoption gets anywhere near that of places like South Korea, they’re in for a successful run. The big question is: Do U.S. consumers want to add more fees to their monthly phone bills?
Those in the U.S. mobile payments space say the time is right, even during or perhaps especially because of the economic crisis. With tighter credit, consumers are looking for responsible ways to buy goods and keep a budget. And payment suppliers say U.S. carriers are increasingly ready to adopt mobile payments as they look for new revenue streams.
DIFFERENT STROKES
The mobile payments market where companies like BOKU and rivals like BilltoMobile are playing is not exactly the same as other types of mobile payments, like that envisioned for near-field communications (NFC). Nor is it mobile banking. Rather, the idea is for people to pay for digital goods, like accessories for an avatar or an online game, and get billed via their monthly mobile phone bill. The amounts are designed to be low enough so that consumers don’t get sticker shock when they get their bill.
For its part, BOKU wants to create a new standard for mobile transactions by bringing bank-grade mobile payments to the Web, according to Ron Hirson, vice president of product marketing. Key to its success is a global presence, he says. BOKU is live in 53 countries on more than 190 carriers, including all major U.S. carriers. “No one comes close to us in terms of country coverage,” he says. “Publishers come to us because they have customers worldwide.”
The company raised $11 million in venture funding led by Benchmark Capital, with participation from Khosla Ventures and Index Ventures, and is unveiling its management team, which includes executives who have had experience at companies like AT&T Interactive, PayPal, Apple, FICO, Google, O2, Bank of America and eBay.
The merger and financing will help the company enable global consumer adoption and accelerate global carrier coverage, executives say. A cross-carrier mobile payments system is necessary to get support from merchants willing to make goods and services available over mobile devices.
BOKU’s U.S. partners include Hi5, Puzzle Pirates, Aeria Games and “hundreds” of apps on Facebook and MySpace. “We’re tapping markets where people aren’t able to pay at all – someone without a credit card or bank account, so it’s tapping a new market,” Hirson says.
MULTIPLE PLAYERS
While the combination of Paymo and Mobillcash as BOKU is just coming out of stealth mode, another U.S.-based entity is lying low. BilltoMobile, based in San Jose, Calif., is the U.S. entity using a payment service established by Danal in South Korea, where Danal has been racking up experience in mobile payments since 2000.
In South Korea, up to 70 percent of all online digital content is purchased using direct mobile billing, and two-thirds of all mobile phone subscribers actively use the service. (South Korea is said to have the second-highest credit-card penetration, so mobile payments are not replacing credit cards.)
Danal builds and operates the payment gateway between merchants and mobile carriers, and it expects it will catch on in the United States. U.S. company executives are mum about their exact plans, but The Korea Herald reported earlier this month that Danal – a strategic investor in BilltoMobile – sealed a contract with a U.S. mobile carrier to provide a mobile phone-based payment service. Danal in Korea did not disclose the name of the carrier, indicating only that it was a major company with a nationwide network and significant customer base.
Park Sung-chan, CEO of Danal Co., told the Korea Herald that the United States is “finally opening to us” after three years of trying to establish a presence.
A different type of payment system using a mobile phone is Obopay’s model, which allows participants to send money to someone else’s phone. In May, Obopay announced the Obopay Family Account, which lets parents send money to their children or any family member from any mobile phone. Parents get an Obopay Family Prepaid Mastercard issued by The Bancorp Bank for any child at least 13 years old, and it can be used in person, online or by phone with any merchant that accepts MasterCard debit cards. Parents can add money to an account using Obopay’s mobile application, text message, mobile Web or Obopay.com.
“This is not … some technology down the line,” says Michael Diamond, Obopay’s senior vice president of product development. “This is for anybody with a mobile phone. You don’t need an iPhone – any phone that does text messaging.”
Today, the kinds of services offered by BOKU and BilltoMobile do not involve physical goods, like clothing, although that’s the next logical extension sometime down the line. For now, Hirson says, “we’ve got a lot of wood to chop.”