Pay by phone: More merchants embrace direct mobile billing

April 6th, 2012 By Roger Yu in Technology / Telecom

Charge it to my phone. It's the shopper's new mantra as wireless carriers increasingly let users tack on charges - racked up at other online stores - to their phone bills.

BilltoMobile, Boku and Zong (owned by PayPal) are luring online businesses to try their software as an option for customers who don't have a credit card or can't be bothered with punching their digits on a Web page or an app.

Hundreds of businesses, including Facebook, Zynga and dating website Lavalife, are among merchants that now accept direct-phone-billing payment. And that's despite the high commission rates - 10 percent to 20 percent of the transaction - that the billing companies charge merchants. (Much of that goes to wireless carriers.)

Direct-phone-billing is much more prevalent in Asia, Europe and the Middle East, where wireless carriers have more sophisticated billing systems.

The companies' payment systems are similar. You get an option to pay with your phone at the buy-now page, where you type in your phone number. Users of BilltoMobile and Zong must punch in a secret code that's texted to the phone immediately. Charges show up on the phone bill.

"There no need to type any ," said Jim Greenwell, CEO of BilltoMobile, a Korean company whose system is accepted by about 300 merchants in the U.S.

You can't buy a couch on Target.com, however. U.S. 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, said David Yoo of Boku.

To grow domestically, the companies will have to convince skittish consumers who've been victimized by fraudulent and unitemized billing in the past from fly-by-nighters that sold ringtones and wallpapers, said Chetan Sharma, a mobile analyst. "The industry has learned from the experience, and there's more vetting of the merchants," he said.

Zong audits merchants by verifying executives and addresses, as well as visiting the site, said Hill Ferguson, PayPal's head of mobile.

Security concern from users who lose their phones is also a lingering issue. If a is reported lost to the carrier, the payment function is cut off immediately, Greenwell said. "We see very little fraud."

, 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, said 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.

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"Pay by phone: More merchants embrace direct mobile billing." April 6th, 2012. http://phys.org/news/2012-04-merchants-embrace-mobile-billing.html