The world of “mobile payments” is becoming increasingly competitive (i.e., Zong, Obopay, Boku, others) with many initiatives in the market and many set to happen over the next year. (Facebook, Amazon, even Google have big opportunities here as well.)
While mobile payments are gaining steam in Europe, Asia and the developing world, in North America it’s a segment that’s somewhat elusive and not well understood. Does it mean, for example, accessing a credit card account stored somewhere online for an e-commerce transaction through your phone (e.g., Amazon); using your phone as a credit card itself with a special numeric code that triggers a payment; swiping your phone over a physical reader at the POS; transferring money via SMS to a merchant or another seller? All of the above?
Definitions aside one of the more visible competitors in the segment, Zong, has launched “Zong Plus” this morning. Essentially this adds credit card payments to its current system of carrier billing. It’s a good move by the company and indicative of where the industry will go. As with almost everything in mobile, the world is bypassing the carriers because they’re demanding, slow and typically don’t offer the best user experience. Zong wouldn’t necessarily say any of that but I will.
Previously Zong was used almost exclusively for “virtual goods” on sites like Facebook. The company said that it continues to focus on that segment. It uses the mobile telephone number for security and authentication and the billing is actually done through the carriers. There is a per transaction limit of $9.99, which doesn’t apply if Zong Plus is invoked.
Here’s a demo of how Zong Plus works by David Marcus, CEO of Zong:
Zong Plus simply accesses a different payments back end with essentially the same user experience.
Micropayments for virtual goods is what everybody seems to get excited about (with the requisite hyperbole about Zong being a “PayPal killer”). What’s more interesting to me is the prospect of mobile PayPal or Zong Plus as a alternative payment system to credit cards in the real world.
The scenario I explored at some length with Zong’s Hill Ferguson was the prospect of a local cafe or service business (contractor, roofer) taking credit card payments via Zong without a merchant account. The per transaction fee would be higher via Zong than if the merchant were to directly accept the credit card, but overall it would be cheaper than setting up a merchant account and paying associated fees on an ongoing basis.
PayPal can be used like this now as well. Almost a year ago I spoke at some length to someone at PayPal about ambitious plans combining mobile payments and local advertising and promotion. It’s not clear what’s happening there or whether the plans have moved forward. But there is an opportunity.
Any merchant who would use a Zong Plus or PayPal (tied to a mobile phone) to accept payments would need to have an account with these companies. But it would be simpler and easier than dealing with banks, credit reviews and so on. I’m eager to see if mobile payments starts to make its way into the world at the local level in the manner I’ve described.
Related: Bling Nation gets big funding for mobile->SMB credit card workaround (total raised almost $30M).