Bill-to-Carrier Rivalry Heats up with Danal’s Verizon Breakthrough

Competition in the bill-to-carrier mobile payments market is heating up with Verizon Wireless's announcement it will offer the service directly to consumers through Danal Inc.'s BilltoMobile payment service within the next few weeks. The deal marks Seoul, Korea-based mobile payments operator Danal's first contract in the U.S. Danal is in discussions “with all the top carriers in the U.S.” to offer the service, a spokesperson says. The new service, announced on Monday by Verizon, will enable Verizon Wireless's 65 million-plus customers to pay for online content and digital goods that are downloaded and used on their personal computers from Danal's participating network of e-commerce merchant partners, the Danal spokesperson says. “The day we turn (the service) on, every post-paid subscriber of Verizon Wireless that's in good standing will be eligible to use it,” she says. “There's no pre-registration, no special software, nothing.” The mobile-payment service will feature a $25 monthly spending limit, along with content and parental controls for individual accounts. Customers with text messaging-enabled phones will be able to shop for Verizon Wireless-approved content at online stores, including game sites, social networks, and virtual worlds. Users also will be able to purchase subscriptions to popular online games. To conduct a transaction, consumers click on the BilltoMobile button during checkout at a participating Web site and then enter their mobile numbers and mobile-billing Zip Codes for subscriber authentication. A text message is then sent to consumers' mobile phones with a one-time pass code. Once consumers enter the pass code into the online checkout window, the transaction is completed. The entire process will take about 15 seconds, and there are no links to credit cards or bank accounts required, Verizon says. “The bottom line is providing another utility for our customers,” a Verizon spokesperson says. While the BilltoMobile service is offered to consumers at no charge, merchants will pay Verizon and Danal a combined fee of about 15% of the transaction, a Danal spokesperson says. “All other mobile billing mechanisms today charge 40% to 50%,” she says. “This is big decrease.” Mobile carriers typically charge the fees In return for handling billing and bearing the collection risk. While consumers initially will be able to use the service for online content only?Danal is anticipating an average ticket of $8 to $10?other types of merchants may be added later, the spokesperson says. “In Korea, we expanded to physical goods about three or four years after we launched there,” she says. “But that's really going to be a carrier choice. If carriers here are interested in going into physical goods, then eventually we will.” Danal is a dominant mobile-payments provider in Korea, where 80% of mobile subscribers use direct mobile billing and up to 60% of all online digital content purchases are billed directly to mobile accounts, the company says. Activity in mobile payments for downloads has been increasing over the past year. Last August, Palo Alto, Calif.-based Zong Inc. said the processing platform it shares with its parent company, Echovox Inc., added 10 million unique users since the beginning of 2009, the bulk of them in Europe and North America (Digital Transactions News, Aug. 6, 2009). Zong began operations in 2008. And early in 2009, Boku Inc., a rival service that handles mobile payments for online-game and social network sites, acquired two other mobile-commerce companies (Digital Transactions News, June 16, 2009). Both Zong and Boku work similarly to BilltoMobile. At checkout, the user types in his cell-phone number and receives a confirmation request to his phone. Once he texts confirmation (Zong also sends and asks for entry of one-time PIN), the transaction is booked and the customers sees a charge for the item on his mobile-phone bill. Like BilltoMobile, Zong and Boku concentrate on digital downloads, an estimated $8 billion market among video-game and social-network sites.