Verizon Makes The First Move On Direct Mobile Payments

Written by Evan Schuman
April 8th, 2010

When Verizon announced it plans to charge consumers for mobile payments directly on their phone bills starting this Spring, the inevitable mobile payment wars began. Will consumers ultimately pay for such services through their carriers, their banks, their PayPal accounts or even through cash at a Western Union office?

Retailers are nervously watching from the sidelines, with one eye on their phones and another on the millions they’re spending on interchange fees to payment processors.

The background of the Verizon deal is noteworthy. Verizon today is the largest wireless network and its CEO has confirmed it’s in the running to support the iPhone on its network. But Verizon is actually using the BilltoMobile service from Danal, the U.S. arm of the Korean company of the same name.

Danal has already been running the direct mobile billing service via 14 mobile carriers in South Korea, Taiwan and China. Danal says that the carriers have processed a total of over $2 billion dollars worth of transactions through more than 10,000 retailers. In theory, that’s an average of $200,000 per retailer.

It’s hard to put those figures into meaningful context, though. First, Danal hasn’t said over what time period those sales were made. Second, much of Asia is so far ahead of the U.S. in terms of mobile payment acceptance that, even if those sales were all recent, it may not be that impressive. That said, $2 billion is still a decent amount of M-Commerce dollars, regardless of the particulars.

The U.S. Verizon-Danal deal, though, is starting off very slow. It’s—initially, at least—excluding physical purchases. If someone hits Best Buy’s mobile site and buys a television, it can’t be charged on a consumer’s Verizon account.

Indeed, the list of restrictions is extensive. The purchase needs to be “online content and digital goods that are downloaded” onto the consumer’s desktop device. Those purchases are limited to whichever retailers accept Danal’s (and Verizon’s?) terms for joining its merchant partner program. The deal is initially also setting an interesting $25/month spending limit.

So, clearly, this is a preliminary trial to determine consumer interest and to try and work out the technical bugs when using the U.S. mobile infrastructure. But if this trial works, there’s every reason to believe that the limits will come off and the mobile payment wars will truly begin.


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