Up and running in 39 countries Paymo, a micro-payments service aimed at mobile phone users, plans to launch a US service in the next few weeks. Already the San Francisco-based alternative payments startup, has agreements with US telecommunications giants AT&T and Verizon Wireless, and says it will likely have other US carriers on board in the next few months.
Paymo’s approach is that the service allows consumers to charge e-commerce transactions to their mobile phone bills, opening micro-payments up to mobile phone users without credit cards.
Paymo requires no enrollment by the consumer, who can make purchases by typing in their phone number. The only extra step is responding to a confirmation text message, which is sent to the phone for authentication purposes. Charges appear on the consumer’s monthly mobile phone bill.
Merchants located in any county, including the US, can now accept Paymo in 50 markets around the globe. Paymo is currently available as a payment option for consumers in countries as far-flung as Australia, the UK, France, the Netherlands, Russia, South Africa, Chile, Columbia, Saudi Arabia and Singapore.
According to Paymo, more than 70 percent of the world’s online population does not have a credit card, and until now these people – more than 3 billion of who own a mobile phone – have largely been locked out of the online shopping experience.
“In today’s challenging global economic environment we can’t afford to exclude 70 percent of consumers from participating in the online marketplace,” Paul McGuire, CEO and co-founder of Paymo told EPI. “With Paymo, online merchants can open their sites to new consumers and revenue opportunities. Consumers who don’t have or who don’t want to use their credit cards online, now have a safe and secure way to shop online, without the need for sign-ins, usernames, or passwords.”
For merchants, incorporating Paymo into their website is a simple process that opens their business to new consumers from around the world with a few simple clicks. And, because Paymo will not work without the user confirming the receipt of a text message, Paymo is safer than traditional methods for online shopping.
Terry Langlais, Paymo’s director of marketing, explained to EPI that her company’s payment method is designed for consumers as young as 13 who do not possess payment cards, and will be targeting gaming sites, social networks and other online gathering places for teenagers in the US market.
Langlais added that in most of the rest of the world, Paymo is targeting adult users, namely the millions of consumers with no credit cards or bank accounts but who have prepaid mobile phone services.
“The Paymo service makes it as simple as entering a cell phone number, and the possibilities for that type of service in under-banked markets is huge,” Langlais said. “It’s a product we can market to different audiences in different markets.”
“In the United States, 13- to 20-year-olds might not have credit cards, but more carry cell phones every day,” Langlais added. “We’re building a payment network that allows consumers to charge digital goods to their cell-phone bill, and that varies from market to market all over the world.”
Tough market to crack
Paymo is not the first company to try charging payments to a mobile phone bill, but the idea has had a hard time taking off. Mobile network operators (MNO) have been reluctant to allow third parties to add charges on their customers’ phone bills, but Langlais said micro-payments are a new way of approaching the model.
The potential merchant base for the service is somewhat limited by the reality that MNOs demand 30 percent to 50 percent of the cost of each transaction, while Paymo takes a 10 percent cut, with the merchant getting the rest.
“That’s why micro-payments for digital content and virtual tokens and upgrades in gaming make so much sense, because the product cost is negligible to the merchant, and because we open new revenue lines for them from unbanked customers,” Langlais said.
Carriers require a huge cut of the transaction to account for the risk of having to reverse transactions when a teenager runs up a bill and the parent demands a refund. Fortunately, new controls on mobile phone packages limit the number of transactions any teen caller can make in a single billing period, easing that risk.
Since Paymo is hoping to attract consumers without credit and debit cards, its biggest competitor in the US would be prepaid cards. Langlais said Paymo’s strongest selling points are ease of use and transaction speed.
“Prepaid cards for gaming have to be purchased, then reloaded,” she said. “That’s a real hassle compared to Paymo, and for online gamers, speed is a big deal.”
In addition to prepaid cards, Paymo competes with a host of other e-commerce payment ventures, including MobilCash and Zong, she said.
Etelcharge.com – which has a adopted a similar approach to e-commerce, but with landline phones – recently reported a cumulative net loss of $17.5 million since its launch in September 2008.
Another competitor is Valista, formerly iPin, which was co-founded by Paymo’s chief technology officer, Alexandre Gonthier, to put e-commerce payments on internet service provider bills. Today, it also handles payments for mobile phone and video game content.
Langlais said that Paymo’s global base gives it an unparalleled depth and breadth, and added that Paymo is an end-to-end payments service unique in the business.
“We are live in countries in every continent, and our reach is two to three times greater than any of our competitors,” she said. “We are a payments business from the beginning, not a premium SMS vendor, and we handle the transaction from beginning to end.”
In less than two years, Paymo has constructed a truly global e-payments business – one well worth watching.