mobile phone accounts is not a new concept but it is one that Paymo
believes holds huge growth potential. Executives from the US-based
company now active in 39 countries provided Charles Davis with
insight into Paymo’s strategy to harness market
opportunities.
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.
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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.
Global reach
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.
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By GlobalDataAccording 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.”
Competitive market
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.
