BilltoMobile Quietly Emerges As Mobile Payment Powerhouse

A year ago, few people in the U.S. had ever heard of BilltoMobile, a direct carrier billing company with roots in Korea. But the San Jose company is fast emerging as a leader in the mobile payments space with direct billing arrangements with Verizon and AT&T and today, its adding Sprint to the list.

The latest announcement extends BilltoMobiles reach to about 240 million customers in the U.S., who will be able to make purchases and charge them directly to their cell phone bill. BilltoMobile is actively looking at locking up more carriers in North America and is expanding the number of merchants it deals with directly. It is also using its unique integration with the three biggest carriers as a gateway for other mobile payments services like Zong and Boku, which partner with BilltoMobile for Verizon billing and will likely replicate the deals on Sprint.

BilltoMobile CEO Jim Greenwellthe spate of carrier wins reflects the hard work the company and its majority shareholder, South Koreans Danal Corp. have done in the carrier billing field. BilltoMobile in 2006 was originally spun out of Danal, a leader in carrier billing in Asia. The company quietly began approaching U.S. carriers in 2006 about using carrier billing but it took a few years before it could establish its first deal with a major carrier, which it did with Verizon in March of last year. It later secured a trial with AT&T in October along with Zong and Boku.

The key, Greenwell, said has been proving a model that has wo! rked in South Korea and Asia. Danal, which bought back majority ownership of BilltoMobile last year, started carrier billing 11 years ago and now boasts $2 billion in transactions last year with 14 carriers in Asia. BilltoMobile used the same knowhow to sell U.S. carriers on carrier billing, offering them a host of features includingbilling, customer service, dynamic pricing, real time authentication and refunds. Altogether, it took two and a half years customizing the service for U.S. carriers and convincing them to get on board.

Weve done a lot of proof of concept. We had to convince a carrier that we will take care of their subscribers. Thats hard to do without evidence, Greenwell said. When we talked to the carriers, we had to present a financial grade system.

Direct carrier billing has been big in Asia and South Korea in particular. Greenwell said 80 percent of the people in Korea use carrier billing for purchases with the average person buying $50 worth of goods a month. In the U.S., the challenge was to migrate carriers away from premium SMS, which other mobile payment services like Zong and Boku have used in addition to direct carrier billing. The problem with premium SMS was that premium SMS providers often charged 35 percent to 50 percent fees on top of transactions, which made it only good for digital goods. But by tying directly into carrier billing systems, BilltoMobile can bring those fees down to the mid-teens. Its not on par with credit cards but it allows merchants to consider carrier billing as an alternative to credit cards. And it now has the potential to become a significant revenue source for operators, who will take a smaller cut compared to premium SMS fees but will likely make it up with more volume.

Greenwell said carriers have been keen to explore a larger role as a payment provider. Though he declines to use the term, dumb pipes he said the carriers a! re anxio us to avoid being irrelevant to its users. He said it makes sense for operators to leverage their strength in billing and capitalize on that relationship.

One of the things carriers do well is they do an efficient job of getting the bills out with correct charges, Greenwell said. Thats an incredibly efficient machine. All we did was say, Take care of what youre good at and levarage that with your consumers.

Greenwell said direct carrier billing along with Near Field Communications are going to be two major components of mobile payments, which he expects to emerge this year in a big way. Weve seen a bunch of NFC news with carriers, financial institutions and handset manufacturers and platform makers recently talking of expanding their efforts with NFC. While NFC will work on point of sale purchases, Greenwell said, direct billing will cover mostly digital goods initially but will likely expand to physical goods bought online. He said in Korea, 20 percent of goods bought through direct billing are physical items like books, movie tickets and even pizza delivery. He expects similar adoption especially as fees hopefully drop into the single digits as they are in Korea.

Look for the digital goods market to take off this year and in six months, well see some non-digital goods as well, Greenwell said. It will be variety of things. Anything thats an impulse sub $50 buy.

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