Discover's new deal with BilltoMobile looks like yet another way to cover its bets as mobile payments evolves in multiple directions.
South Korea-based Danal Co. Ltd.'s BilltoMobile, which has connections to the top four major U.S. mobile carriers, on March 27 announced a marketing agreement with Discover Financial Services designed to refer some of Discover's "marquee" e-commerce customers to BilltoMobile.
The deal also will enable BilltoMobile to work on developing payments products with Discover that could include a digital wallet.
BilltoMobile and Discover will share revenues that emerge from the customer-referral aspect of the agreement, Jim Greenwell, BilltoMobile's CEO, tells PaymentsSource.
One goal of the deal is to help merchants that sell low-balance, mostly digital-goods products through traditional online payment channels such as credit cards expand their sales by enabling customers to charge purchases to their mobile phone bill, he says.
Consumer demand for direct-to-carrier billing is on the rise, observers say (see story).
"A lot of these are impulse purchases for games or dating services that are under $50, and consumers would like the option of avoiding the whole process of putting in their credit card or address," Greenwell says.
As part of the agreement, BilltoMobile's U.S. subsidiary, based in San Jose, Calif., also will receive marketing funds from Discover to explore the development of new payment technologies, Greenwell says. Although he declined to offer specifics, he suggests new products could include a digital wallet, financing tools and other offerings Discover would help to design.
One example: Discover possibly could offer "overflow" payment options to customers whose purchases charged to mobile carrier bills exceed monthly limits.
Most carriers have limits ranging from about $25 to $100 per month for such online purchases, "to limit bill shock and other problems," Greenwell notes.
Merchants pay only about 2.5% interchange fee on such transactions via Discover, and mobile billing carrier rates cost merchants about 12% to 15% of the purchase, but "it's worth it to merchants to open up these channels to customers they would not otherwise have," Greenwell says.
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