Boku Inc. is working with European mobile network operators to enable users to buy physical goods through its carrier billing service, which previously faced regulatory constraints that limited it to digital content sales.
The partnership comes at a time when telcos and financial companies worldwide face a new wave of competition from Apple Pay and other disruptors. The telcos involved in Boku's plan Telefonica UK (O2), Everything Everywhere and Vodafone recently scrapped the mobile wallet component of their Weve venture.
"With the industry getting excited about Apple Pay, HCE [host card emulation] and bank account-based solutions, mobile network operators are facing the risk of being left behind in mobile payments," said Zil Bareisis, a London-based senior analyst for research firm Celent.
Carrier billing, which allows consumers to add purchases to their phone bills, is "one of those solutions that remains firmly in the MNO control," Bareisis said. "It is not surprising that they are seeking to leverage it in as broad a context as possible."
Boku has obtained a license from the Financial Conduct Authority that gives it the flexibility to sell physical goods as well as digital content. Prior to obtaining that license, Boku had to operate under an exemption from the European Union's Payment Services Directive that states telcos and carrier-billing providers can sell only digital content to consumers.
"The challenge had always been that the previous carrier billing regulation was interpreted differently in different countries," said James Patmore, senior vice president and managing director for Boku. "This clarifies the situation, by getting our license, and merchants can now accept these payments in the same way they would a credit card or other financial instruments."
Boku will continue to focus on e-commerce payments, but consumers can now use it to also purchase transit tickets, household services, or pay for pre-ordered food and drinks from restaurants, Patmore said.
The system will emphasize "one click" transactions on e-commerce sites, Patmore said.
Boku users generally submit mobile phone numbers and get a text message back from Boku that is used to confirm a transaction. With the new service, the consumer won't have to register, as the mobile network operators will already have the customer information available for Boku's use.
Even with the service expanded to physical goods, it is not likely consumers will begin making high-value transactions on their Boku accounts, Patmore said. The average transactions will likely be between 2 and 30 pounds ($48 U.S.), he added.
Under their partnership, "the mobile operator pays Boku, and Boku pays the merchants," Patmore said.
The new payment system will launch in Western Europe, and Boku will consider moves into other parts of Europe while also studying the potential in the U.S., Patmore said.
Parts of Asia already have a similar system for regulation of carrier billing providers, Patmore said.
In August, Boku established direct carrier billing agreements with the leading telcos in India.
Last month, Boku set the stage for transit ticket purchases through a partnership with Corethree involving its MoBus mobile ticketing application.