Payvia, which provides direct-carrier billing technology, has acquired Mogreet, a provider of cloud-based mobile messaging.
The companies plan to combine the two technologies in a way that positions Payvia to expand into other payments arenas. The companies announced the acquisition May 20.
When Payvia first approached Venice, Calif.-based Mogreet six months ago to establish a business relationship for some mobile messaging and tie-ins to carrier billing services, the conversations evolved into "something far more strategic," says Payvia CEO Darcy Wedd.
"With the ability to send targeted messages with an immediate transaction option attached, and a way for merchants to have ongoing engagement with their customers, that becomes very powerful when added to our sweet spot, which is mobile payments," Wedd says.
Mogreet's 23 employees will join the Payvia staff, bringing more than 1,000 clients who can now pitch Payvia's carrier billing offering as a payment method for digital goods and services.
The addition of Mogreet's mobile video and media messaging services allows Payvia to consider "branching off into other areas," Wedd says.
"Digital goods is a big market, but now we can tap into the e-commerce market and we're establishing the groundwork for playing in that market," Wedd says.
Direct carrier billing service providers find it difficult to expand beyond sales of digital goods because consumers don't want high mobile phone bills and carriers don't want to operate like a bank, but Payvia aims to move past those barriers.
"We are planting the seed for slowly moving into the physical [goods] world, maybe with parking payments and some other services at some point in time," Wedd says.
In a fairly short period of time, Payvia plans to have a merchant base of more than 5,000, Wedd says. "We expect to be well-positioned to have a stake in the e-commerce game at that point," he adds.
The challenge for Payvia in the past, and possibly in the future, is working with the other participants in mobile billing, says Maria Arminio, president of Avenue B Consulting Inc., a Redondo Beach, Calif.-based payments management consulting firm.
"You have to have the telecommunications companies participating to make it work," unless Payvia changes its business model entirely or creates new divisions within the company, Arminio says.
The significant profit margins and markups in telecommunications as a utility are "very different from the payments world," she adds.
Payvia must also convince consumers of a value proposition in converting to a different form of payment or currency, Arminio says.
Despite those challenges, Wedd expects great things from the Mogreet acquisition.
Payvia may rebrand some products, Wedd says, but it will take some time for changes of that nature to develop. The combined company will operate out of separate offices at first, but the goal is to have the staff move into Payvia's Los Angeles office during the fourth quarter of 2013, Wedd says.
"That would give us about 95 employees in the LA headquarters and 50 employees in our San Francisco, Seattle and Boston locations," Wedd says.
Last month, Payvia added several new clients. Payvia first appeared a year ago, touting its experience from eight years as part of carrier billing network provider m-Qube Inc.