Leveraging Zong, PayPal Gets Serious About Mobile Carrier Payments

Back in July, PayPal shelled out over $200 million for payments platform Zong, as a way to boost mobile payments technology. As you may know, Zong lets you pay for things, particularly virtual goods online, via direct billing to your mobile phone. According to an announcement made by eBay today, PayPal is looking to make these mobile carrier payments more available for online merchants.

According to a blog post from Zong founder and PayPal Mobile VP David Marcus, PayPal is launching an initiative to help increase the usage of carrier payments. One of the main barriers to carrier payments are lofty carrier rates. Wireless carriers have charged roughly 30-40 percent to process transactions made via mobile phone accounts, making it very difficult for mobile payment companies like Zong and competitor Boku to scale beyond virtual goods.

These transaction costs are passed down to developers and merchants using the mobile billing technology, which are then passed to the consumer. Carriers also sometimes have a dollar amount limit on payments that can be processed over a specific period of time, which inhibits merchants from using this payments option for larger transactions. In order to avoid these costs, mobile payments companies need to negotiate direct relationships with carriers.

PayPal says that the initiative will require that carriers “revise standards to help optimize user experience, increase flexibility of carrier payments as a payment method, and increase payout rates for merchants.” PayPal adds it will be working directly with carriers to help make lower transaction costs a reality. In turn for lowering fees, carriers will be able to leverage some of PayPal’s own mobile payments expertise and network of users.

It’s hard to tell whether PayPal is making real headway in cutting transaction costs without actual evidence of deals where carriers have actually lowered their cut. Hopefully, we’ll see more deals being struck in the future. Until then, this is still just an ‘initiative.’