Few markets in technology are more crowded than mobile payments. That was the case even before Apple made its loud entrance as part of the iPhone 6 launch last month and prior to eBay's announced plans a week ago to spin off PayPal.
In a lesser-known corner of the industry, called carrier billing, two start-ups are coming together to try to expand. Boku, based in San Francisco, announced Tuesday it's acquiring Germany's mopay, and if the combined company has its way, more consumers will start buying things using just their phone number.
Carrier billing hasn't caught on in the U.S. the way it has in Europe and Asia. For the business to work, the major phone companies have to be on board, because payments are made through their networks. Instead of the purchase of a digital song or online magazine subscription going over the credit card systems, they get tacked onto a consumer's phone bill.
But elsewhere the model has gained traction. Boku and mopay combined have about 185 employees and customers in 80 countries. Boku alone works with more than 250 operators. Paying with a phone number is particularly popular for things like mobile games, virtual goods and digital media, where items cost less than $50 and convenience is at a premium. According to eMarketer, 4.6 billion people worldwide will use a mobile phone this year.
"More people have got phones than have got cards or bank accounts," said Jon Prideaux, Boku's chief executive officer, who's based in London. "We've got a massive advantage. If you've got a phone, you just need to know your phone number in order to make that payment."
Boku's customers include Spotify and Sony. Prideaux said that joining forces with mopay will give them the scale to go after more big-name merchants.
Mopay has been at this for awhile. Founded in 2000, the company has more than 500 clients and processes over 5 million monthly payments. Mopay operates in countries like Vietnam and Indonesia, where traditional networks are less prominent. In May, mopay signed a deal to be the preferred carrier billing partner for China's Baidu Mobile Game, a channel for distributing games.
Boku was started in 2009, and the business took off quickly as Facebook became a hub for social game makers like Zynga. Fans of games like FarmVille could buy virtual tractors using their phone number, and Zynga was willing to share much of that revenue with the phone company because there was almost no cost associated with selling the product.