AT&T Launches Mobile Payments Trial

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The mobile payments space continued to heat up this week with AT&T entering partnerships with Boku, Zong and BilltoMobile to begin trials allowing users to make online purchases directly through their phones. This marks AT&T's most ambitious payments effort to date and could help make direct mobile billing a more mainstream activity in the U.S.

Through the initiative, AT&T's 93 million customers would be able to charge digital content like music, video and virtual goods directly to their wireless bills simply by entering their mobile phone numbers. That would eliminate the need to provide credit card or PayPal information in what AT&T and its payment service partners hope proves a more attractive option for mobile transactions.

Verizon Wireless earlier this year struck a similar deal with San Jose, Calif.-based BilltoMobile, allowing subscribers to charge up to $25 a month directly to their bills for online and virtual goods at game sites, social networks and virtual worlds. With BilltoMobile and the other services, users essentially enter their mobile number at checkout and receive a text message confirming the purchase before it's added to their bill.

Payment providers like Zong and Boku already allow U.S. mobile users to pay for online goods through their phones, but that can be an expensive proposition for merchants because transactions are typically handled via SMS text message. Carriers charge fees equal to up to half the value of a purchase under that method.

By working directly with operators like AT&T and Verizon, the payments companies aim to lower the merchant fees and encourage wider participation. The fees that merchants would be charged through the AT&T payments trial are not disclosed, but are believed to be less than 20% of the value of a transaction.

AT&T isn't the only player eyeing a bigger role in the mobile payments market -- expected to grow to 108 million users worldwide in 2010, up 54.5% from last year, according to Gartner. Earlier this week, PayPal announced new technology that lets users log into its service in one mobile app and then use that same log-in across other apps to ease purchasing.

PayPal's partners during testing of the Mobile Express Checkout service included Starbucks, which will add the payment option to its Starbucks Card Mobile app for the iPhone early next year. Among other initiatives, PayPal is also teaming up with mobile developer Appcelerator to allow its 8 million merchants to create their own mobile commerce apps. PayPal said it will process $700 million in mobile payments this year.

Sprint is also pushing harder into m-commerce, unveiling a new mobile wallet offering that lets customers pay for digital and physical products on their phones through a PIN code that bills purchases to existing Visa, MasterCard and Amazon accounts.

Despite the frenzy of activity, Deepa Karthikeyan, a wireless analyst at Current Analysis, noted that direct billing via mobile will not become common overnight. "While the launches will to some degree increase awareness for m-commerce among the uninitiated, it is a long way from becoming the default, or for that matter even replacing the traditional methods of credit card payments," she said.

That's especially true in the U.S., where users are more PC-centric and mobile shopping is viewed as an ancillary service. Of the 108 million mobile payment users Gartner predicts in 2010, only 3.5 million are expected to be in North America, or about 1.1% of the region's cell users. According to a Pew Research Center study released in July, however, 11% of U.S. mobile users have made a purchase on their phone.

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