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Monday, July 20, 2009

Micropayment technologies on the rise

A recent article from The New York Times discusses a growing trend known as micropayments. In recent months, the popularity of the iPhone and other mobile devices has driven several new start-ups as well as established companies to develop micropayment technologies that will make it easier for users to purchase goods via their mobile devices. The goal of these technologies is to make it as easy to make purchases on a cellphone, as it is on a computer. While there are still security concerns associated with some of these technologies, the ideas are interesting.

One technology, that officially launched last month, is from a start-up company called BOKU which allows users to type in their cell phone number rather than their credit card number to make a purchase. The system then sends a confirmation text message to the cell phone which requires the user to respond via text for authorization. The charge is then added to the user’s mobile phone bill. Social-networking, gaming, and retail websites can install BOKU as a payment platform for the site.

Another start-up company known as Zong, launched a similar service last year. David Marcus, chief executive of Zong, commented, “When people can use their phone numbers to make a purchase, they are 10 times as likely to follow through on a transaction as when they have to type in a credit card and billing information.” Currently both BOKU and Zong are focusing their efforts on companies that offer virtual goods because the large transaction fees that wireless carriers charge would make it unprofitable to offer physical goods. However, in the future, carriers may decide to reduce their fees if they see that customers want to make physical goods purchases with their cell phones.

Another article from CNET notes that this space is one to watch, as social networks and gaming companies begin offering these services. David Marcus added, “The space is definitely growing, and it's in hyper-growth stage, and you’re going to have major players that are going to enable mobile payments in the very near future." As these technologies develop, stores may be able to take advantage of these offerings. Perhaps students will be able to pay for their textbooks with their cell phone in the not-too-distant future.

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