Payfone

NICHE

Founded in 2008 by Rodger Desai and Mike Brody, Payfone’s core business is to facilitate online purchases with the use of cellphones. The company relies on the usage of the SS7 inter-carrier roaming network to create mobile identities that make mobile payments more seamless. Like Boku and Zong, Payfone offers a payment solution based on the bill-to-mobile model. However, in addition, the New York based company offers additional services to their clientele of banks, credit card issuers and MNOs through a white-label model.

The company’s current product line up consists of Direct Carrier Billing, 1-Touch Checkout, and Mobile Authentication. The first offering is very similar to BOKU and Zong, and provides payment services to online merchants, allowing customers to pay with their phone numbers and get billed at the end of the month. Rather than using Premium SMS for direct-to-mobile billing, Payfone sends payment information directly over the SS7 network through a loose partnership companies like Roamware.

Payfone’s second product, 1-Touch checkout, essentially provides merchants with a personalized payment app, similar to Dwolla, allowing consumers to pay from their phones as long as they have a linked credit card or bank account. Payfone’s last product, Mobile Authentication is not a payment service, but helps provide authentication services to other mobile services that may require identification. 1-Touch Checkout and Mobile Authentication service, like Direct Carrier Billing, all leverage the SS7 network to gain a handset’s identification attributes.

CEME Presents: Payfone, part of the ABCs of Payments Series. CC-BY-NC

CEME Presents: Payfone, part of the ABCs of Payments Series. CC-BY-NC

NETWORK SPECIFICS

SS7 is the inter-carrier roaming network that allows cell phone subscribers to use outside networks; because SS7 was designed specifically with internetwork communication and billing in mind, it offers a slew of benefits in the mobile payments realm. Premium SMS based payments are inefficient and costly for MNO’s to implement; since PSMS was invented for sending ringtones rather than sending payments, purchases made this way have high transaction failure rates, long settlement periods, and high exposure to charge-backs and fraud. These lead to transaction costs as high as 40% (explained more in-depth in BOKU page).

Payments through Payfone do not have the same problems. Using the SS7 network, the company is able to record more information about each transaction, including the location, device identification number and SIM card. This way, if a mobile number is used to make a purchase from a different phone or location than is usual, Payfone can flag the transaction. This lowers the risk of fraud and charge-backs, bringing down transaction costs for their bill-to-mobile service. Additionally, the added layer of security facilitates a more seamless payment experience:

With Direct Carrier Billing, customers do not need to send and receive SMS confirmation codes for each transaction. Once a customer has authenticated a mobile device with a merchant, future purchases can be completed with a single click.

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