Boku & Zong

NICHE

BOKU and ZONG are new online payments companies that facilitate payments of virtual goods though mobile phone bills. Their primary clients are online businesses that sell virtual goods, which they connect to mobile network operators that facilitate the payments.

Boku was launched in 2009 as a merger between Paymo and Mobillcash.  The company allows merchants to vend their products without forcing consumers to fill out a long credit card form.  Instead, by partnering with Boku, their customers pay by simply entering their mobile phone number and get charged via phone bill at the end of the month. Boku CEO Mark Britto has been expanding the company by reaching out primarily to mobile network operators in other countries. Today, the company works with over 260 mobile network operators across 67 different countries. It has more than 110 employees.

Zong is nearly identical to Boku. Another “bill-to-mobile” company that deals with virtual goods, Zong possesses essentially the same revenue model but a slightly different way of paying. In 2011, Zong was acquired by eBay and currently acts as a service of PayPal. Today, the service is in 30 countries and works with over 120 carriers.

In addition to Boku and Zong, a myriad of other similar bill-to-mobile payments companies exist: For instance, Mopay, BilltoMobile, PayOne, Fortumo and SmsCoin. Because of this quickly filling niche, both companies have begun looking for ways to expand to physical goods.

CEME Presents: Boku and Zong, part of the ABCs of Payments Series. CC-BY-NC

CEME Presents: Boku and Zong, part of the ABCs of Payments Series. CC-BY-NC

BUSINESS MODEL

Boku, as well as its competitor Zong, currently only deal with sales of virtual goods – for example, music, video games, or items within video games. The reason for this is because MNOs charge exorbitantly high rates, ranging from 30%-40% per transaction, when an item is charged to a consumer’s monthly phone bill. These rates are high for several reasons. First of all, the payment infrastructure that currently exists for MNOs is old and not well suited for this billing function, making it expensive for phone companies to use (more on Premium SMS below). Next, purchasing an item through Boku or Zong essentially extends free credit to the purchaser until their next bill. Since this is risky for MNOs, transaction fees are necessarily high.

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