LevelUp is trying something it says is a first in the U.S.—enabling users of its mobile payments platform to charge in-store purchases to their mobile phone bills, beginning with Sprint customers. Through a partnership with mobile carrier billing company Danal, LevelUp has integrated Sprint as a payment option within its mobile app, and the Boston-based company is dangling a bonus of 10 percent above the usual rewards for every purchase LevelUp users route to their monthly Sprint bills. While direct-to-mobile billing is popular for merchants of digital goods, the method is relatively rare for purchasing physical goods at the POS. Benefits include convenience for consumers interested in aggregating payments on a monthly bill, but the drawback with direct-to-carrier billing can be sticker shock for consumers when the bill arrives. Carrier billing specialist Boku last fall announced a partnership with U.K. mobile network operators O2, EE and Vodafone enabling U.K. mobile phone customers to charge physical goods and services at the POS.
LevelUp says it’s looking for other carriers to support its direct-to-mobile option, and analysts say if the move is successful, it could provide an opening for MNOs, which have struggled to break into mobile payments. Examples include Softcard and Weve, two high-profile mobile payments joint ventures of major wireless carriers that have been shuttered or, in Weve’s case, refocused on mobile marketing. “The advantage of carrier billing at the POS is that typically it requires no separate enrollment or account number, so it’s convenient and could reduce friction for consumers,” Rick Oglesby, research director with Double Diamond Group, tells Paybefore. The downside, he notes, is that carrier billing is typically expensive for merchants and restricted by carriers to small-dollar amounts to minimize risk. But a focus on smaller purchases could play in LevelUp’s favor, Oglesby suggests. “LevelUp makes sense as an entry point for the carriers because its footprint in QSRs and cafes provides the low-dollar, low-risk transactions the carriers require.”
Building merchant support for carrier billing at the POS could be challenging, according to Zilvinas Bareisis, a senior analyst with Celent, because of the higher risks and fees associated with routing payments to a third party. “While merchants could afford it for digital goods, which have zero or marginal costs, carrier billing has posed obstacles for selling physical goods. The fees have been coming down, but if a mobile wallet offers this as one payment alongside others, it needs to make sure that economics are comparable with other payment types,” he adds.
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