Microsoft, Sprint Make a Major Endorsement of Boku’s Carrier Billing

Boku had to stay mum last week about its involvement in powering Apple Inc.'s carrier billing option in Russia, but there is no such gag order this week regarding the company's partnership with Microsoft.

Boku is launching carrier billing for the first time anywhere on Windows 10 through Sprint in the U.S. and Swisscom in Sweden. Consumers making digital content purchases in the Windows Store will now have carrier billing listed as a payment option, using only their mobile phone number to charge a purchase to their phone.

For the San Francisco-based Boku, the last two weeks represent major victories in its mission to establish a reliable and secure payment method that can stand alongside payment cards in the digital world.

"I see this deal with Microsoft as a breakthrough," said Jon Prideaux, CEO of Boku. "It signals we are getting to where people's perception of buying digital content and doing it through your phone bill becomes a mainstream payment option."

While Sprint is the carrier to debut this service on Windows Store, Boku expects Microsoft to encourage other carriers to offer the service at some point in the future.

"Our strategy has been consistent from the start," Prideaux said of Boku's cloud-based system that essentially converts a user's phone number into a token and keeps it on file for future one-click purchases."We think the idea of buying stuff through your phone bill ties in really well with mobile commerce and digital content, and this is validation of what we have been saying."

While Boku has concentrated on digital content for its carrier billing service, it has dipped its toe into other spaces such as mobile ticketing for buses and parking lots.

In a more direct approach to testing the potential of carrier billing for physical goods, Boku in past two months has also offered the service as a payment option for Japan's largest coffee shop chain, Ueshima Coffee Co.

Customers add money to their Ueshima coffee cards using their carrier login through the coffee company's mobile app or website. They still use the physical card to make coffee purchases at the store. "We will go anywhere the carrier wants to make an investment and the merchant wants to launch the service," Prideaux said. "We are expecting more carriers and more countries to get on board with this."

Carrier billing always has a couple of key obstacles to overcome, the first being what the carrier charges to allow a company to become part of its billing process.

"Typically, those charges have been significantly greater than what is commonly associated with payments interchange, but it has been acceptable because the margins on digital content are 70% to 80%," said Tim Sloane, director of emerging technologies advisory services for Boston-based Mercator Advisory Group. Competition has started to drive those costs down, he added.

Consumer trust in carriers and understanding how to decipher a phone bill have also worked against carrier billing propositions in the past, Sloane said. "Consumers find carrier bills absolutely confusing and some don't like the idea of adding more to it."

However, carrier billing represents the most logical method for payment of digital content, Sloane said.

"If you are going to consume these products on the phone, it makes sense to add the cost to your phone bill," Sloane added. "If Boku and others can figure out a way to make that happen at a cost that is not prohibitive and in a way in which consumers clearly understand, I think it should have legs."