It wasn’t all that long ago that, if you wanted to purchase an item online, you needed at least a credit card or a checking account to complete the transaction. Not so any longer. With the latest online payment solution developed by BSG Clearing Solutions, dubbed Bill2Phone, all you’ll need is a telephone. Or, more accurately, a telephone bill.
Bill2Phone is a real-time payment solution that offers online merchants, content aggregators, and e-wallet providers the ability to process payments through a consumer’s phone bill. When a retailer employs Bill2Phone and a customer selects that as his payment option, the purchase price is added to the customer’s phone bill. BSG has established partnerships with over 1,400 local telephone companies, giving it access to more than 140 million individuals or households with land lines.
“Naturally, when people are online, part of what they’re doing is downloading content and making purchases,” says Randy Broukman, CEO of BSG. “There’s a nice confluence of events. We came to understand that vendors can directly access all of these potential customers via their phone bills.”
According to Brouckman, Bill2Phone is targeted at purchases that are exclusively the domain of the internet, such as subscriptions to online dating services and digital music downloads. “We’re trying to pick up on the ‘I’d prefer not to give my credit card information to a dating site’ demographic,” Brouckman says.
BSG hopes Bill2Phone, which was introduced at the end of the first quarter of 2007, will help online merchants expand their customer base into one of the most notoriously difficult-to-reach market sectors: the unbanked and the underbanked. These terms describe individuals who are not established, or are only minimally established, in the traditional financial infrastructure of banks and credit card companies. With Bill2Phone, anyone who owns a land line and pays the bill, even if it’s with cash or a money order, will be able to shop online.
There is certainly no shortage of market research to suggest the potential profitability of giving the underbanked access to an online payment method. A recent Forrester Research Benchmark Survey found that 13% of people in the U.S. using the internet do not have credit cards. The demographic category that is most likely not to possess a credit card or a checking account is recent immigrants, and some estimates place the buying power of the nation’s 35 million recent immigrants at nearly $1 trillion.
Bill2Phone seeks to set itself apart from established internet payment tools by letting customers pay for online purchases with whatever form of payment they use for their phone bill. The pioneer of the online payment industry, PayPal (an eBay Company), gained traction about eight years ago as an electronic alternative to making payments online with checks, cash, or money orders. Though it wasn’t paper-dependant, PayPal was still built on the existing financial infrastructure of bank accounts and credit cards (one of which is required for PayPal).
While some might balk at the idea of allowing customers with no verifiable credit to make an online purchase, BSG contends that the nature of the phone bill provides enough of a safety net. As a utility, phone bills are highly collectible and they’re generally paid on time. And the Bill2Phone service is not intended to serve as an unlimited line of credit. “We’re focused on digital content and services, and we intend to limit the level of charges that could come onto the phone bill,” Brockman says. “We don’t want sticker shock.”