Zong has seen tremendous growth over the past year from when the company debuted its mobile payments service from the TechCrunch50 demo pit. Zong’s model of billing micropayments to your cell phone bill caught our eye and sure enough, less than one year later, the startup is picking up serious traction, including a partnership with Facebook to power the purchase of the social network’s new currency. And in 2009 alone, Zong has processed mobile payments for over 10 million unique users worldwide. Today, Zong is launching a new feature that not only expands its payment services, but could make a lasting impact on the micropayments field.
Zong is launching Zong+, a extension of the mobile payment startup which lets users bill microtransactions to credit, debit and prepaid cards. We have an exclusive demo of Zong+ by the startup’s founder and CEO, David Marcus, below. So in addition to making online purchases through their cell phone bill, Zong customers will also be able to link any type of payment card to their Zong account through a one-time entry process and continue to purchase goods by simply entering their mobile number and confirming the security transaction code sent to their phone.
So if I wanted to buy credits on Facebook via Zong’s payment service, I would now have the option to enroll and pay via Zong+. Once I create and account with all of my credit card info, Zong will automatically bill my card. But each time I want to make a purchase via Zong+, I will only need to enter my mobile number. Zong will then send me a transaction code via SMS, and I will need to enter that code to complete the transaction.
Zong is also incentivizing the use of Zong+ by offering users merchant credits (a cost which Zong swallows) if they purchase a certain amount. In fact, Zong will double whatever amount of credits your buy, if you sign up for Zong+. And there are benefits to using Zong+ (besides the incentives). Zong allows you to make larger transactions, in the range of $9.99 or higher, via Zong+.
Zong’s other method of payments, via your mobile phone carrier account, works in a similar fashion. You enter your mobile phone number to pay for a virtual good and then you get a text message on your phone with a pin number. Once you enter that pin number, the charge will be reflected in your cell phone bill.
But this cell phone carrier model has proven to have some complications, which may be why Zong is looking to expand its offerings to different models. Zong and other mobile payments platforms, such as rival Boku, face high fees that mobile carriers charge to the payment systems (which are inadvertently passed on to the consumer via the merchant), creating a potential obstacle in the business model.
Zong recently launched a subscription feature to mitigate this issue and potentially produce lower fees for the end users. Marcus told me in September that many U.S. and European carriers that Zong works with are contemplating reducing these fees by building large-scale models to process payments that would in turn lessen the pressure on the mobile payments startups as well as the applications and social networks using the systems.
But this new system will undoubtedly open new channels for Zong and perhaps even attract additional merchants to adopt its payment systems. Merchants who may have previously been frustrated with the high fees from carrier rates, will now find themselves able to enjoy greater transaction completion at the typical card rates. And as Zong+ is able to increase the amount of the tendered transaction, the startup could even give PayPal a run for its money.
One of the first merchants that will be utilizing Zong+ is social network hi5. The social network’s director of business development, Rajat Kongovi, says that because of Zong+’s flexibility and frictionless model, hi5 will be able to offer a wider variety of virtual goods at more varied price points and give users more freedom of choice. Of course, it’s important to point out that the mobile payments method via cell phone carrier has gained serious traction internationally, where many virtual goods buyers don’t have a credit or debit card but do have a cell phone. So Zong+ may not be take off in some regions, but the service will undoubtedly offer users a more varied and dead, simple way of using your credit card for purchases.
So when will Zong and Zong+ hit Facebook more extensively? Marcus told us that while Zong is currently being used on a limited number of apps to buy currency at the moment, the mobile payments system will be rolled out to a greater user base “soon.” I think that Zong+ only enhances the service and definitely gives it a leg up over competitors on the mobile payments space as well as competitors in the micropayments space such as PlaySpan and Live Gamer. Zong has become a powerful hybrd with the launch of Zong+. Watch your back, PayPal.