Zong Debuts Payment Service Linked To Cell Numbers

For year I’ve been waiting for the day when I can pay for something with my wireless phone. Technically I guess that day has been here for awhile — you can certainly buy things like music and ringtones and let the charges roll over to your wireless bill — but not in a way that I would actually use.

Zong, the mobile payments startup the specializes in selling virtual goods on social networking sites like Facebook and MySpace as well as online gaming sites like Gaia Online has today kicked it up a notch, with a service called Zong+.

The idea is to link your cell phone number to a credit or debit card, and then make payments buy giving your phone number. So if you want to buy a cool outfit for your avatar in the virtual world IMVU, you can do it more easily by just using your phone number and instead of seeing the charge on your wireless phone bill, see it on your debit card instead. The point, the company says is to make it easier for consumers to make the purchase.

I talked to Zong founder and CEO David Marcus and he told me that merchants like the new approach because it reduces their transactions fees, which in turn expands the markets that Zong can go after. Also, by making the transactions simple to executive, conversion rates go up: People who are looking at virtual goods, but not buying, tend to buy more readily.

It may sound like small potatoes, but Zong has processed payments for 10 million users. Compare that to the 50 million accounts on eBay’s payment service PayPal. Additionally Zong and has relationships with more than 100 wireless carriers around the world.

And virtual goods is no market to disregard. As my colleague Rob Hof reported last year Gaia Online was doing up to $1 million a month in revenues selling virtual clothes and jewelry and accessories for its users’ avatars at prices of a few pennies to a $10 apiece.

How’s it work? After you link your card to your phone number Zong sends a unique PIN code to your phone via a text message for each transaction. That provides the security. If you try to buy something using someone else’s phone number they see a text message with a PIN code that tells them someone is trying to use their account. And surprisingly, adding a phone number alongside a payment card number increases the security because the person trying to pay is offering two forms of authentication instead of one.

Personally I don’t buy many virtual goods, and so I don’t see myself using Zong yet. But give me chance to use my phone number to buy real-world goods from a merchant like Amazon without having to go through all the contortions of digging out my credit card, entering all the updated information and the little three-digit code on the back, and I just might spend more online generally. And why not make pay-by-phone-number available in traditional retail stores? I could walk into Best Buy, pick out a plasma screen TV, give my phone number and address to a sale associate, and walk out with a delivery appointment. I suspect something like this has got to be part of Zong’s long-term plan.

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