Boku targets carriers with in-store payment system

Boku until now has been known for enabling carrier billing for online goods, so users can pay for digital items on Facebook and other online sites using their mobile phone number. But the San Francisco payment startup is leaping into the physical world with the launch of a new white-label offering for carriers that will include in-store payments.

The new service, called Boku Accounts, will allow operators to set up payment accounts for mobile users that will work in physical stores using MasterCardcards, NFC stickers and NFC-enabled phones.

Boku Accounts is seeking to appeal to carriers looking for a digital wallet strategy, giving them a way to offer an all-in-one payment system for online and offline payments. The online payment portion is not the focus at launch but will be incorporated into Boku Accounts later. Boku doesn’t have any carrier customers to announce yet but said it will focus initially on Europe before coming to America. That’s probably because three of the four major carriers here are working on Isis, an NFC wallet, while Sprint has teamed with Google Wallet.

When it becomes available, users will be create a Boku-stored value account through their carrier that will be linked to a MasterCard pre-paid card. They will also get an NFC sticker that can be tied to their account or if their phone is NFC enabled, it can also be linked to their Boku Account. Users will be able to pay with their card anywhere MasterCard is accepted or they can pay at PayPass-enabled NFC point of sale terminals.

Users will be able to get real-time updates and alerts on their spending using iOS, Android and web apps. They can also receive targeted offers and deals from merchants and their carrier through their phone.

Boku becomes yet another payment service looking to get in on real-world in-store transactions. About 90 percent of transactions still take place offline and that’s what PayPal, Isis, Square and many others are looking to attack. We have to see which carriers actually take up Boku Accounts, but the company appears to be in a decent position to strike some deals. It is already working in 60 countries with more than 230 operators tied into its carrier billing system.

Ron Hirson, founder of Boku, told me Boku Accounts is meant to target people who want a cash replacement. And it’s a way for carriers to offer more branded services to their customers and make their phones a versatile tool for payments and offers.

“We’re delivering a platform that has real value that doesn’t wait for NFC but can incorporate NFC and offers and can be used for traditional payments,” said Hirson. “A lot of companies are doing bits and pieces but what Boku does is bring the best parts of NFC payments and cards.”

Doing in-store makes sense for Boku, a San Francisco startup backed by Andreessen Horowitz, Khosla Ventures, Benchmark Capital and others. It’s one of the top options for carrier billing but that market is constrained. With the fees for most carrier billing purchases much higher than traditional credit card fees, it confines carrier billing to being more of an option for digital and virtual goods. And with chief rival Zong swallowed up by PayPal, which is in the midst of pushing ahead with its own in-store payment system, Boku may see that it needs to join the in-store battle now so as not to be left behind.

It’s not clear how many carriers will sign up for Boku Accounts. Most of the big worldwide carriers have been testing or moving forward with their own initiatives, including a lot of NFC projects. But Boku Accounts could appeal to smaller carriers or could be a hedge for operators looking to make sure they have options in the mobile payment space, especially if NFC takes off slower than expected.