Zong’s credit-card based mobile payments system is growing fast

Mobile payments company Zong said its new online mobile payments platform has grown dramatically in the couple of months.
The Zong+ platform, launched in October, lets people use their mobile phone numbers to pay for virtual goods and other items in games and social networks. But the twist is that, rather than going through mobile carriers who charge big fees, Zong fulfills the transaction by charging the purchase to your credit card. Hence, the transaction fee that the user pays is a lot lower than it otherwise would be.
With Zong+, a user can pay for virtual goods — such as weapons or clothing — in an online game by typing in their mobile phone number, which is easier to remember than a 16-digit credit card number. Users link their credit card number or any other kind of payment card through a one-time sign-up process.
Aeria Games starting using Zong+ six weeks ago in its free-t0-play online games. Now, 32 percent of Aeria’s mobile payment revenue is coming from Zong+ users. And Zong+ transactions generated an average payout that is 12 times higher than traditional mobile payments, due to higher payout rates and flexible prices. Zong+ transaction costs are about 67 percent lower than traditional mobile payments.
Zong+ is also making consumers more loyal. Repeat payments are up 48 percent and Zong+ users averaged 4.3 transactions per month, compared to 2.7 transactions for others. David Marcus, chief executive of Zong, said that the results exceeded expectations and that the company now has 20 publishers of games. Those include Playdom, Slide and Kongregate; the total reach is more than 500 million online users and its reach on carriers is 1.5 billion users.  In the past six weeks, Zong has three countries to its reach and plans to add six more soon. In 2009, Zong processed mobile payments for 10 million users. Rivals include mobile payment companies such as Boku, which recently raised $25 million, as well as PayPal, credit card companies, and other direct payment providers.
The rapid growth of Zong+ should be a lesson for U.S. mobile phone carriers. They should lower the rates they charge customers for completing billing transactions. Or they will lose them.