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Why One Startup Wants Your Mobile Carrier to Act Like Your Bank

Google, PayPal and major credit companies are all making land-grabs for the emerging mobile payments industry. Mobile carriers — used to controlling profits made from mobile phones — want to avoid being squeezed out.

Now, thanks to a startup called BOKU, there’s a mobile payment solution that could satisfy all sides.

The product, BOKU Accounts, works like a debit card issued by your mobile carrier instead of your bank. Users receive an NFC-enabled sticker they can attach to any phone — as well as a mobile-carrier-branded MasterCard. The financial management of Boku’s product works a little differently than its earlier offering, direct carrier billing. In that product, any purchases made with mobile phone numbers show up on mobile phone bills. The system lets people who don’t have credit cards shop online.

With BOKU Accounts, however, users deposit money into a separate account with their mobile carriers. Credit card providers aren’t cut out of the process. Everybody’s happy.

“[Credit card] networks rely on banks as issuers to attract, retain and manage users,” explains BOKU SVP of Product & Marketing David Yoo. “Banks have limited access to users — well, in relative terms.” “There are only 2 billion credit cards, according to Nilson Report. However, mobile operators have access to 6 billion users. If the right solution can be worked out, mobile operators can become one of the largest issuing partners of credit card networks in the world.”

That sounds great for credit card companies, but why would a consumer transfer money into a separate account instead of opening a credit card with a bank? BOKU’s value proposition is this: it’s a mobile payment system not tied to specific phones or terminals. Unlike Google Wallet, which requires an NFC-enabled phone, or the PayPal wallet, which requires merchants to install a software upgrade in their terminals, BOKU works with whatever hardware each party in the transaction happens to have. If the retailer’s terminal isn’t NFC-enabled, that means the customer is just swiping a regular credit card.

What is different is that merchants can communicate with customers before and after the transaction. A BOKU-powered rewards program lets merchants target deals at people who fit specific demographics within a certain proximity. Each time they do so, they pay those customers’ mobile carriers. Users can set their phones to be alerted when certain types of deals are pushed out. They can also set budgets and be alerted when they approach their limits. If they’re using a feature phone, they get text messages instead of push notifications.

It’s not dissimilar to the deals programs in the Google and PayPal Wallets, but it’s viable on existing hardware.

Beyond that, everyone involved in the payment should be satisfied. The carriers, and BOKU, get paid when merchants send offers; credit cards (for the time being, MasterCard only) get their usual transaction fee from the merchant. And users get something like a real-time Mint with coupons — but not yet. Not a single carrier is currently offering Boku, though one of them in the UK is running a pilot program. Through its direct carrier billing product, the startup does, however, have relationships with more than 200 of them.

If your carrier were to offer Accounts, would you sign up? Let us know why or why not in the comments.