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Mobile payments for virtual goods to grow exponentially in 2010: Boku

Mobile payments for virtual goods and services sold via online gaming and social-networking sites will continue to grow in 2010, according to a Boku executive.

Mobile Commerce Daily’s Dan Butcher interviewed Ron Hirson, cofounder and senior vice president of products and marketing at Boku, San Francisco, to discuss his forecast for the mobile commerce and payments space in 2010. Here is what he had to say:

What is your outlook for the mobile payments space in 2010?
We’ll see phenomenal growth in mobile payments in 2010.

The category where we’re focused, online purchases made using your mobile phone number as a means for payment, will continue to see remarkable uptake.

Depending on the type of purchase, the phone number will either bill directly to a user’s mobile phone bill or in some cases serve as a proxy for additional payment methods such as credit cards and Automated Clearing House (ACH).

This coming year will not be the year for physical world purchases using your mobile phone in the United States via Near Field Communication, as chip-prices, handset turnover and point-of-sale build-out will continue to push the vision of buying a soda with your mobile phone to 2011 or 2012.

Direct-to-mobile-phone billing will continue to grow globally as merchants located in a given country are looking for ubiquitous payment methods for all the countries they serve.

This year will see mainstream adoption and launches of mobile payments by large merchants as well as mobile carriers.

What challenges do you expect and what opportunities?
In terms of challenges, as phones become platforms, we’ll see a rise in viruses and hacks to phones that will change how open consumers are about installing applications.

If the phone is going to take market share from the wallet and online services in terms of payments and banking, security will need to be enhanced at the OS, hardware and carrier level, as well as the payments and mobile banking service provider level.

In terms of opportunity, the ubiquity of the mobile phone, with 4.5 billion worldwide versus 2 billion credit card accounts, means an opportunity for reaching consumers who find it easier to pay with their phone, or have no other means of paying—the unbanked and under-banked.

This means additional categories will open up, and providers will hit scaling issues. As consumer expectations harden, the systems delivery capabilities will need to step up.

Carriers, domestically and globally, will begin to launch mobile payments, letting consumers pay via their carrier bill, to try and take share of wallet.

Social and casual games such as Farmville on Facebook will continue to drive virtual goods and currency purchases, which reached $1 billion in the U.S. in 2009.

With little to no cost of goods sold (COGS) and the low barrier for customers to pay with their mobile-phone, this type of mobile payments will continue to grow and drive growth into other categories.

What is your advice to marketers, advertisers, content providers and retailers?
This type of mobile payment represents incremental revenues and a way to reach new customers, though enabling it has challenges and drawbacks, so be sure to check your provider has the funding and risk management tools to make this work for your business.