Payment by Phone Bill Picks Up Momentum

A payment service that allows Internet content and service providers to bill their customers via their phone bill has been gaining momentum. Although San Jose, Calif.-based PaymentOne, a billing service for 50 large Internet service companies, provides those companies with six different payment options, the PhoneBill choice is being used for about half of all payments today, according to Don Teague, PaymentOne vice president of sales and marketing. “This is the fastest-growing of all our payment options,” Teague says. The other payment options are credit card, ACH debit, direct bill, Web bill via e-mail, and prepaid accounts. Three-year-old PaymentOne has relationships with 1,400 local phone companies, covering about 92% of the households in the U.S., that allow Internet service fees to show up on the phone bills. Web merchants pay an undisclosed fee to PaymentOne, typically a biweekly or monthly charge based on volume, rather than a per-transaction fee. For most customers, paying for Internet-based services on a phone bill is not unusual since many consumers subscribe to Internet services already offered by phone companies, which then bill the customers on their monthly phone bills, Teague says. The company guards against fraud by checking phone numbers to make sure they are valid and current, and will also often call the number being billed to get authorization. Many of PaymentOne's customers are ISPs or Web hosting companies, including Netzero, Juno and AOL. But the firm also bills for Web-based game sites, dating services, and online music services. It recently signed Netlovematch.com, which hosts a number of online dating services geared to specific ethnic or religious backgrounds. The average PhoneBill transaction is about $17, Teague says. His firm does not handle micropayments–those under $1–although some Internet content providers will allow their customers to run up multiple charges on an account before sending the aggregated bill to PaymentOne to handle. PhoneBill is often used by customers who don't have credit cards or even bank accounts, but who do own a telephone, Teague says. Additionally, some of the bigger users of PhoneBill are households with incomes of more than $150,000 who want to spread their bills out over multiple sources. During the fiscal year ending June 30, PaymentOne had $27 million in revenue from all payment options, compared to $14 million the year before. It has processed $1 billion in payments since its inception.