Peter Kafka

Recent Posts by Peter Kafka

Another Big Bet on Mobile Payments: Boku Raises $25 Million

bokuIs there big money in mobile payments–systems that let people buy stuff using their phones, charging purchases to their wireless bills? Not yet, perhaps. But investors are betting there will be.

Latest example: Boku, a mobile payment start-up that raised $13 million last June, has added another $25 million via a C round led by DAG Ventures. Benchmark Capital, Index Ventures and Khosla Ventures are all re-upping.

For now, Boku and competitors like Zong are focused on letting people use their phones to buy “virtual goods,” primarily on social games run by the likes of Zynga, Playdom, and Playfish from Electronic Arts (ERTS).

But even if you believe that the virtual goods business is not going the way of Pet Rocks, it is going to be somewhat limited–the most obvious users for this stuff are kids who don’t have their own credits cards–and competition will ratchet up if Facebook decides to finally offer its own payment platform, which seems very likely.

But the amount of money the start-ups are raising indicates that they have much bigger ambitions. They want to turn your phone into a payment system for “real” stuff. Easy enough to see how you could extend this to other digital purchases, like music, video, etc., but there’s no reason you couldn’t buy physical goods this way.

Could happen, too. Though we’ve been hearing about that scenario for more than a decade, and it hasn’t taken off yet.

One near-term obstacle, at least in the U.S., is carrier fees–AT&T (T), Sprint (S) et al generally take up to 50 percent of each transaction that happens on their networks. If the mobile payment business is going to go up, those numbers need to come down.

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