Verizon Wireless and American Express Find an Intermediary Path to Mobile Payments

Verizon Wireless is announcing a partnership with American Express this morning that will enable its 100-million-plus mobile subscribers to pay for digital or physical goods online using their phone numbers.

To do so, subscribers enter their phone number and a PIN code at checkout, rather than entering a 16-digit credit card number. The service will work for shopping on any Internet-connected device, including a PC, phone or tablet.

Subscribers will also have to sign up for a Serve account through American Express, which is very similar to a PayPal account and can be funded by a bank account or a credit card.

While the system is designed to make checking out more simple, it could take awhile for consumers and merchants to adopt it. Not only will Verizon subscribers be required to have a Serve account, but online retailers will also have had to integrate Serve as a payment mechanism.

“Yes, they have to be Verizon and a Serve customer, but we are preloading a number of devices — smartphones or tablets — with the Serve app, and when you preload there’s a much greater uptake,” said Dan Schulman, group president, Enterprise Growth, American Express. “They’ll be able to simply or easily transact for any size good, whether it’s a virtual good or hard good.”

Schulman declined to say how many customers have signed up for Serve since it launched in April, but said that the deal with Verizon Wireless is not exclusive, meaning it could partner with other carriers in the future.

Despite these hurdles, this may be a logical intermediary before we see people using their phones to pay for items in the store using near field communication. A number of companies are scrambling to become a player in the digital wallet space, including Google, PayPal, Square and the credit card and payment providers, so this will be one of many options consumers will be able to choose from.

Verizon Wireless has also formed a joint venture called ISIS with AT&T and T-Mobile USA that will launch a near field communication trial next year.

A number of companies have also pursued carrier billing as an option, but convincing carriers to allow large payments on the bill for physical goods has proven difficult. Companies that fall into this bucket include BOKU, BilltoMobile and Zong, which was just acquired by PayPal.

Up until now, the items most often charged to a carrier bill are ringtones, or virtual goods that are purchased inside online games.

Greg Haller, Verizon’s president of enterprise and government, said its partnership with American Express is not designed to compete with carrier billing or its ISIS joint venture. “We’ll still allow virtual goods to go on the bill, but the real opportunity now going forward is that a customer won’t have to go in a shopping cart and enter a 16-digit number. This really turns it into a one-click process. The benefit is the simplicity for the customer, who can now buy it on their phone, by entering their mobile number.”

Over time, additional services will be added, such as coupons and loyalty programs. One partner is, a French-owned flash sales site that partnered with American Express to enter the U.S.

“We are pleased and we are deploying with more and more functionality all the time,” Schulman said. “We’ve announced a number of partnerships, all of which are being integrated, this being the largest and most strategic that we have. We’ll start to integrate and be in market [with Verizon Wireless] by the end of the year, and we have high hopes for it spurring mobile commerce.”

American Express and Verizon Wireless are also working with Payfone, a New York-based company that the two companies backed financially in the spring. Payfone is running all the authentication in the background to ensure that the phone number entered is valid and corresponds with the correct account.

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work