Magazine article American Banker

Zong Finds Merchants Pay Higher Fees If Sales Rise

Magazine article American Banker

Zong Finds Merchants Pay Higher Fees If Sales Rise

Article excerpt

Byline: Stephanie Bell

The mobile payments provider Zong Inc. says that merchants are increasingly willing to pay higher transaction fees in exchange for higher sales.

Zong's platform lets organizations such as Facebook Inc., Sony Online Entertainment and Sulake Corp.'s Habbo Hotel that sell digital goods to offer their customers the option to pay using their mobile phone number, Hill Ferguson, Zong's vice president of product and marketing, said in an interview.

Of the 500 Zong users who responded to a company survey in November, 34% said they chose the mobile payment option because it is "fast and easy," while 23% said they chose the option because it is "fun."

"Consumers will always choose the option that is easier for them," said Todd Ablowitz, president of Double Diamond Group LLC. "If consumers are buying something online or on their mobile phone, the fewer keys they have to press, the more likely they are to complete the purchase."

Carriers set the transaction fees merchants pay, which typically are much higher than those for debit and credit card transactions.

The fees vary by carrier but usually are between 10% and 40% of the sale, Ferguson said. By comparison, merchants may pay up to 3% of the sale to accept credit and debit cards, Ablowitz said.

Many merchants, however, are willing to accept the higher transaction fees if it means more sales, especially if they sell goods with a high margin, such as virtual currency, music videos and other digital content, Ferguson said. The profit margin for merchants from sales of digital goods may be as high as 80%, he said.

Consumers do not need to register or set up an account because the service is set up to give consumers a "frictionless experience," Ferguson said.

Consumers shopping on a participating merchant's website select the "Zong" option at checkout and enter their mobile phone number when prompted. …

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