Mobile payments company Boku Inc. has raised $25 million in series C capital led by DAG Ventures Inc. with continued participation from Benchmark Capital, Index Ventures and Khosla Ventures.

With this round of capital, Boku is hoping to build on the momentum it has experienced in the last year. It also stands as a strong vote of confidence for the prospects for the mobile payments space, which is expected to continue its strong growth throughout 2010 and beyond.

“We couldn’t be more excited—since launch we’ve executed along the way and now more than 1,000 companies live with our services,” said Ron Hirson, cofounder and senior vice president of products and marketing at Boku, San Francisco. “That success and our growth made it so that, looking at the mobile payments space, investors believed that Boku is the place to make the big bet.

“Having been in technology, we know we can’t rest on the platform we’ve built, we have to continue to improve it and make it more advanced,” he said. “We also want to scale it globally beyond the 58 countries we’re in already.

“This investment helps us further that growth by letting us invest in technology and connections globally—we want to do for the mobile telephone number what PayPal did for the credit card.”

Boku’s goal is to create the standard for online payments for digital goods and social experiences using consumers’ mobile phone.

Boku’s mobile payment service, Paymo, is enabled across 196 carriers worldwide in 58 countries, which the company claims reaches more than 1.8 billion consumers worldwide.

Merci Boku
When Boku launched in June 2009, it announced that it had raised $13 million in venture funding and acquired both Paymo and Mobillcash (see story).

Since then, it has developed mobile payment processing relationships with more than 1,000 game and application developers, including almost all of the top applications for virtual goods and currencies purchased on Facebook.

Mobile social network MocoSpace selected Boku’s mobile payments platform to let consumers pay for virtual goods and premium services via their handsets (see story).

Last month, Boku announced 12 new partnerships with online game developers.

Currently North America makes up a large percentage of Boku’s business, but the company sees Europe, Asia and South America as contributing more over time.

“Once you’ve built out a scalable platform as we have, the next step is continuing to add carriers, countries and merchants,” Mr. Hirson said.

The company claims that one of the last remaining barriers to mass-market adoption of mobile payments is the high fees carriers charge third-party companies such as itself (see story).

However, Boku still believes that mobile payments for virtual goods will grow exponentially in 2010 (see story).

“As evidenced by the text-message donations to charities supporting Haiti, when friction is reduced in the buying process, people will choose to pay with the mobile phone,” Mr. Hirson said. “The big barrier the mobile payments space faces is carrier fees, but I believe to a meaningful degree we will see carrier fees come down.

“We’ll see merchants increasingly developing mobile payments as an option—the shift will start to happen this year,” he said. “Various categories, not just virtual goods, will start to use mobile payments.

“You’ll also see consolidation in virtual goods and social networking companies.”