Discover is teaming up with BilltoMobile to let shoppers bill purchases made on ecommerce sites to a mobile phone account.

Select Discover ecommerce merchants interested in generating incremental revenue via alternative payment solutions will offer the BilltoMobile carrier billing option. As a result of the arrangement, Discover will be able to better serve ecommerce merchants selling digital goods, which account for a lot of the transaction volume via carrier billing.

“Discover has been proactive in the mobile payments space,” said Jim Greenwall, CEO of BilltoMobile, San Jose, CA.

“There is really no question that consumers will move towards mobile payments over the next decade,” he said.

“Carrier billing offers convenience, is good for smaller impulse purchases and offers higher conversion rates for merchants.”

Higher conversion rates
Credit card networks such as Discover are looking for ways to take advantage of the growth in mobile payments and carrier billing is one option.

Carrier billing is attractive to credit card companies because it offers higher conversion rates than standard offerings.

“While credit cards offer lower rates than carrier billing, it is all about conversion,” Mr. Greenwall said.

“We are seeing 40 to 50 percent conversion rates on carrier billing and that is typically much higher than you will find for conversion on normal credit card payments,” he said.

For merchants, offering carrier billing is a way to drive sales from consumers they would not normally be able to attract such as those without credit cards.

Increasingly carrier billing is also appealing to consumers who have credit cards but may not want to take the time to enter their credit card number and billing address for smaller purchases.

Carrier billing enables these consumers to make impulse purchases. Purchases of digital goods or ones that are under $50 are frequently paid for via carrier billing.

Carrier relationships
BilltoMobile’s proprietary mobile payments service is used by Verizon Wireless, AT&T, Sprint and T-Mobile. The company also serves as a mobile payments gateway for Verizon and Sprint.

Carrier billing is just one of the ways that credit card networks are trying to take advantage of the growth in  mobile payments.

Visa recently said it is readying a mobile payments application in partnership with Sony that will let consumers make contactless payments at the point of sale during the London 2012 Olympic Games (see story).

MasterCard is running an NFC pilot program at movie theaters in Australia that lets consumers pay for food and drink items via their mobile devices (see story).

The deal with BilltoMobile reflects how Discover and others are interested in developing closer ties to wireless carriers, who are expected to play a key role in mobile payments going forward.

“There is no question that the mobile payments market is the future of payments and that the carriers will play a pretty significant role,” Mr. Greenwall said. “All major credit card companies want to stay close to the carriers as a strategic advantage.”