Facebook Begins Testing Mobile Payments for Virtual Currency with Zong

We’ve been speculating for a long time that Facebook would begin testing alternative payment methods for its virtual currency, Facebook Credits. Well, Facebook’s first mobile payments test is now live through mobile payment provider Zong.

The user experience is very similar to the flow Zong and other mobile payment providers have integrated into many Facebook applications and social games. When users purchase Facebook Credits in the Facebook gift shop or in a limited number of Facebook applications, they’re now being presented with two payment options: mobile phone or credit card. Here’s how it looks (images courtesy of Payments Views):

First, users are presented with a new mobile payment option.

When users choose the mobile option, they enter their phone number and a confirmation PIN is sent via text message.

When the PIN is entered in the gift shop checkout confirmation, the Facebook Credits are billed to the user’s account with the mobile carrier.

Facebook confirmed the tests to us this afternoon, saying: “We are looking at extending our virtual currency — Facebook Credits — via a very small alpha test with a handful of developers. As part of this test, we are working with Zong to explore ways for users to easily purchase credits and virtual goods by entering their mobile number, rather than credit card information, in the supported application. It’s also available as a payment option in the Gift Shop for a small group of users.”

Zong’s VP of Product and Marketing Hill Ferguson added, “As Facebook identifies ways to incorporate Facebook Credits into third party applications and help developers monetize their applications, we are testing an integration that would allow users to purchase Facebook Credits through our mobile payments service.”

Interestingly, as you may observe above, Facebook Credits cost more when paying through mobile compared to paying through credit card (USD $0.20 per credit with Zong vs. USD $0.10 per credit with credit card). Why? The simple answer is that mobile carriers currently charge high commissions for premium SMS payments in the United States – sometimes as high as 50%. So even though a Facebook Credit costs USD $0.20 through mobile, Facebook itself is likely seeing roughly the same net proceeds after the carriers (and Zong) take a cut.

The test is a big step for Zong, as it seeks to grow its worldwide customer base. As we wrote yesterday, “Given that 70% of Facebook’s audience is outside the United States, it only makes sense for Facebook to make it easier for users to make purchases using whatever payment methods are available to them.” We expect Facebook to start tests with more payment partners in the future. Decreasing payment friction is a vital step toward increasing direct virtual currency sales.