The US subsidiary of South Korean mobile payments company Danal has received $9.5 million in venture financing led by Morgenthaler Ventures.
Danal Co, a public entity in South Korea with 2006 revenues of around $75 million, pioneered the mobile payment industry in South Korea in 2000. Danal allows consumers to purchase goods and services online by charging their regular mobile phone bills. The programme allows for spontaneous purchasing, in that users don't have to sign up for an account or own a credit card.
The service has seen wide adoption in Asia. In 2006, South Koreans alone charged more than $1 billion worth of transactions - representing 70% of all digital content purchased online - to their mobile phone bills at more than 16,000 participating online merchants. Danal currently holds close to 50% market share in South Korea.
When making a purchase, subscribers input their mobile phone number, voicemail password, and a separate authentication code received instantly via SMSMost transactions take between 10 to 20 seconds from inception to completion, and customers pay for the charges when they pay for their regular mobile phone bill. Typical purchases range from $1 to $30.
Ken Gullicksen, a partner at Morgenthaler Ventures, says Danal is "the only mobile payment provider to have commercialised this service on a large enough scale to guarantee a high quality of service and security to customers".
Forrester Research estimates that the US e-commerce market will grow to well over $400 billion by 2011. If mobile payments make up only 8% of the US e-commerce market in 2012 (a level the South Korean market reached in the fifth year of service), then mobile payment transaction volumes could reach $40 billion by that year.
Danal says it will use the $9.5 million in venture financing to add to its team, commercialise its mobile payment service in the US and strengthen its relationships with mobile carriers and merchants.