STi Turns Pre-Paid Calling Cards into Game Cards for Virtual Goods with Zeus Research

Virtual goods have become a more popular form of monetizing online games, especially social games, so developers are looking at new ways to let users pay for them. The latest move is from a new payments company called Zeus Research. Today, it is coming out of stealth and announcing a partnership with STi Prepaid LLC, the largest pre-paid calling card provider in the US.

The idea is to let people buy virtual currency for goods within games and other sites using these widely-distributed cards. While pre-paid game cards have been available in convenience stores for years, calling cards have so far not been an option.

The product is simple. STi’s cards can be found in more than 200,000 retail locations around the US and 200 million of them are sold every year. Popular with people making calls to other countries, the cards can be identified by the yellow STi logo.

A user first buys a card, scratches off the part of the back of the card to get a unique set of 2 PIN numbers, and then enters the numbers in the game. To obtain currency in a game, they just need to click on the STi logo in partners’ offer walls or other payments interfaces, then enter the numbers. Then, they get whatever sort of virtual currency exists in a game, at a value roughly equal to whatever they paid for.

What does Zeus provide? The online payments technology — basically an application programming interface (API) that accepts third-party information like STi PIN numbers — as well as the business development deals.

The big idea is these cards will allow people to buy currency in games without needing to pay by credit card, or via their mobile account, or by having to buy a specialized pre-paid game card.

Like with other forms of virtual goods payments, one downside here is that the pre-paid calling cards come with higher transaction costs than, say, Paypal. The result, according to the Zeus web site, is that “[S]ome online publishers may elect to provide less virtual currency for the amount, as they often do with Premium SMS.”

For New York-based STi, the deal (an exclusive multi-year contract with Zeus), is a new way to monetize its retail distribution at minimal cost. The pre-paid calling card industry brings in roughly a few billion dollars a year, but it is facing lots of new competitors, like Skype and other VoIP services, wireless calling plans, etc…. By repositioning its product beyond calls, the company could bring in a sustainable flow of new revenue.

San Francisco-based Zeus is also looking at other payment services that it can introduce to online gaming. Founder Sean Ryan, who previously founded virtual goods platform company TwoFish (now part of Live Gamer) and virtual world Meez, tells us to watch out for more news from the company this spring.

Overall, we expect the US virtual goods market to grow to $1.6 billion this year, with growth continuing in future years as more developers and payment providers figure out how to reach users. More on that in our Inside Virtual Goods reports.