Editor’s Note: Welcome to our weekly Reality Check column where we let C-level executives and advisory firms from across the mobile industry to provide their unique insights into the marketplace.
For a growing number of Americans, owning the latest mobile device is more than just keeping up with the Jones’ – smartphones and tablets are critical work tools and their primary way to access the Internet. More than half of Americans over 13 years old own smartphones. Companies and even government agencies are embracing bring-your-own-device policies in the workplace. The newest, fastest technology is a resource to stay ahead in increasingly competitive environments.
However, smartphones and tablets are costly. In the past, most wireless carriers have subsidized the devices to attract new customers and included that cost in customers’ monthly bills. While initially convenient, this practice binds customers to long-term contracts and means users pay more than the phones’ value if they keep them for a long time. It also means a large upfront investment for carriers. Without an alternative, most customers don’t want to – and many can’t – pay the full cost of expensive smartphones and tablets outright.
The game is changing. Carriers are beginning to eliminate subsidies and are offering financing plans. Several carriers are partnering with companies to offer on-the-spot financing in retail locations and online. These innovative plans are expanding smartphone and tablet access to more consumers, ultimately expanding the overall market.
Spurring change with financing
American consumers are familiar with financing cars and home appliances, so why not the one device they use most, their handset? We can get there. One key to creating comfort for the buyer and the wireless carrier is a proven credit process that serves the vast majority of customers with affordably structured monthly repayments. However, most underwriting is based on FICO credit scores, which might not tell the whole financial story and may exclude a large number of applicants will thin credit files. There are several innovative companies that are looking at alternative ways to determine if a “thin file” consumer is worthy of credit.
Partnering with a reliable third-party financier maintains carriers’ low barrier entry for service and creates financial support for purchases. Without the burden of subsidizing the cost of handheld devices, carriers can invest and focus on their network infrastructure and customer service. Their customers will benefit from lower priced devices over the length of use and more frequent upgrades.
A new subsidy-free era
Not only does alternative financing create a low-cost, low-risk solution for smartphone and tablet adoption, it also brings the United States more in line with global markets. Industry analysts have pointed to greater transparency, simplicity and flexibility in service plans in subsidy-free environments.
Ending device subsidies will have other long-term benefits. Eliminating the need for long-term contracts will result in more freedom between networks and positive competition for customer business. Lower overall costs will allow more affordable upgrades to the latest smartphones and tablets, and carriers can focus on what they do best, rather than device financing.
As consumers face an increasingly mobile world, the best smartphone or tablet is one that fits their needs and their wallets. More financing options help empower them and make the process less daunting. Americans know connectivity and information provides them an edge. In a workplace, devices may even be critical to their jobs. Changes within the wireless industry can help them get ahead within our fast-paced world.
Ryan Gilbert is CEO and Co-Founder of BillFloat Inc., a leading innovator in consumer credit delivery. Its SmartPay option offers smartphone purchasers instant financing through affordable monthly payment plans.
