For communication service providers searching for new revenue streams, direct carrier billing opens the door of opportunity as it enables them to directly participate in the over-the-top market by providing a payment option for consumers to charge their mobile phone bills. This also means that rather than competing with OTTs, complementing business relationships can be developed by CSPs. Consider these two scenarios:
Mr. Mandela was enjoying his vacation in the Sahara desert and wanted to purchase a discounted book from an online store. However, he was hesitant to provide his credit card details due to the fear of online frauds. He noticed an option for payment through his mobile operator and without further hesitation, quickly made the financial transaction, finding it the most secure option of payment as it did not require him to disclose his banking/debit/credit card details.
Mr. John, a U.S. businessman on a month-long business trip to Russia wanted to make urgent Skype calls and needed Skype credits. He was happy to learn that his Russian CSP has the facility to charge the Skype credits to his phone bill.
Direct carrier billing solution is “need of the hour” as OTT players such as Apple, Netflix and other application platform players have created services that are delivered directly to consumers, reducing the role of CSPs to mere connectivity providers. The value-added business relationship is limited between subscribers OTT providers and the application stores. Consumers subscribing to content and video services pay for content directly to OTT providers. CSPs are only paid for the data services, dramatically limiting CSPs role in the value chain. A balanced cooperation between CSPs and OTT players is required to develop a win-win situation as CSPs can enable better margins for the OTT players.
The business model for direct carrier billing is transaction based and margin driven – CSPs take a margin for enabling the payment service. This capability introduces a new payment channel with the financial services industry and positions the CSP as a financial transaction enabler.
Some compelling facts encouraging adoption of the direct carrier billing model are:
• The App Economy alone is worth $25 billion, which would be a valuable piece of the pie for CSPs (MobilePaymentstoday.com).
• Direct carrier billing will provide CSPs with more than $12 billion in revenue in 2022 – a significant stake in the growing mobile payments market (Analysys Mason forecast).
• While 95% of the world’s population owns a mobile phone, only 49% have a bank account and 30% hold a credit card. With a world population of 7.14 billion, according to the U.S. Census Bureau, 6.8 billion have mobile phone accounts (International Telecommunications Union); 3.5 billion people have bank accounts (World Bank); and 2.15 billion hold credit cards (Nilson Report).
• According to the World Bank, more than 80 countries have an unbanked penetration rate amongst adults higher than 50%; in 38 countries, the rate is in excess of 80%.
These statistics highlight that worldwide, more people have mobile phones than credit cards or even bank accounts. Direct carrier billing is an attractive method of payment when targeted toward active mobile subscribers, especially because a significant percentage of both adult and youth are outside the electronic payment system.
Popular app stores like Playstore, Google and Windows Store and some OTT players like Skype, Facebook and Netflix are already direct carrier billing compatible. Mobile subscribers can therefore charge apps, games and in-app purchases to their phone bill, eliminating the need for a debit/credit card. Realizing the current and future potential, companies have already started investing in enabling technologies. Samsung announced buying mobile payment company LoopPay and Google acquired U.S. mobile payments company Softcard, a joint venture supported by Verizon Wireless, AT&T Mobility and T-Mobile US, promising to pre-install Google Wallet on Android phones sold by the carriers.
Such investments make good commercial sense as direct carrier billing is no longer limited to the digital goods in app stores. While Europe and the U.S. already have mature e-commerce markets, an increased appetite for online shopping due to the security of the payment facility is noticed in emerging economies. CSPs can enable their subscribers to pay for almost all types of goods of certain denomination purchased online using tablets and smartphones through their own payment platform. China leads e-commerce purchases followed by India, Taiwan, Thailand and Indonesia, according to the MasterCard Online Shopping Survey 2014. That means more revenue for CSPs, as purchases of lower value but higher volume are made, both in terms of ad-hoc purchases such as magazines, flowers, chocolates and movie tickets to more regular purchases such as daily travel tickets, food and beverages, and even utility bill payments can be tapped.
With direct carrier billing, CSPs can play an active role in financial inclusion, starting with micropayments and boosting m-commerce further as regulations become more favorable. The advantage of having good knowledge of digital consumers, their buying patterns and spending habits along with existing billing relationships and established distribution channels, CSPs can derive greater value than any OTT player. They can enhance revenue by creating sound partnerships in the digital and e-commerce value chain. Providing a wide variety of merchandise in a digital world with secure and easy payment options will increase the likelihood of customer retention.
For enablement of direct carrier billing, CSPs can work with experienced system integrators who can create the right platform with the right configurations while leveraging the capabilities of the existing IT ecosystem for billing, CRM and revenue management.
Summing up, direct carrier billing is like the new wine in a new bottle. CSPs have to seriously plan and adopt this business model to not only open a new and growing revenue stream with sales volume increasing; but also to gain customer loyalty and regain market share lost to the OTT players.
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