Mobile payment insight by Massimiliano Silenzi, via Onebip Blog
I often get asked this question by journalists and potential customers and thought I’d share my answer with everyone to set the story straight. The answer is YES and there are lots of other sectors that can benefit from carrier billing.
It’s without a doubt that the online gaming and dating sectors have been at the forefront of utilising the benefits of carrier billing to monetise their sites. I think there are several reasons why they have been such early adopters:
– Target segments. The gaming sector had traditionally targeted younger segments that were typically uncarded and with its global reach also targeted large user bases of early adopters in emerging markets that were once again without bank accounts or credit cards. So, alternative payments such as mobile carrier billing became pivotal for the monetisation of such services and with the incredible penetration of mobile this option was a no-brainer.
– Type of business model. Within the digital sector, dating and gaming companies had business models and structures that could support carrier billing. By this I mean that their sales were usually able to scale up with little impact on direct costs. From a general perspective dating and gaming companies can usually support the high transaction costs applied by the operators and still find a way of making a profit and grow.
– Business approach. Media and other entertainment companies built their online businesses based on free or advertising funded business models – a natural evolution from TV and radio. But, when you look at the history of gaming and dating companies you’ll see an immediate synergy with the first Premium SMS and most legacy mobile payment systems. Why? Many game companies have always thrived on impulse purchases based on micro-transactions. Today’s browser games follow the same business model as in the 80′s when users would play games in arcades and spend money to make continuous top ups – what’s changed is context (at “home”) and the payment methods. Mobile payment was a natural alternative choice when the gaming industry evolved. Dating and social networking companies had traditionally managed their transactions via PSMS as they found a strong synergy with the growing phenomenon of the mobile VAS industry during the first part of the decade. For example, with improved technology and the ability to target segments effectively, mobile recurring payment provided an excellent fit for their business model which is usually based on providing people access to services in return for a periodic subscription.
The evolution of mobile carrier billing
Today the mobile carrier billing landscape has evolved tremendously. In Onebip, we generally refer to this evolution as the ‘second generation’ of mobile payments. Reduced commissions from the carriers (payouts ranging from 70 – 90% in Europe), increased price points (for e.g. Russian operators allow transactions of up to 5,000 Rubles – approximately EUR 125), better security and transparency standards and the adoption of newer and more sophisticated technologies such as mobile direct billing instead of PSMS has encouraged other businesses outside of gaming and dating to start adopting mobile carrier billing as an effective payment option.
So, going back to that initial question – Can mobile carrier billing monetise beyond online gaming and dating? The answer is yes and I think that there’s great potential for businesses in the following sectors:
– Software and Anti-virus. The reduction in carrier commissions (better merchant payouts) means that businesses in this sector are now able to pay their R&D costs and publisher/distributor costs and still make a decent profit and grow. The higher price points that are available in various markets also fit well with the usual price of these types of products. I think that there’s a real potential for subscription based services as well. For example, anti-virus software could be downloaded for free but the user is charged periodically to his/her phone bill to receive software updates.
– Online multimedia. This refers to digital goods and services such as video downloading, streaming and music purchases. Once again, attractive payouts and higher price points means that businesses in this sector can take advantage of carrier billing to monetise their services. In Turkey for instance, Turkcell are offering lower commissions to video and music sellers to encourage adoption in this sector. This forward looking carrier has defined different commission rates based on the product category to be sold.
– Online classifieds. We’ve started working with a few classifieds in Europe that are using mobile payments as a tool for their users to give more visibility to their announcements.
– I also think that carrier billing will soon be able to suit the needs of companies offering e-learning or other digitally accessible services.
Plus there’s great potential for any business that can create an online store that can sell digital goods and services directly to mobile phones. Carrier commissions are decreasing, price points are increasing and the technology is available today to allow users to select an item on a mobile browser or within an app and purchase it in one click without the need for registration or a credit card. This evolution is not only driving an increase in carrier billing adoption in the gaming and dating sectors but is also creating tremendous opportunities for other sectors to monetise with mobile payments!
Check out Onebip Blog for the latest insight into the mobile payments industry
*Editor’s note: the article’s author has been Neomobile employee until 2015