Carrier Billing vs Proprietary Payment Systems: The Mobile Commerce War

4575
Benefits of carrier billing

As mobile internet gets faster and content developers more creative and innovative, streaming and HTML5 gaming are becoming the next big thing in mobile entertainment.

The “only” Big Question is: how to monetize? PayPal vs Google Wallet vs Apple Pay – is just another war among proprietary systems who function as a “front end” to credit card companies and banks.
On the other hand, carrier billing is becoming the successful alternative that customers trust, not just for apps and mobile web apps, but also for music, video streaming services and HTML5 games.

Check out the reasons why, outside of these app stores, the simplest payment flow is Carrier Billing.

Easy Monetization with Carrier billing

App developers and content providers across the globe face a common obstacle that can make or break their success: how to get discovered and offer easy ways to pay for apps and content.

According to the Business Insider, the two main challenges faced by app developers today are:[1]

  • Making mobile purchases easy enough so that people will buy their app and in-app content.
  • Enabling people to make payments in markets where many do not have credit cards.

It can be frustrating to collaborate with overflowing app stores, with a total of 1,230,168 apps offered on the Apple Store and 1,299,573 apps available on Google Play, according to knicket.com.

When you sell digital content in an app store, you limit your sales potential by only offering your product to users that own specific brands of devices such as iPhones, Samsung, Windows Phones, etc. One of the main benefits of Google Wallet, the payment service launched in May 2011, is that it is offered on a wider variety of mobile devices including: HTC, LG, Motorola, Samsung and even Apple, and that it is optimized for selling digital goods. On the other hand, Apple Pay, freshly launched in October 2014, can be used only for physical goods, while virtual goods such as premium content for apps and subscriptions for digital content must be completed with In-App Purchase.

Carrier billing allows people to buy digital content by adding the cost of a purchase directly to their mobile bill, regardless of the type of device they own. The concept is comparable to buying on-demand television shows by adding it to your cable bill. Carrier billing technology offers a smooth, seamless way for consumers to pay for not only digital goods like apps and other content within apps but also streaming services and HTML5 videogame apps that don’t require any downloads. Plus, having no limitations on what kind of mobile phone you can sell to, brings us to the next reason developers and mobile carriers are excited about carrier billing: access to more clients.

One of the key advantages of carrier billing is the market it is addressing: close to 7 billion mobile phone users, compared to 2,5 billion credit card owners or, for example, 500 million iTunes accounts. It is becoming popular in both emerging and developing markets, since it offers the safest and fastest way for completing a digital purchase.

It’s not a secret that carrier billing is succeeding in the mobile payments market. Today, carrier billing is a $4 Billion USD industry[2]. Recently, even Google has decided to enter the carrier billing market. These numbers are expected to grow even more, especially after seeing how many customers prefer paying without inserting any sensitive bank or credit card details, via mobile devices.

Let’s take a closer look at how proprietary payment systems are coping with the digital goods market.

PayPal: an Online Champion Struggling in an Offline World

PayPal has been specializing in online payments for 15 years, making them an experienced player in the online payment industry. There is no doubt that PayPal is ahead of the game when it comes to online (especially desktop) payments. However PayPal still has a long way to go on mobile purchases, and if it wants to compete in the offline world.

Google Wallet: slow in taking off despite the huge Android base

Google wallet (for apps purchased inside Google Play) has been in the mobile payment market since its launch in May 2011 but only during 2014 has shown clear signs of uptake, though it has still remained relatively small in terms of end user spend compared to Apple App Store (about 10% only). It is interesting to notice that Android smartphone installed base is approximately 4-5 times bigger than the iOS base. However, the Free Apps Downloads volumes are similar in both stores.

Apple Pay: a super secure but exclusive platform

Apple Pay is the newest platform to join the market and has been gaining user trust for its security measures. Until now, it is the only platform to use fingerprint technology, also well known as biometric security. It utilizes a system that makes sure merchants never see your credit card information which is stored in a chip called the Secure Element, which can only be accessed by fingerprint.

While Apple Pay excels in security, it still needs to pick up speed in other departments. At the moment, it is only offered to iPhone 6 and 6 Plus. It will also be offered on the Apple Watch which is expected to be released next year. Google’s watch devices may already be tapping into the market by then.  Apple’s choice to be exclusive to two devices has been questioned by many as it requires anyone wanting to use it to purchase a new device. Stats show that Apple sales are declining compared to Android devices in most countries, and many wonder how long Apple will be able to stay in the market. [1]

Staying Safe & Secure

Lack of security may very well be one of the biggest reasons why consumers choose not to make purchases on a mobile device. No one wants to risk losing their personal banking and credit card details to cyber thieves.

When it comes to purchasing digital goods on a mobile device, especially for small amounts (micropayments), a trusted payment method is direct carrier billing, thanks to its secure nature and simplicity. This billing process allows customers to charge purchases to their monthly phone bill. No bank accounts or credit cards are needed to make a purchase, which makes this payment method secure and available to virtually anyone with a mobile phone.

PayPal users often become targets of fraud, phishing and spam scams through fake emails asking them to login to a fake PayPal web page.[2] Google Wallet stores bank and card information on the cloud, which for many, it is still considered a large risk factor, while Apple Pay utilizes a system that makes sure merchants never see your credit card information which is stored in a chip called the Secure Element, which can only be accessed by fingerprint. However, it is only offered on two mobile devices: the iPhone 6 and 6 Plus phones.

 Sources:

[1] http://www.businessinsider.com/apple-sales-team-fears-iphone-decline-2014-4

[2] http://banking.about.com/od/securityandsafety/fl/Is-PayPal-Safe.htm

[1] http://www.businessinsider.com/carrier-billing-hasnt-gone-away–here-is-why-it-has-got-developers-app-stores-and-mobile-carriers-so-excited-2014-2

[2] http://www.businessinsider.com/a-handful-of-deals-show-that-carrier-billing-is-making-headway-as-a-payment-method-2014-7