This article was originally published in Payments Cards & Mobile magazine.
By appreciating its true strengths, and overcoming its pain points, carrier billing can become far more relevant to many more merchants – and hundreds of millions of European consumers.
Today, carrier billing (CB) has a niche, and it serves that niche very well, writes Clemens Leitner, CEO, DIMOCO.
It excels at facilitating micro transactions and the purchase of digital content, such as mobile apps, games, and impulse purchases. It is also incredibly inclusive.
Given its benefits, the use of CB is expected to grow significantly.
For example, a recent report from Business Market Insights predicts a CAGR of +10% and, in some niches, like online gaming, the growth rates are set to be many times higher.
Europe is expected to be particularly fertile ground. High degrees of digitalisation, near universal levels of mobile coverage, and a complex regulatory backdrop all mean that the region is extremely well suited to carrier billing.
At DIMOCO Payments we believe that, by capitalising on its unique strengths, and addressing its pain points, CB can be propelled into the payments mainstream – generating billions of euros worth of payment volume, providing a great service to hundreds of millions of consumers, and providing a secure and universal payment mechanism to a variety of merchants across different industries.
So, what’s the path to mainstream success? Let’s begin by recognising the inherent strengths and attributes of CB.
Celebrating CB’s strengths
The beauty of CB is that it merely requires a mobile phone number to make a payment.
Mobile phone numbers are the most prevalent, reliable, and long-lived identifiers of the digital age.
They exist only once, are tied to just one person, are non-manipulable, and are networked based. And this means they are the ideal digital identity of the mobile world.
With more mobile numbers that there are people, the reach is near-universal. And, because these numbers are linked to an individual, they can also be used for authentication and identification purposes.
Digital merchants, especially those with security and regulatory concerns, and those that specialise in impulse purchases, have so far been the main users of CB. And they have found that this method of payment overcomes several challenges.
For example:
- Enabling regulatory compliance – by partnering with mobile operators, merchants can draw on established relationships and compliance measures to ensure seamless transactions, even in regulated markets.
- Overcoming payment blockages – traditional payment methods like credit cards can be prone to blockages due to issuer policies or security concerns, resulting in declined transactions and frustrated players.
- Providing additional options – it is not uncommon for payment methods to temporarily unavailable, due to technical reasons, or simply because the user does not have their payment details to hand. These challenges and the related cart abandonment can be avoided with CB, as uptimes are high and only a mobile phone number is necessary.
- Enhancing privacy – consumers do not need to share any payment card details or banking information, which provides a superior level of privacy, and reduced the risk of data breaches.
- Simplifying the payment funnel – CB only requires users to confirm their purchases, so reduces the risk of drop-off or abandonment through the payment funnel.
This is why CB is becoming established as the payment method of choice among so many digital merchants.
As a consequence, strong growth rates are predicted. In one recent report from SNS Insider, it was estimated that CB is set to grow at a compound annual growth rate of 13.69% through to 2030, to reach $153 billion.
Meanwhile growth rates in niches like online gaming are expected to be even higher – with Juniper Research predicting CAGRs of an eye-popping 60.44%.
How to overcome the CB challenges-points
As with any other payment method, there are certain challenges to overcome, and players such as DIMOCO Payments are working on a programme of related initiatives.
One of the biggest issues to date has been a simple lack of awareness among mobile network operators (MNOs), merchants, and consumers.
So, in markets such as Germany, Poland, and Austria, we are partnering with MNOs and merchants to actively promote the possibility of paying via CB in their customer base – and we are seeing a larger take-up.
Within the EU, the regulations around digital payments can be quite restrictive. For example, MNOs are only able to process CB transactions if they are micropayments (under EUR 50) and for digital goods.
To open CB for a wider variety of goods, we provide MNOs the option to act as a payment agent of DIMOCO Payments, as a licenced payment service company.
With this setup there are fewer regulatory restrictions, meaning the spending limits can be increased in line with the risk profile.
Overall, the level of adoption and the perceived benefits and pain points of CB can vary widely based on the specific context of each region and the existing mobile payment ecosystem.
So, we provide guidance to the market players to help them find the right CB strategy that maximises revenue and reduces complexity.
Prospects for CB in the near-to-mid-term
At DIMOCO Payments, we know that CB delivers benefits and overcomes challenges for a specific niche. It is particularly strong in areas like e-gaming and mobile applications.
And we have worked with MNOs to meet the needs of these merchant categories while also aligning with regulatory requirements.
But we believe the innate strengths and characteristics of CB make it suitable for many more types of purchase.
In Germany, for example, we worked with the wider MNO community to extend the use of CB from its digital niche to face-to-face payments in the guise of Zahl einfach per Handyrechnung – a domestic payments brand in Germany for CB.
It is currently in operation with bike rental, EV charging, parking, public transport, and more.
This is just the start.
We strongly believe that, from its niche in digital payments, CB can conquer adjacent sectors.
Therefore, we can easily envisage a time when CB becomes a viable option for a far broader range of transactions – further simplifying payments for consumers, providing more options for merchants, and providing everyone with a viable alternative to traditional payment methods.
