Carrier billing is another way mobile users can pay for goods via their phone. It adds the cost of the purchase — most often for digital goods — to consumers’ wireless bills, allowing for a virtually frictionless transaction.
The problem is that wireless carriers are still charging a lot of money for every carrier billing purchase made. But that is beginning to change now that mobile operators see there’s a big opportunity to earn a lot more money off of mobile purchases.
In emerging markets like India, where mobile penetration is high but lots of people lack credit cards, allowing users to add the cost of goods to their mobile bills could open up a big opportunity for merchants that sell digital content.
In a recent report, BI Intelligence finds that by 2017, carrier billing will account for 22% of mobile transactions, or $US13 billion. The report looks at how carrier billing is being updated for the mobile app age, now that carrier billing technology has made some giant leaps. The report explains how carrier billing works, who is using it, and whether or not it has the potential to catch on for physical goods, beyond the world of digital content.
Here are some key points from the report:
- Though it’s often associated with emerging markets, some carrier billing companies actually make most of their money in developed markets like North America and Europe.
- But that could change. In emerging markets like India, where mobile penetration is high, but hundreds of millions of people lack credit cards or bank accounts, carrier billing has especially big potential as a way to get more people paying for apps, music, and in-app purchases on mobile devices.
In terms of numbers, we estimate carrier billing powers $US3 billion in mobile transactions, or 12% of the global market for mobile digital content.
- Mobile operators charge fees between 25% and 40% of the total cost of purchased goods. But as carriers struggle to maintain revenue, and realise they are missing out on a big opportunity in digital goods, they are beginning to compromise on their rates in hopes that they will see a higher volume of carrier billing sales.
- The holy grail for carrier billing is to reduce rates enough so that people adopt it as a method for purchasing physical goods via e-commerce sites and apps. If this happens, as it has in South Korea, the carrier billing opportunity would be truly massive, as it would begin to compete head to head with credit cards as a payment method.
In full, the report: