The concept of a cashless society is rapidly being established – albeit not in the way traditionally pictured in films and popular culture.
The reality is there will always be a place for physical money. Digital alternatives, no matter what form they take, will never fully replace this need. But that’s not to say there isn’t room for the two to exist side by side, with a lot of innovation in technology and user experience in this regard coming from developing markets.
Mobile payments are being used in developing regions to meet various market requirements and fill gaps presented by current alternatives. South East Asia is an especially prominent example, and is a region of the world where until recently there have been few uses of traditional payments services such as credit or debit cards, or even alternatives like PayPal, when making online or mobile purchases. Yet this region still sees particularly high demand for digital and virtual goods and is also one where it’s common for consumers to buy things using their phones. This has led to new mobile payments options like Direct Carrier Billing becoming increasingly popular.
DCB: Where’s the money?
In its most basic form, Direct Carrier Billing is the process of using mobile pre-paid credit to pay for services, or attaching the cost of goods to a subscriber’s existing pay monthly plan. The benefit of this approach is that it avoids the need to use a credit card or similar, and dramatically speeds up the overall process.
In India for example, where $1 billion is spent online each year and this figure is growing 31% annually, it has become a thriving market for mobile payments. As a technology that sidesteps the country’s relatively low credit card penetration and takes advantage of the growing demand for alternate payment methods, 630 million mobile subscribers are already taking advantage of DCB. It represents a simple alternative that lets merchants increase the average spend and make virtual goods significantly more accessible, and is just one example of the how DCB is driving not just the mobile payments boom but also the digital content market.
As a concept, DCB is nothing new. It’s been around for years now. But it has improved dramatically since it was first introduced and now works across desktop and mobile browsers, with support for any mobile phone user in the world. It’s become a quick, intuitive, and easy to use service, which has led to lots of benefits for the companies that take advantage of it. And with operators at the heart of Direct Carrier Billing as the mechanism by which it can function, it’s good news for their bottom line too.
It comes as no surprise that DCB is an attractive concept for digital content providers. From their perspective, it not only offers an easy way to monetise them, it makes access to them even easier. DCB helps create new paying users thanks to its frictionless payment process, as well as new subscribers. Merchants running freemium models with DCB have seen very high conversion rates of up to 30% of users converted into paying users, while merchants running subscription based business models convert up to 1% of the leads into subscribers
The challenge, however, is for operators to have the infrastructure and technical expertise in place to support it, which has traditionally been expensive and time consuming to deploy.
The role of mobile operators
The problem is that developing and maintaining Direct Carrier Billing functionality often falls outside the usual scope of an operator’s business. Typically all operators, but particularly those in developing markets, have focused on enhancing technologies their core subscriber base demands, and in many cases will not have the necessary support in place to manage their own DCB deployment. Specialist companies and mobile payments providers have appeared over the last decade to cater to this demand – not only for DCB but other popular mobile payment methods too – and huge investments have been made to improve the performance of these services.
Until recently, these specialists have only delivered one aspect of this service for operators. But now they are enabling mobile operators to roll out Direct Carrier Billing without first having to invest significant resources into their own networks. Through years of experience and investment in R&D, the same mobile payments specialists have combined in-house development with enhanced functionality to take an active role in managing the business of DCB for operators directly, offering this as a managed service.
This approach lets operators tap into the DCB opportunity via partnership. By working directly with a mobile payments specialist, it’s possible for operators to both quickly and easily take advantage of a market that’s expected to be worth $24.7 billion by 2019 according to research by Ovum. It’s a way for operators to partner with a provider that already has the reach, relationships, and payment technologies in place to bring Direct Carrier Billing to a region overnight.
A win-win situation
It’s easy to see the appeal for merchants. The benefits for operators are obvious too, as they play a vital role in the DCB food chain. With the appetite for mobile payments increasing across all markets operators must act now to ensure they are poised to make the most of the lucrative mobile payments opportunity. However, it’s only by working with a specialist in Direct Carrier Billing technology that operators can truly hope to reap the full rewards offered by this ongoing trend in developing markets.
Ante Ukalovic is the CEO of Centili.