Carrier billing is slowly starting to get noticed as PSD2 opens up where it can be used. But its time is still yet to come. Paul Skeldonlooks at where it is today, where it is going and how long that might take
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Carrier billing has long been used along the periphery of the telecoms industry, carving out a niche for itself around gaming and other content services. The rise of interest in mobile payments in the past decade should have propelled it to even greater use, only it didn’t.
In the UK, there has been a whiff of controversy around carrier billing – tainted largely by scams that occurred with some of the services where it was used – and this has held back its deployment.
Elsewhere, carrier billing has seen more success, but again thanks to lack of any meaningful education by operators, it hasn’t ever really exploded.
But times have changed. A new generation of users are now looking again at the convenience of simply clicking and paying – from their credit or in their bill – and, as consumers become ever-more demanding of instant gratification, carrier billing is starting to be looked at anew.
In 2018, the global market for carrier billing is estimated to be worth around US$13.9billion. By 2022 this is going to top US$31billion, according to figures from Mobilesquared – showing just how people around the world are embracing this payment tool.
“A lot of this growth is coming from Asia,” explains Nick Lane, principle analyst at Mobilesquared. “Google is already adding about US$2.5 to US$3 billion a year to DCB [direct carrier billing]traffic too and we also need to factor in Amazon, which is already using DCB in Japan and which is likely to add US$10billion to DCB by 2022 and beyond.”
What is driving DCB?
In Asia the growth of mcommerce using DCB is adding large amounts of traffic, but in Europe, there are a crop of new services that tap into millennial users that are also adding DCB traffic to the mix.
Currently in the UK, DCB is worth some £253million, but is set to grow to £580million by 2020, says Lane, driven by services such as ebooks, health services, gym payments and subscriptions. “These alone will account for 27% of the UK DCB market by 2020,” says Lane.
Affiliate marketing and VAS are also playing their part too.
“Growing use of affiliate marketing to push VAS will start to create an interesting and sustainable DCB eco-system,” says Lane.
The entire global VAS market is worth anything up to US$600billion a year and even if DCB takes a tiny slice of this it will be extremely lucrative.
And this is the principle consideration with carrier billing: it isn’t going to dominate any market, but it is going to be one of the payment tools available and it will generate some money. It is the agglomeration of these slices of other markets where the revenues from DCB lie.
What holds it back
However, it isn’t all plain sailing. The biggest bugbear with DCB is that revenue shares between merchants and services providers and MNOs are still not favourable. Currently, operators are typically keeping between 8 and 12% of revenues, which is too high. Credit card and other payment tools are typically around 3-5%. “Getting it to 5% would be acceptable,” says Lane, making it more attractive to more merchants.
“There is also the issue of time to market,” says Lane. “It can take anything from several weeks to a number of months from initial discussions to actually getting a DCB service up and running across a network – that compares poorly to PayPal, which can usually be set up in a matter of minutes. Hours at most.”
This does put merchants off and, while DCB isn’t there to compete per se with other payment tools, many aren’t bothering to add it to the mix simply because it takes too long.
There is also the issue that the market simply isn’t educated about DCB. Many consumers and merchants both are unaware of the benefits of DCB and this lack of perceived interest feeds into operator reluctance to improve revenue shares and speed up onboarding.
However, as it does slowly start to offer ease-of-use gains to some consumers, it will start to see more use. It’s been a slow burn – we can wait.
