Monday, May 27, 2024

    Carry on carrier billing

    Direct carrier billing has finally come into its own as a payment tool used alongside cards and cash. Paul Skeldon takes a look at the trends shaping its growth around the world and where it may go next

    Direct carrier billing (DCB), long seen as a very niche payment method, has not only come into its own across the pandemic, but has also thrived. The surge in consumption of digital goods and services during lockdown has continued apace – and for many who were unbanked or ‘low’ banked, DCB has become the main way to pay.

    Data from Juniper Research suggests that the global spend on DCB will already be worth $70bn by the end of 2023, rising to a staggering $122bn globally by 2027. This is because, in many countries, it has become the preferred payment method for digital goods, such as games, apps, and media content.

    However, as technology has advanced and mobile devices have become more ubiquitous, direct carrier billing is now being used to purchase physical goods as well – and it is this, along with growing use of DCB as the preferred payment method in ticketing, as well as mainstream music and games services that is going to propel this stellar growth.

    The use of DCB for physical purchases has long been prohibited in many key markets – and remain so across many, including the UK. In Asia, however, it has long been used as a convenient payment tool when buying with mobile, long before contactless payments and wallets became a staple of the mainstream banking and payment industry.

    Here is continues to be used widely and, in Japan for example, carrier billing is commonly used to purchase physical goods like transportation tickets, food, and cosmetics. Major Japanese mobile operators like NTT DoCoMo and KDDI offer carrier billing services to their customers, allowing them to easily purchase goods and services while on-the-go. These include content and services, but also extends to clothing, gifts and even groceries.

    Going global

    However, as DCB uptake has accelerated – often prompted by a whole raft of new, younger users – so the stigma that has dogged the payment method born from its association with adult and PRS services, fraud and scams has withered and gone.

    This has seen more mainstream merchants turn to telcos to help add the payment method to pantheon of well-used payment channels.

    In the United States, for example, AT&T offers direct carrier billing through its AT&T Billing service, which can be used to purchase physical goods, such as clothing, electronics and household items from online retailers like Amazon and Walmart.

    In Brazil, DCB has become the preferred payment method for purchasing digital and physical goods alike. Operators like Vivo and Claro offer carrier billing services that can be used to purchase a wide range of products, from groceries and household items to fashion and electronics.

    Overall, carrier billing is being used to purchase physical goods in a variety of countries and by a range of mobile operators. The convenience and ease of use make it an attractive option for consumers, particularly those who do not have access to traditional payment methods or who prefer to keep their financial information private. As more retailers and mobile operators embrace this payment method, it is likely to become even more widespread in the future.

    Just the ticket

    Ticketing – which is a quasi-physical purchase, as you get a ticket to ride as well as the transport or event that is being ticketed – is also set for huge growth. According to Juniper Research’s numbers, while digital games and video will account for almost 60% of global carrier billing spend by 2027, the report identified digital ticketing as the fastest-growing area – a key focus for carrier billing platforms and operators over the next four years. It found that MaaS (Mobility-as-a-Service) subscription platforms will be a vital driver of growth.

    Report author Michael Greenwood explains: “Carrier billing platforms and operators must look to partner with emerging transport solutions, such as multi-modal transport. The subscription-based service is ideally suited to carrier billing owing to the recurring nature of spend aligning to the payment of mobile bills.”

    Global digital ticketing is a massive sector. The global market for digital ticketing transactions could reach $1.4trn in 2027; up from $768bn in 2022, believes Juniper Research. While bus and train ticketing is the fastest growing part of this, ticketing for events mustn’t be overlooked as vital for DCB growth. Research suggests that the value of digital events ticketing will exceed $230 billion in 2027, from just under $100bn in 2022; representing rapid growth of 137%, as events move to contactless entry to improve the on-the-day experience and reduce costs.

    The research recommends that vendors offer added incentives, such as collectable digital ticket stubs minted as NFTs (Non-fungible tokens), to enhance the fan experience.

    Other drivers of DCB uptake

    While growth of DCB in digital content, ticketing and even physical goods is driving the market to extraordinary new heights, there are some emerging trends that are also proving pivotal to DCB acceptance by a mainstream audience.

    Expansion into new markets – DCB has traditionally been popular in countries like Japan and South Korea, but it is now gaining traction in other parts of the world, particularly developing countries. Here, DCB appeals to users who do not have access to credit cards or bank accounts, but have mobile phones. The technology has made digital payments more accessible and convenient for these users. One example is Bango, which recently formed partnerships with three new mobile network operators in Asia – two in Pakistan and one in Indonesia – that will allow Bango to expand its reach and offer DCB services to millions of users in these countries.

    Integration with mobile wallets – DCB providers are partnering with mobile wallet providers to offer users an even more seamless and convenient payment experience. One example of this trend is the partnership between DCB company Fortumo and Paytm, a mobile wallet provider in India. This integration has made it easier for users to pay for digital content and services without having to enter their credit card information or use other payment methods.

    Partnership with merchants – DCB providers are partnering with merchants to allow users to make payments using DCB on a variety of platforms, including social media, gaming and entertainment apps. As more merchants adopt DCB, users will have a more seamless and convenient experience when making purchases. Fortumo and Google Play, for example, have teamed up to allow users in more than 100 countries pay for apps, games and other digital content and services if they are unbanked.

    Integration with subscription services – DCB is also being integrated with subscription services, such as streaming platforms and digital magazines. Here, users pay for monthly subscriptions using their phone bills, rather than having to enter their credit card information each time or set up standing orders or direct debits. This integration makes the payment process more convenient for users and encourages more people to subscribe to digital services. This can been seen in the partnership between Spotify and Boku, a global DCB provider. Boku has integrated its DCB service with Spotify, allowing users to pay for their monthly subscriptions using their mobile phone bills. This integration has made it easier for users to subscribe to Spotify and access its vast music library without having to enter their credit card information each time.

    Open banking booming

    Carrier billing is seeing a range of new markets open up before it, but it is just part of a renaissance in payments that is shaking up not only the payments industry, but also the content and services market too. Open Banking has created a wealth of new opportunities for merchants, service providers and even carrier billing providers – an these opportunities are coming to fruition.

    Research suggests that open banking usage will grow by 470% over the next four years, with the total number of API calls generated via Open Banking to exceed 580 billion by 2027, from only 102 billion in 2023.

    According to Juniper Research, strong interest in new Open Banking-based services, such as PFM (Personal Financial Management) tools and account access for underwriting for loans & credit, is driving this growth, as users seek to gain better control of their finances across different accounts, exacerbated by the impact of the cost-of-living crisis.

    The study found that, given Open Banking’s low consumer awareness, infrastructure vendors must work with the wider ecosystem to fully educate users and ensure they understand the benefits that sharing data can bring.

    Europe has the best-established set of API connections of any region, having deployed Open Banking rails as part of PSD2 and as a result, Europe’s share of Open Banking API calls predicted to be 70% of the global total in 2027. Deployments here are now becoming more advanced and covering a greater number of banking services than ever before, such as credit cards or mortgages, creating significant opportunities for vendors to explore.

    Research co-author Nick Maynard explains: “Europe has led the way on Open Banking and is an example of how regulator-led approaches can stimulate innovation. As a well-established market, Europe’s growth rate will dip compared to others, but it will still serve as an innovation hub for Open Banking development.”

    Latin America also represents a massive growth opportunity. Here, the number of API calls is set to grow by over 1,270% between 2023 and 2027, generating significant opportunities. Broader access to APIs and stronger consumer awareness will drive growth, as well as additional roll-outs, such as within Colombia.

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