As a payment mechanic, DCB now dominates the VAS market, accounting for 62% of total spend in 2018, increasing to 73% by 2023. The VAS market itself is worth $25.63 billion in 2018, and is projected to increase to $29.35 billion in 2023.
So finds the latest research by Mobilesquared in conjunction with Telemedia magazine, which on interviewing 124 DCB and VAS service providers worldwide has found that DCB is now a real force to be reckoned with in payments.
The study finds that direct carrier billing (DCB) was worth $15.86 billion in 2018 and projected to grow at a CAGR of 6% to $21.56 billion in 2023.
The growth of DCB, while potentially spectacular, comes at the expense of PSMS and PVOICE, which are expected to fall from 20% and 18%, to 14% and 13% respectively. The sharper decline in revenues of PSMS compared to PVOICE can be attributed to the migration of PSMS services on to carrier billing, whereas PVOICE around the world has been in decline for a number of years as smartphone penetration increases, changing consumer behaviour and using free online information and services which previously resulted in a premium rate voice call.
Based on year-on-year revenue change carrier billing spend will remain stable between 2019 and 2020 before experiencing steady growth for the remainder of the forecast period. From 2020 PSMS will experience dramatic falls in revenues, while spend on PVOICE is expected to experience a consistent year-on-year fall in revenues.
Games accounted for 31% of total carrier billing spend in 2018, followed by music and video, each on 11%. In total, games, music and video accounted for 61% of total spend. And this remains consistent throughout the forecast period, as existing services grow organically, but there are very few shifts in consumer behaviour brought about through new services. Based on the research, and the current view of the carrier billing ecosystem, very little is expected to change in the marketplace. Services, such as health and fitness, information services, lifestyle, publishing and ticketing, are not expected to have a big impact on revenues during the forecast period.
Asia accounted for 78.1% of total carrier billing spend in 2018, and that is expected to increase marginally to 79% by 2023. China, Japan, South Korea, and Taiwan accounted for 65% of total global spend in 2018. West Europe, in contrast, accounted for 9% in 2018, falling to 8% in 2023. Over the forecast period, Africa to experience largest CAGR (12%), followed by Latin America (10%).
Drags on DCB
However, the research finds that, while DCB is growing, its growth could be higher and is being held back by a number of factors.
According to report author Nick Lane: “Despite the carrier billing market expanding by $5.7 billion over the forecast period, this is significantly smaller growth than expected for a number of reasons highlighted during the research process.”
Lane cites new services not emerging quickly enough, regulation negatively impacting customer flows and mobile operators still looking to receive in excess of 10% per transaction, as the key drags on DCB growth.
“In Europe [the MNO take]figure typically stands between 10-15%, but beyond Europe, it is not uncommon for mobile operators to still request in excess of 50%. The target figure needs to be closer to 5%,” says Lane. This, he avers, is one of DCB’s biggest headaches, along with on-boarding of new merchants taking up to 18 months in some markets.
“Also,” warns Lane, “the unique selling point of carrier billing – convenience – no longer relevant as other payment mechanics such as credit or debit cards, now matching the convenience of carrier billing, using wallets and the short security code on each card.”
What of PSMS and PVoice?
While DCB is set to dominate, it will be at the expense of PSMS and Premium voice, the study finds.
PSMS was worth $5.1 billion in 2018 and will be worth $3.98 billion in 2023, with a CAGR of -5%. PSMS accounted for 20% of the total VAS market in 2018, but will fall to 14% by 2023. The payment mechanic is expected to grow to $5.34 billion in 2020, where it will peak, and then steadily decline as the migration from PSMS to carrier billing intensifies.
Asia accounted for 45% of spend in 2018, and is projected to increase to 46% by 2023. West Europe accounted for 20% in 2018, falling to 17% in 2023. Over forecast period, Oceania to experience largest CAGR (20%), with Africa and North America to grow 1%. West Europe to experience greatest contraction, with CAGR of -9%. Middle East and Asia to experience CAGR of -5%.
PVOICE will fall from $4.69 billion in 2018 to $3.8 billion – a CAGR of -4% – by 2023. The global adoption of smartphones has severely impacted voice services, as consumers find free online alternatives to information and content previously accessed via premium voice services.
The research reveals that voice continues to have a role to play but this is diminishing, as preferred communication migrates from voice to chat and messaging. In developed markets, spend on voice is expected to bottom-out during the forecast period.