author
Content Marketing Manager
published-on
18 May 2021
We live in an on-demand, consumerism-driven world and expect to access all kinds of products and services with just a few taps on our smartphone screens. In an era where convenience and promptness are key, our mobile phones have evolved to offer much more than a simplified way of communication. Nowadays, these powerful devices represent the go-to mediums for different billing solutions. But how convenient and secure can mobile payments be?
Understanding the Concept of Direct Carrier Billing
What is Direct Carrier Billing?
Direct Carrier Billing (DCB) is a type of mobile payment method that lets consumers make purchases and add the charges these transactions incur to their mobile phone bills. Also referred to as Direct Operator Billing, this mechanism allows its users to buy digital products from third-party vendors without having to use their bank cards. To make carrier billing transactions, a consumer only needs a mobile device and a SIM card.
Direct Carrier Billing in the Pre-Smartphone Era
The emergence of this concept can be traced back to the times when consumers used it to purchase ringtones and wallpapers on their feature phones.
Nowadays, however, Carrier Billing services are much more extensive in their usability and compatible with almost any digital service provider type. From streaming subscriptions to travel tickets, gaming app extensions, and even physical products, there's a huge range of services that consumers can purchase using Direct Carrier Billing. The list of channels where these purchases happen has also expanded beyond features phones and smartphones and now includes computers, smart TVs, and gaming consoles.
DCB vs. Other Mobile Payment Mechanisms
The most apparent difference between DCB and other, more traditional, smartphone payment methods such as mobile wallets or near-field communication (NFC) solutions is Direct Carrier Billing providers’ independence on banking infrastructure to complete a transaction. While consumers usually resort to the latter two mobile payment options when making point-of-sale purchases, DCB has proven to be a highly convenient solution in online environments.
But what is it that makes Carrier Billing so convenient for mobile network operators, digital services providers, and end-users? Here’s an overview of the payment method’s main benefits:
❖ Providers get exposure to both undeveloped (underbanked) and developed markets.
❖ Anyone with a mobile phone can make purchases.
❖ A simple checkout experience leads to lower abandonment rates and higher conversion rates for Direct Carrier Billing merchants.
❖ End-users don’t need to worry about the transmission of their sensitive data.
Looking into the Future of DCB Solutions
The aforementioned unique advantages of DCB solutions make this billing mechanism attractive today. But what does the near future hold?
According to a study published by Juniper Research in 2019, experts predict that the proportion of global digital content paid for via Carrier Billing will double over the five years between 2019 and 2024.[1]
The same paper suggests that, with all the leading digital content providers and app stores (Google Play Store, the App Store) looking to list Digital Carrier Billing as a payment option, consumer spend via the mechanism will rise from $28 billion in 2018 to $90 billion by 2024.[2]
Furthermore,the Juniper Research study points out that carrier billing deployment benefits not only content publishers but also operators, giving the former the opportunity to gain subscribers by using carrier marketing channels while enabling the latter to generate an additional revenue stream.[3]
Admittedly, the research claims that this mobile payment solution is gaining momentum in parts of the world such as South America and the Indian subcontinent where Mobile Carrier Billing is arguably the most significant facilitator of end-user content spend.[4]
Still, even the telecommunication companies operating in markets such as the United States, the United Kingdom, and the European Union, where card payments currently predominate, can benefit from DCB solutions. Juniper finds that the ever-growing availability and convenience of carrier billing could be the determining factors for its increased use for content subscriptions and impulse purchases. As a result, the total US Direct Carrier Billing spend is expected to increase to $8.6 billion by 2024. [5]
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Carrier Billing in Developing Markets: A Closer Look
We may have entered the third decade of the 21st century, however, a large percentage of the global population still hasn’t gained access to traditional banking facilities and basic financial technologies like credit cards and debit cards. In India, for example, there are only three credit cards for every 100 people, in comparison with 32 cards in the US.[6]
Aiming to fill this gap and help individuals who live in underbanked regions get access to online content and services, fintech companies have started developing robust but easy-to-use payment technologies users are already familiar with. Nowadays, Carrier Billing has arguably become the only way for consumers to purchase online services in emerging markets, especially when it comes to entertainment. Therefore, mobile network operators and digital services providers are relying on this ‘pay-as-you-go’ model to reach their growing target audience in underbanked regions.
According to a report published by Research and Markets, the Asia-Pacific region dominated the DCB market in 2019. The research argued that the limited accessibility of credit and debit cards among a high percentage of its population is one of the main reasons why DCB services have been blooming in the APAC region over the past few years. However, the research also claims that there’s another determining factor that could explain the evident market growth - the emergence of affordable smartphones. As budget smartphone penetration rises, so does the demand for mobile games and OTT content.[7]
The benefits of Carrier Billing for digital content providers are clear. By leveraging the strength of the mobile network operators’ payment channel, DCB eliminates the need for local presence, allows the merchants to enter multiple markets at the same time, and creates higher conversion rates.
Why DCB Works So Well in Developed Countries
According to a survey conducted by Deloitte, smartphone penetration has surpassed 80% in both developing and developed regions.[8] While high bank card ownership rates are also typical for mature markets, there are still many payment situations where consumers resort to solutions offered by Direct Carrier Billing companies - mainly due to the simplicity and security aspects of their pay-as-you-go solutions.
To complete a DCB payment, users only need to enter their phone number. There’s no need to fill out any forms or open any additional accounts and transactions are completed in a matter of seconds.
In contrast, bank card-based payments require the consumers to fill in their personal details such as credit card number, name, home address, etc. Due to a smoother and shorter checkout flow, merchants who list both credit cards and Carrier Billing as billing options report higher conversion rates with DCB payments.
Furthermore, making payments with Carrier Billing is associated with high levels of security. In other words, as there’s no need to share personal data during the payment process, the risk of identity theft is significantly lower in comparison with credit card-based online transactions.
Additionally, many people see the DCB payment mechanism as an opportunity to reduce their digital trace, especially when it comes to microtransactions. Not only is purchasing bus tickets, in-game content, and subscriptions services more convenient via Direct Carrier Billing but also makes the card-not-present fraud type impossible.
Once again, the benefits for merchants and mobile network operators are obvious - the increased convenience and high levels of security associated with Carrier Billing services lead to high conversion rates in developed markets, especially when it comes to occasional transactions and micro spends.
