Direct carrier billing for app stores represents opportunity for MNOs

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Increasing smartphone penetration worldwide is driving higher digital content consumption for consumers.

Research shows that digital content purchases are expected to reach some $60 billion in sales by the end of 2017.

Consumers during the same time period are expected to charge $13 billion of that amount to their mobile phone bills through direct carrier billing. While mobile network operators face dwindling revenue streams from voice and messaging services, digital content is a growing revenue opportunity for them as smartphone ownership continues to grow worldwide.

Bango, a direct operator billing company, thinks there's even more reason to be optimistic than the current research would suggest.

"Bango's experience so far this year allows us to have a more bullish outlook on this," Richard Leyland, the company's vice president of marketing, said during a webinar last week that Bango presented in conjunction with Mobile Payments Today. "We think it's growing more rapidly than that."

Trevor Goldberg, Bango's vice president of mobile operator business development, and Prince Thomas, who leads digital services development for du in the United Arab Emirates, joined Leyland for the 60-minute webinar.

Listen to the webinar here.

Bango's message was clear: As app stores such as Google Play grow more popular with smartphone users, an opportunity exists for MNOs to capture some of that revenue with direct operator billing.

"Time really is money and a delay in adding direct carrier billing can really result in significant revenue loss both for the app store and the MNO," Goldberg said during the webinar. "A delay of just three months can result in a loss of $4 million. A delay could also cause subscribers to use credit and never consider DCB purchases."

That could also lead to additional losses since conversion rates remain small when consumers use plastic to pay for digital content.

For a consumer's first digital content purchase with a credit card, the conversion rate is 10–12 percent. The direct carrier billing conversion rate is 70 percent, according to Bango's own experiences. The conversion rate for plastic jumps to 20–25 percent with the second purchase, but carrier billing's is still higher at 80–88 percent.

"This is not revenue that is coming down the line at a later date," Leyland said. "This is happening immediately."

Leyland warned webinar listeners that revenue opportunities will vary from country to country based on current smartphone penetration. But whether MNOs are operating in Europe, the Middle East or North America, the chance to make headway in those markets will present itself almost immediately.

The United Arab Emirates is one such market and Leyland believes the Middle East represents a "white-hot" opportunity for MNOs to capture revenue from digital content purchases. Smartphone penetration stands at 75 percent in the country, which tops the world according to data from Statista.

The UAE also has the highest credit card use in the region, but Thomas said security concerns stop consumers from using plastic to pay online.

"That brings in a huge opportunity to bring in something that the customer wants, which is a way to pay without exposing sensitive card information," he said about direct carrier billing in the country.

Thomas presented three key points MNOs should consider before they add direct carrier billing:

• partnerships with OEM stores — before you can connect and launch services, you will need to iron out the contractual terms and conditions with OEM stores, publishers and merchants;
• revenue margins and costs — DCB is competing against established alternative mobile payment methods such as credit cards with charge rates of almost 2 percent. This requires operators to seek innovative ways to cover top-up distribution costs. The promise of reach and conversion is a key enabler to success; and
• technical readiness — ensure that the basics are enabled from the technology and platform side to cover requirements such as flexible pricing and refunding capabilities.