Carrier Billing Beats NFC For Short-Term Monetization of Mobile Payments
Amdocs and Juniper Research have released a new white paper unveiling winning operator strategies for mobile payments dominance in the app store economy. We asked Amdocs’ Oded Israeli, Director, Mobile Payments, to share the white paper’s key insights.
PYMNTS.com: Your recent white paper "Mobile Payments in the App Store Economy: Winning Strategies for Telcos" touches upon core assets telcos can leverage to gain relevance in an app-centric economy. What trends are you seeing in the industry that led you to believe this was a topic that needed to be addressed?
Oded Israeli: First of all, this is a joint white paper with Juniper Research, which builds on Juniper’s excellent research and command of the mobile payments market, as well as on Amdocs’ experience as a leader in processing mobile payments for some of the largest operators worldwide.
With the emergence of the app-centric environment, the Mobile Network Operators (MNOs) have seen their traditional role as the core content gatekeepers eroded. From being the primary source of digital content, MNO storefronts and portals now account for only an estimated 6-7% of all app downloads, according to Juniper Research. With consumers and many operators abandoning this model, operators must seek alternative means for monetizing content and commerce. In the white paper, we highlight core assets that operators can leverage to regain dominance in the digital economy, with billing relationship and big data being the most critical.
Consumer adoption is a major deterrent for scalability of mobile payments solutions. Can operator-enabled payments help overcome this challenge?
The initiatives that face difficulties in gathering customer adoption for the time being are the NFC-based proximity payment ones, as those require the existence of many concurrent factors that are not yet in play, such as merchant acceptance, NFC-enabled device and terminal availability, and mass education.
However, every payment made over a mobile device (phone or tablet) is a ‘mobile payment’. By this definition, the soaring paid app and in-app market (set to expand to $52 bn by 2016) is seeing great customer adoption. For the consumer, the simplicity of the few-click purchase flow of carrier billing makes it a particularly attractive option for impulse purchases and drives sales conversions.
According to Juniper Research’s findings, OTT (Over-The-Top) storefronts such as Google Play and Windows Phone Store that have implemented Direct Carrier Billing solutions have experienced a sharp increase in transaction volumes, average transactions values and conversion rates. At Amdocs, for example, we processed in 2012 on behalf of our operator customers three times more Google Play purchases over Direct Carrier Billing than in the year before.
And what about payments beyond the content value chain - are operator-enabled mobile payments still relevant?
It’s important to note here that the major factors that determine the applicability of carrier billing to various types of payments are regulation, operator policy, and operator interchange (the rate that the merchant pays to the operator for processing and collecting the payment).
The white paper alludes to the fact that regulators in certain countries are gradually permitting more types of purchases to be charged to carrier billing, opening up the potential for facilitating payments for other verticals, such as transport and ticketing. As these drivers realize, we foresee that carrier billing will expand to ‘real world’ purchases, mostly at the low-value, high-frequency impulse purchases, such as transit, parking, ticketing, flowers and more.
How do you see NFC stacking up against direct carrier billing as an enabling technology for mobile payments?
While operators are keen to explore the opportunities offered by NFC, they should remember that the monetization here is very much a longer term prospect. Given the scale of the marketing/educational challenge facing MNOs and other NFC stakeholders – according to the white paper, Direct Carrier Billing represents a greater monetization option in the foreseeable future.
NFC’s prospects received a severe setback in September 2012 when Apple opted not to include an NFC chipset within the iPhone 5. This is likely to have a knock-on effect amongst consumers, who adopt new technology based on Apple’s innovation, and amongst retailers, who might invest less in NFC-enabled POS terminals.
At the same time, NFC and carrier billing are not “opposites”. If and when payments with NFC becomes main stream, charging to carrier billing (or an operator-controlled stored value) will be one of the viable options.
What would be your top three strategic recommendations for operators to establish a dominant role in the mobile payments value chain?
*Capitalize on your billing relationship — enable Direct Carrier Billing on leading OTT app stores for the benefit of all players - operators, storefronts and consumers.
*Leverage “Big Data” — with analytics of the BSS (Business Support Systems) data, the operator can add far more value to mobile commerce and mobile payments by powering personalised discovery of both digital content and real-world coupons and deals.
*Educating consumers and retailers — Operators need to invest significantly in consumer education about benefits and the security of mobile payments. At the same time, it is critical to educate merchants on its business benefits like cash substitution, personalized upsell and post-sale, and driving the prepaid and young consumers to their shops.
Finally, tell us where you see the mobile payments industry evolving from here and how Amdocs can help communication service providers become an integral part of that future.
OTT app store monetization is becoming an integral source of content revenues for service providers, and Amdocs is playing a big part here, by exposing the carrier billing systems to the merchant community and integrating with the leading app stores, including Google Play and Windows Phone Store.
Amdocs Mobile Payments is our cloud-based solution that makes it easy for operators to enable mobile payments for their customers and to monetize their commerce transactions. In addition Amdocs Mobile Payments makes it easy to settle against any payment method (post-paid bill, pre-paid balance, cards or wallet) and quickly capture new and emerging revenue streams.
In the future, we expect carrier billing to enable mobile operators to provide a larger set of financial services to their customers, such as bill payment, money transfer, micro-savings and loans, etc. Beyond payments, we expect communication service providers - to leverage their big data to enable personalization of various commerce use cases, from content discovery to coupon redemption. Amdocs can help service providers in their journey to realize their assets and potential, with consulting, software and services.
Director, Mobile Payments, Amdocs
Oded Israeli leads product management and marketing for Amdocs Digital Commerce and Mobile Payments. Oded joined Amdocs as the Chief of Staff for Amdocs’ CEO and later moved to the Digital Services division, where he led Amdocs’ strategy around mobile payments and the post-merger integration of two acquired companies: NewACT and MX Telecom. Prior to Amdocs, Oded practiced law as a high-tech attorney, managed a web development company, and advised Fortune 500 companies as a management consultant for the Boston Consulting Group. Oded holds an LL.B. and LL.M. from Tel Aviv University and an MBA from INSEAD business school in France and Singapore.