Want to really reach out to emerging markets? The key doesn’t lie in their wallets: it’s in their mobile phones.
That’s the bet being made by Fortumo, an Estonian company looking to cater to the underbanked through Direct Carrier Billing (DCB). It’s not what many first think of when mobile payments comes to mind, but according to Gerry Kodres, VP of business development, it’s an industry with big possibility. We spoke with Kodres at Mobile World Congress about how Fortumo operates, the most lucrative DCB markets and why mobile operators are increasingly attracted to DCB as a payments option.
“Fortumo enables mobile services, games, social networks and other online services to monetize from a user base that does not have access to credit cards,” Kodres said. “What we do is make agreements with service providers, game developers and mobile operators, so that when the end user wants to make a payments … they can get charged through the mobile bill.”
According to Kodres, in the recent past mobile operators charged such a high commission for DCB that many virtual goods developers opted to stay with Credit Card or established mobile payments methods, such as PayPal or Google. The operators have recently come around to offer more competitive commissions, however, as they want a bigger piece of the DCB business.
Kodres says this could enable the sale of small physical goods in the future as well.
“The business hasn’t yet developed into physical goods, because typically the commissions are still too high. And one characteristic of this business is that it will never be used for selling big items, like TVs … it will be restricted to micropayments,” he said. “But, there are millions of micropayments locally.”
It’s clear that Kodres isn’t the only one optimistic about Fortumo’s ability to reach such undeveloped markets. The company recently partnered with a major carrier in China Mobile, and received $10 million in funding from Intel Capital and Greycroft Partners.
Kodres says Fortumo will use that funding to expand first into the Asian market, where it already has a Beijing office, and possibly into Latin American and African markets in the future as well.
“Most of the Western payments methods require you to have a credit card,” Kodres pointed out, “but the majority of the world doesn’t have one.”