Merchant Innovation

Apple Quietly Enabling Carrier Billing

Consumers in Russia are about to have a very different reason to give Apple a chance.  Starting this week, Russian shoppers will be able to purchase a host of digital content from the app store and add the charges to their monthly bill. No plastic necessary.

The new carrier billing scheme in Russia is made possible by Apple’s partnership with Beeline, a unit of VimpelCom, an Amsterdam-based phone company.   Beeline users will see the following message going forward in their account when they log in:

“Mobile phone billing is available in Russia for Beeline mobile customers. A verification will be sent to you.”

This is the second carrier-billing type deal to come out recently; last month a similar partnership was announced in Germany with Telefonica O2.

Software and systems support powering Apple’s services in Germany, Russia and wherever else is on the expansion menu is powered by San Francisco’s Boku. The collaboration to provide phone number based payments for card-free consumers comes as the phone networks are backing away from the sky-high transaction fees that had been the norm.

In the past, large phone companies would charge on average 10 percent, but as much as 30 percent of the purchase itself, leaving too little room left for the content or its developers to make any money. Credit cards, with their 2 percent charges, are the much more reasonable bet.

However, the newest round of carrier fees that Apple is looking at are in the single digits — meaning the incentive may actually be there to design for a carrier billing model.

“It opens up the market significantly,” Charlene Li, an analyst at research firm Altimeter Group, told CNBC. “A lot more people have phones and phone accounts.”

While the new capability is new to iPhone users, Android carriers who shop in the Google Play Store have had access to carrier billing in 35 countries (Russia included). Facebook has also announced plan to expand carrier billing arrangements into 60 nations, while Microsoft announced last April that paying by mobile number will be available in the Windows 10 store.

Why the rush? The big potential profit for those who can capture the market, particularly in nations outside the U.S. where pay card use is less common. Analysts estimate that carrier billing revenue will jump to $24.7 billion in 2019 from $14.5 billion last year.

Plus, carrier billing plans bring with them higher conversion rates — 30 times higher than with credit cards, according to research from Juniper.

“Apple is famously independent and doesn’t want to rely on anyone or have to deal with their privacy concerns,” Li said. “Having another company handle billing and have the primary relationship with somebody is tenuous.”

But Apple sees that the movement may just be to let consumer pay by phone numbers — meaning as much as they don’t like allowing access in their walled garden, it seems for now they don’t have much of a choice.

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