Payment Methods

A Match Made In (Carrier Billing) Heaven

Bango Acquisition Carrier Billing

Though billions of people around the world have access to smartphones, it doesn’t mean they have access to a payment method that allows them to purchase digital goods and content on their devices. Ray Anderson, cofounder and CEO of Bango, joined Karen Webster for a discussion about the doors that carrier billing can open for carriers, consumers and developers.

Carrier billing may not be a hot topic in the U.S. (yet), but around the world, people are turning to the service as an alternative and convenient way to buy digital goods and services purchased via their mobile devices.

The most well-known use case typically takes place within app stores, think Google Play, where users can make in-app game purchases or buy movies or music, without having to go through the painstaking process of entering payment card details on their phone. Rather, carrier billing operates exactly like it sounds, billing those charges through the mobile phone carrier and showing up on a user’s monthly phone bill.

Why would someone want to do that? Carrier billing solves a problem for those who may want to avoid using credit cards for privacy or convenience purposes, but it can also open the door to the huge population of unbanked people around the world who have a phone and a carrier billing relationship but not a credit or debit card.

As Bango Cofounder and CEO Ray Anderson pointed out, his company’s mission is to help its customers — such as Google, Samsung and Microsoft — collect money from people they otherwise wouldn’t be able to reach through the utilization of carrier billing.

“They can get more traffic and have happier users if they open up to third parties and don’t try to do it all themselves,” Anderson explained, noting that this is a key driver for the acceleration of carrier billing happening around the globe.

A report last year from Juniper Research forecasted that digital content paid for through carrier billing will generate more than $14 billion in revenue over the next five years, with the percentage of merchants who let customers charge their purchases to their mobile phone bills climbing to 35 percent from 21 percent in 2014.

The type of consumers who use carrier billing vary widely — from some in emerging markets that may only spend $5 per month on digital goods and content to those willing to easily spend $10,000 per month on their mobile carrier bill.

 

CHANGING THE U.S. PERCEPTION

However, the U.S. market in particular has been a little late to the carrier billing party.

Anderson said this is due to various factors, from a general lack of awareness about carrier billing to ongoing misconceptions about how it all really works, but Bango is looking to address this through its recent acquisition of BilltoMobile.

The adoption (or lack thereof) of carrier billing, Anderson explained, usually comes down to the behaviors people are used to doing. In the U.S. market, he said that while there will likely be some behavioral changes needed, there’s also been some unfortunate experiences in the market, where consumers have been tricked by bad actors who have abused the text messaging channel and, therefore, they no longer trust the idea of digital services being billed through their carriers.

But Anderson said the tides are changing, and by acquiring carrier bill service BilltoMobile, which has operated as a provider in the U.S. market for some time, Bango will have the opportunity to help partners like Google (a well-known and typically trusted brand in the eyes of U.S. consumers) find the same success in the U.S. via carrier billing that they’ve experienced in other markets around the world.

“Within a few months, all of the services [BilltoMobile] was offering will be mapped over to the Bango services, then we’ll turn on the extra capability of Bango Boost and some of the other things we can do for their merchants,” Anderson confirmed, which he said includes opening the door for those U.S. merchants to access carriers and users around the globe.

 

A GLOBAL OPPORTUNITY

Earlier this month, Bango helped to launch direct carrier billing in India for Google Play.

In India, where credit card penetration is less than 3 percent, Bango confirmed in a press release, there is a huge opportunity to enable customers to purchase mobile content and services.

Anderson describes the experience of a user doing carrier billing for the first time with Google Play as “very smooth,” noting that it doesn’t require any pre-setup for Google Wallet.

If there’s no method of payment already in Google Wallet, the first time someone tries to buy something through Google Play, the technology will ask if they’d like to add the carrier billing method to the mobile wallet. From there, it creates the wallet, sets up carrier billing within it and the user is ready to spend.

In addition to enabling the payment, Bango provides the carrier with insights that can help them to learn more about the purchasing behaviors of their users, as well as what other carriers are doing in the market.

For example, Anderson said that it can be useful for a carrier to know if other operators have increased the spending cap on Google Play for repeat users to a much higher number and are seeing a bigger yield.

When carrier billing enters new markets, merchants also typically see a surge in revenue, Anderson explained, specifically when unbanked people in a market are able to now make purchases that they weren’t able to before. This is where Bango can offer guidance — like translating content into a native language or increasing marketing in a certain country — to help the revenue growth continue.

In general, Anderson said that Bango has seen that people who spend quite a lot of money in Google Play will also have a significantly lower bad debt rate, meaning operators can make more money and have lower bad debt.

“There’s a tremendous amount of stickiness once you get into these ecosystems,” he added.

In countries around the world, carrier billing is also being applied to physical goods — such as train and bus tickets, transportation upgrades and different types of tokens or tolls — but, for Anderson, the key in making it work is proximity.

“What’s happening in most markets is that there’s a step before that which is physical goods based on presence, not just shipping goods to a different place at a different time. They’ve got to be consumed at the point,” he explained.

In these scenarios, the risk is lower because the mobile device is with the person.

Anderson and Webster agreed that the physical goods aspect of carrier billing is definitely a space to watch, because it creates a very different dynamic and is about more than just paying for a physical good.

 

MAKING THE (ECONOMIC) CASE FOR CARRIER BILLING

Bango estimates that Google Play in particular brings in somewhere between $15 billion and $20 billion a year, with carrier billing representing roughly $2 billion to $4 billion of that.

That’s a significant chunk.

“The growth of carrier billing is growing faster than credit cards because it’s obviously taking players like Google Play into some of the newer markets,” Anderson said.

Carrier billing economics work in concept very similarly to the credit card world, with the carrier taking a chunk of what’s left over after developers get their cut. The carrier is on the hook for covering the costs of collecting the money, dealing with customer care issues and any bad debt before passing the rest to back to an app store, like Google Play. Google gives a small share to Bango for enabling the transaction.

“In some ways, carrier billing can be cheaper than credit cards because there are no fixed costs,” he explained, but depending on how large the transaction is, the opposite could be true.

As mobile devices continue to become a part of the human experience that consumers just can’t live without, the carrier billing model may have its staying powers. Because, as Webster pointed out, consumers will likely always want to make sure their phones are working by making sure their monthly bill is paid.

Though the profile of users tends to differ depending on the market and consumer access to financial services, Anderson said the unifying factor is that they are making a decision to bypass other payment options and instead spend with the intention of putting those charges on their carrier bill.

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