Among the critical assets of the mobile network operator is its network and its billing relationship with the end-user. As its direct role as a content retailer has diminished, DCB (Direct Carrier Billing) offers an alternative revenue stream according to Juniper Research.
The convenience of combining monthly subscription costs into a user’s monthly cellular subscription will be a crucial growth driver for carrier billing over the next five years. Carrier billing vendors should focus on expanding their partnerships with digital service providers; enabling consumers to pay via carrier billing, capitalising on the growing trend of monetisation via subscription.
While carrier billing spend on physical goods is established in the Far East, the research has identified emerging opportunities for carrier billing vendors in North America. Juniper Research believes that high smartphone penetration and accessibility of same-day delivery services will be fundamental driving forces behind a growth to $600 billion of end-user spend on physical goods over carrier billing by 2025.
However, Juniper Research warns that vendors will need to re-evaluate their monetisation models to compete with established payment methods, such as credit card and digital wallets. To make carrier billing a more appealing payment method, it urges these players to reduce their charge rates and align themselves with established payment methods.
The Carrier Billing Market Today
The market is dominated by half a dozen leading players, which together accounted for over 40% of transactions by value worldwide. Two of these players, DOCOMO Digital and Boku, had nearly $5 billion or more in transactions in 2019, while a further four (Bango, Centili, DIMOCO and Fortumo), processed between $480 million and $1.4 billion.
Juniper Research estimates that in 2019, the total end-user spend via carrier billing was approximately $33 billion worldwide, up by around 35% year-on-year. Juniper Research’s estimations are shown below in Figure 1.
While DCB is primarily used through smartphones, once set up it can also be used through other devices. Having set up a simple payment channel, users then make use of it through tablets, laptops, and smart TVs.
Both Google and Apple have continued to increase the number of markets in which they offer carrier billing over recent years. Google Play now offers the payment option across much of Asia (including major markets such as India, Indonesia, Japan, Philippines, Thailand and Vietnam) and the Middle East, as well as Europe and North America; Apple is moving DCB into its Asian and Middle Eastern markets.
Over the past two years, Microsoft has continued its move in the opposite direction. Instead of providing direct billing as a payment option where others are not available, it has withdrawn from markets such as India, Indonesia,and the Philippines. It now only offers the mechanism in 26 countries, most of them in Europe and all with high consumer spend levels. While emerging markets provide an opportunity for substantial expansion, they also bring risks such as bad debt amongst users which Microsoft may be trying to avoid.
Total spend over direct carrier billing will reach $100 billion for the first time by 2025; rising from $37 billion in 2020. The increasing shift to subscription-based monetisation models for digital services such as games, video streaming and music, will be vital to the market realising a substantial growth rate of 172% over the next five years, shown below in Figure 3.
Removing friction from the purchasing experience increases conversion rates and so supports both customer acquisition and customer retention. DCB reduces the need to input information; potentially reducing the process down to two taps on the screen.
It is not just the payment process that makes purchasing easier with DCB; it is also delivery. For electronic subscription services, such as video streaming and accessing newspapers’ websites, the merchant can immediately know that the device is connected to the paid account; granting instant access.
Related article: Direct carrier billing will see huge boost in the next year or two