As the race for dominance in the mobile payments sector heats up, Paul Paterson, Commercial Director at ImpulsePay examines what one solution, Charge to Mobile (or direct carrier billing), means in 2015.
Every year is predicted to be the year of mobile something, but 2015 may genuinely be the year of mobile payments. Many in the industry expect that there will be a major shift this year, from current favoured online payment methods like credit cards and PayPal, to a broader set of online and mobile payment options.
According to Techcrunch, it has been estimated that by 2017, financial transactions through mobile payments will reach £1 trillion. With 93% of adults in the UK using a mobile phone (and 60% of those owning a smartphone) that means we have a large market in the UK to tap into that boom in transactions.
How do we buy?
If there is this much activity happening through mobile phones, then it is clear that smartphones will begin to replace the wallet. But for this to happen there is a substantial need for reliable and resilient services. To take full advantage of this shift in consumer behaviour merchants and e-commerce businesses will need to move quickly to introduce new options that allow their customers to buy directly from their phone.
These predictions have led to many of the big players moving into this space, or possibly the movement has led to the predictions, with the likes of Apple (Apple Pay) and Facebook, joining existing heavyweights such as Google Wallet and PayPal in trying to encourage the UK consumer market to adapt their purchasing habits. But amongst the noise of the giants, little is being said about an existing alternative - direct carrier billing, or Charge to Mobile - which already has the largest share of potential users for mobile payments.
Charge to Mobile is when a customer makes a purchase via their phone, in a quick transaction without entering their credit card data, and the costs of those goods are charged to the customers’ mobile phone account, or taken from the available credit if they are on a pay as you go tariff. With over 85 million active mobile subscriptions in the UK alone, Charge to Mobile already has the largest share of users than any other mobile payment option in the UK. For example, when compared to the 58 million credit cards in circulation in the UK in early 2014, of which only 66% were active, a Charge to Mobile option at check out has the potential to reach an additional 37% of UK adults.
What to buy
Typically content bought through Charge to Mobile is ‘digital’ content, with predictions showing that digital content purchases will reach $60 billion by the end of 2015, with 22% of this charged through direct carrier billing. Part of this growth is down to the fact that the Charge to Mobile sector has been working hard to loosen restrictions on what can be bought, as well as reducing the charges placed on the merchant.
Premium SMS, the technology that became popular in the early 2000s and allowed consumers to purchase ringtones or wallpapers for their phones, was the original carrier billing technology. However both the technology and regulation have improved in recent years and the new level of consumer security, combined with two click payments, has resulted in increased popularity and a greater range of content available.
The limits of what can be bought using Charge to Mobile are also expanding. An expected relaxing of the restrictions placed by the Payment Services Directive (PSD) will soon see it become possible to sell non-digital goods, such as tickets and magazine subscriptions via Charge to Mobile.
While when it comes to rates, the goal for Charge to Mobile has always been to bring the rates down enough in order to compete head to head with credit cards as a payment method. A great deal of effort work has been done by the Charge to Mobile providers and the network operators and as a result new transaction fees of only 9.9% were introduced last year, alongside simpler payment flows.
This means that fees for mobile payments are now comparable to the fees charged for credit card or PayPal transactions and have moved a long way from the 30% transaction fee charged by app stores.
By allowing customers to pay for goods using their mobile phone number, suddenly many new potential purchasers are available for merchants, including under 18s or the hundreds of thousands of people that lack a bank account, who are otherwise excluded from the alternative services. And in countries such as India, where mobile penetration is high, but hundreds of millions of people lack credit cards or bank accounts, direct carrier billing has enormous potential as a way to enable even more people than alternative options to make purchases on mobile devices.
Simpler payment flows mean that direct to carrier billing is 7.5 times quicker than using a credit card, and in some cases just a two-click payment, so for customers a Charge to Mobile option at check out is even simpler – meaning that even for people with access to other payment methods Charge to Mobile is often more convenient and less likely to result in basket abandonment. And all this with a simple, uncomplicated and quick to integrate system for merchants.
With every UK mobile owner having access to Charge to Mobile billing, without them having to download an app or sign up for a special account, it truly is the biggest player in the mobile payments sector – yet the one to have the least written about it so far.
2015 may well be the year of the mobile payment and if it is, you will certainly have heard of Charge to Mobile by the end of the year.
By Paul Paterson, Commercial Director, ImpulsePay