March 17, 2020
One of FinTech’s noblest goals has always been empowering underserved communities to access the financial services most of us take for granted. An estimated 1.7 billion adults in the world remain without basic access to financial services and billions are still underserved. Against this backdrop, FinTech players continue to come up with different innovative ways to reach this segment of the population. Many of these solutions leverage the comparatively higher smartphone penetration rates to provide access to the underserved. But while smartphones and telecom penetration in combination with the right technology solutions can enable them to access crucial financial services, why stop there?
In today’s world, digital services, despite being largely characterized as leisure activities, still contribute significantly to our quality of life. They shouldn’t be a privilege. These underserved communities deserve the right to enjoy them as well. But once again, their access is hindered by their unbanked status, as many of the benefits of these services can only be unlocked for a fee and specific payment method. Before the introduction of smartphones, the concept of carrier billing was limited to the purchase of ringtones and wallpapers. It has since evolved and reached a phase that allows users to purchase digital content such as apps and tokens in a smooth and user-friendly manner.
Fortunately, the increasing use of direct carrier billing—sometimes known as carrier billings solutions—means that more of the unbanked are now able to access these paid digital services.
Carrier billing capabilities allow users to pay for digital services, e.g., Netflix, Google Play, and Amazon Prime, via the same channels as their mobile phone bills. This means that the underserved, most of whom use prepaid payments topped up through cash, can now pay for such digital services while still being underbanked.
This greatly expands the reach of these digital service providers. In the current age of increasingly globalized internet commerce, these consumers want to participate in the ecosystem, and carrier billing allows them to do so. Both the consumers and the digital service providers benefit, as do the mobile carriers, who receive a percentage fee in exchange for permitting this payment channel.
Enabling the scalable adoption of such carrier billing capabilities are the solution providers. These direct carrier billing solutions providers act as a digital intermediary between the mobile carriers and digital service providers. They handle all the backend integration work between both parties and take responsibility for the carrier payment service uptime. Essentially, they are a scalable ‘hands-off’ solution for both the mobile carriers and digital service providers.
These carrier billing solutions providers play an essential role in the ecosystem. This makes it imperative that detailed consideration be given to which solutions providers both the mobile carriers and the digital services providers select.
As subscription-based services and e-commerce volumes continue to grow, mobile carriers and digital services providers are increasingly aware of the benefits provided by direct carrier billing solutions providers. This has led to more and more companies joining the fray and offering such services. But there is a big difference between those who can provide global capabilities and those whose capabilities are still lingering in the local stage.
The main benefits these solutions providers confer stem primarily from two things—convenience and scale. Providers whose capabilities are limited to the local stage cannot provide the latter, meaning these digital service providers are missing out on much of the benefits. Since many digital service providers are global, it makes sense to engage with a global provider.
Consider a global service like Netflix. By using carrier billing solutions providers with global integration capabilities, they can use a single company for multiple markets. If they use providers with only local capabilities, they will have to engage numerous companies to achieve the same effect—losing out on economies of scale and thus incurring higher costs, both from a monetary and time perspective. That’s why companies like Boku, Bango, Fortumo, and DOCOMO Digital have been growing from strength to strength.
DOCOMO Digital is a global player that has integrated over 300 mobile carriers and 200 digital service providers around the world. In 2018, over $3 billion in e-commerce volume flowed through its platform, and that number is only expected to increase. The statement “scale creates growth” stands correct in this case. One of the reasons DOCOMO Digital was able to attain such a scale in the first place was the numerous value-added services it provides, particularly to the mobile carriers. These services include bad debt management, detailed business analytics, and second-level customer support. All these have led to tangible and measurable improvements for its customers.
Take the example of one of DOCOMO Digital’s customers—Movistar, a major Spanish telco. Before coming on board, it had been implementing its own DIY carrier billing solutions with a variety of digital services providers. However, this had created a high number of billing disputes over these digital services fees as well as non-payment of bills. Its bad debt started piling up, impacting the profitability of its digital business. It decided to engage DOCOMO Digital, which implemented a customer self-care tool to maximize transparency on the part of the users, as well as a billing risk manager, which enabled Movistar to set spending caps on digital services. In conjunction, these two solutions led to a 40% reduction in bad debt, a 25% drop in billing inquiries, and a 20% increase in realized revenue.
With results like these, it is likely that the carrier billing market will only continue to grow and companies like DOCOMO Digital, Boku, Fortumo, and Bango will continue to scale up and innovate.