The launch of Apple Pay has put mobile payments firmly on the agenda: now there isn’t a person in the land who isn’t aware that you can use your mobile phone to pay for things.
But mobile payments has been with us for many years and has been working away for some businesses without much fuss or bother. Carrier billing – where the phone is used to put the charge for what the customer is buying onto their phone bill or takes it out of their credit – has powered all manner of services since the inception of the mobile phone.
Quietly in the background, carrier billing has started to gain traction in sectors such as gaming and we have already seen how it can be used around the likes TV voting and competitions.
But with all this Apple-inspired attention now on the convenience factor offered by mobile payments its time merchants in all sorts of sectors to start to look seriously at carrier billing as a way to tap into this need.
Misconceptions
There are some common misconceptions about mobile payments in general and carrier billing in particular. First of all, mobile payments aren’t – at least in the medium term – going to replace anything. More it is going to augment current payment systems. Apple Pay, for instance, is largely capped at £20 (rising to £30 later this year) and requires a card to be tied to the service. It isn’t going to be used to do your weekly supermarket shop any time soon.
Secondly, mobile payments don’t cannibalise all other payment channels - they just spread that spend across new ways to pay. Instead, it is likely to generate more business as ever increasing ease of payment makes it ever more likely that people will hit pay. It brings down the barriers.
Charities, for example, have been using carrier billing since 1999 and have created a £100 million donation channel offering an impulsive, frictionless donations mechanic. Initially charities baulked at carrier billing (usually set at £5 - £10 per donation) fearing that it would totally erode the £30+ online and phone donations that are the sector’s lifeblood through credit card.
Instead, it sees many more people donate, because it is easy.
Carrier billing ticks all these boxes. It is simple to use and pretty much frictionless and again plays into this convenience factor. It also, unlike many other mobile payment tools, works on all mobile phones.
The idea that carrier billing is too expensive – certainly compared with credit card and even PayPal – is also somewhat unfounded. The prevailing view in many sectors is that it costs up to 50% of the transaction in fees – this is no longer the case. Carrier billing is now competiting alongside credit card and PayPal as a viable alternative.
The cost factor is an interesting one. On paper it looks to cost more, however, the advantages it delivers actually make the added cost well worth paying. Typically, because it is so convenient and works on any phone – so connects anyone with a mobile phone to m-payments – it dramatically increases the reach and volume you have with getting people to pay.
It is entirely frictionless, requiring nothing more than a click to pay, so it ups the number of people who actually buy and don’t drop out at the check out stage – the biggest pain point in the online payment process.
Customer acquisition and mobile marketing
Also, a large number of merchants using Carrier Billing do so as an acquisition technique, getting users to purchase frictionlessly and then offering them a chance to migrate to credit card as a softer sell.
But there is one major factor with carrier billing which is often overlooked and which should really be its main selling point: messaging. Because carrier billing needs a phone number merchants not only have a simple way to let people pay, but they can talk to them using SMS.
Text messages have a 90 per cent open rate - using the channel to send receipts at the very least, which can contain a message, opens a customer dialogue. And that is just the beginning of the mobile marketing opportunity.
Again, charities have shown that this works. When someone donates they get a text back thanking them and pointing them to a website to pledge the tax too to the charity. This works with over 35 per cent of donators doing so.
So where could carrier billing be put into action today?
Well, as stated, it’s not going to replace anything, rather it is the best way to get people paying who wouldn’t usually. And the best payment level for this to work is in the sub-£10 space where convenience is key – the types of purchase where getting a card out is a barrier.
Typically these are pay-as-you-go purchases: car parking and ticketing are key areas of growth, as is any sort of top up. Already topping up phones can be done using carrier billing, but there is no reason why it can’t be used to top up an electricity card or other payment card for example.
Then there are the ‘new’ opportunities that the Uber generation are ushering in. The idea of pay-as-you-go gyms are gaining momentum and are an ideal market for this quick and easy payment tool.
With so much attention focused on mobile payments – given PayPal going it alone and Apple Pay now out there – any merchant should be looking at mobile payments. And as part of that, many need to look at how to add carrier billing to the mix: it works and offers a way to not only charge people, but to engage them. Can you afford not to use it?
By Rob Weisz, CEO of fonix.
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