If Wireless Operators Can Get In On Mobile Commerce Dollars, It Could Offset Voice And SMS Losses

Wireless operators are seeing their revenues per user from voice and texting fall off, and revenues from data are not offsetting those losses. This is putting considerably more pressure on mobile carriers to find other sources of revenues.

Carrier billing is starting to look like one such possibility.

You may remember carrier billing from the days of buying ringtones via SMS on cellphones. Now new technology is updating carrier billing for the smartphone age by allowing users to buy digital goods like music, apps, e-books, and in-app purchases by adding the cost of the purchase directly to their mobile bills.

A recent report from BI Intelligence finds that carrier billing offers a smooth, low-friction way for consumers to pay for digital content like apps and tokens within apps. It's got especially big potential in countries with low credit card penetration. But that said, it faces some major hurdles, in particular the high prices currently charged by mobile operators for providing carrier billing services.

In the report, BI Intelligence explains how carrier billing works, who is using it, and whether or not it has the potential to catch on for physical goods, beyond the world of digital content.

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Here are some of the key elements from the report:

• Though it's often associated with emerging markets, carrier billing companies actually make most of their money in developed markets like North America and Europe.
• But that could change. In emerging markets like India, where mobile penetration is high, but hundreds of millions of people lack credit cards or bank accounts, carrier billing has especially big potential as a way to get more people paying for apps, music, and in-app purchases on mobile devices.
• In terms of numbers, we estimate carrier billing powers $3 billion in mobile transactions, or 12% of the global market for mobile digital content.
• Mobile operators charge fees between 25% and 40% of the total cost of purchased goods. But as carriers struggle to maintain revenue, and realize they are missing out on a big opportunity in digital goods, they are beginning to compromise on their rates in hopes that they will see a higher volume of carrier billing sales.
• The holy grail for carrier billing is to reduce rates enough so that people adopt it as a method for purchasing physical goods via e-commerce sites and apps. If this happens, as it has in South Korea, the carrier billing opportunity would be truly massive, as it would begin to compete head to head with credit cards as a payment method.

In full, the report:

• Explains the complex set of relationships between wireless carriers, app stores, platform vendors, and app developers, upon which carrier billing depends.
• Includes interviews with executives from four leading carrier billing companies on challenges they are encountering in their market and the health of the industry as a whole.
• Assesses just how big the carrier billing opportunity is, where it has the most potential for growth, and the hurdles it will have to overcome in order to expand to be a commonly used method of payment among consumers.
• Analyzes how and why carriers are beginning to lower their once-prohibitive fees for powering carrier billing transactions.