There’s no doubt that credit cards and digital wallets are today the primary method of collecting payments for digital content. However, a growing amount of people (young audiences and underbanked in emerging markets) do not have access to these payment methods. This means users want and merchants need to implement alternative payment methods, including carrier billing.
What are the main differences between card-based payments and carrier billing that should make it relevant for you and your customers?
Yes, 25x more. In the emerging markets of Latin America, Central & Eastern Europe, Middle East, Africa and Asia, credit card ownership is usually in the low single digits (2-5%). At the same time, almost everyone has a mobile phone and more than 50% of these phones are smartphones by today.
This creates a huge gap between users who are able to access digital content from their mobile devices, but are unable to pay for it. Carrier billing resolves the problem by making online payments available to any phone owner, both prepaid and postpaid.
On the other hand, in Western markets most people also have a credit card. So why should they use carrier billing? Read on.
In the United States, 6.5% credit card owners fall victim to identity theft each year. In these cases, consumers can dispute payments and demand their money back. This is a risk for the merchant as it puts them at risk of having their account closed.
Chargebacks can also be costly as the fees for each chargeback can be above 20%. There is also a chance that after identity theft users request chargebacks even for purchases which were made prior to the identity theft, resulting loss in revenues for services that were purchased legitimately.
Carrier billing requires users to physically confirm the payment on their device and simply having their phone number is not sufficient to commit fraud. As a result, fraud rates with carrier billing are much lower than with bank-based payments. Refunds issued by Fortumo (a comparable statistic to chargebacks) are thus much lower: 0.02% of all transactions.
Having credit card details and personal information stolen is a serious and increasing concern for consumers. This means users can cancel their payment if they see that you are requesting this data from them. With carrier billing, only the user’s phone number (and access to the device) is required, which means they have less to worry about.
Bad debt means that a customer purchases something with a credit card or carrier billing and does not pay the money owed. Depending on the month in 60% to 70% of the markets where Fortumo operates, bad debt does not occur at all. In countries where it does happen, the bad debt rate is usually below 1% of the total transaction volume.
In case of prepaid SIM card users, money is loaded to the mobile account in advance, which means bad debt can not happen (think of it as a prepaid gift card, only available to everyone).
In comparison, 7% of credit card users in the US have a balance overdue for more than 90 days and 3% of debts are completely written off by banks.
Fortumo works with a transparent flat revenue logic: out of each transaction, the mobile operator pays a certain amount to us. We take our fee for providing you with the platform, mobile operator integrations, operational support and fraud management, pay the taxes on your behalf and pay your share out to you. We do not need to hide costs because we do not have hidden costs: chargeback fees etc. are not relevant with carrier billing.
If you have any further questions about carrier billing, do not hesitate to reach out to us at firstname.lastname@example.org.