Credit card & bank-based payments are the primary method of collecting payments for digital content in Western markets. However, the majority of people consuming digital content do not live in Western markets. In Indonesia, there are 255 million mobile phone owners while only 4 million people own a credit card. The situation is similar across all emerging regions of the world: Asia, Central & Eastern Europe, Latin America, Middle East & North Africa.
This creates a problem for digital content merchants. While the majority of mobile users are able to access your content, they are unable to pay for premium services. This is where carrier billing and digital wallets can help. But how?
Since credit cards are often the only payment option offered by digital content merchants on checkout, many people are unable to pay for content. Globally, only 18% of people own a credit card while 40% own a smartphone.
This means carrier billing and digital wallets are critical for the continued growth of digital content merchants. Local payment methods bring new paying users to merchants, without displacing credit card payments.
SuperData research shows that for digital gaming transactions, card-based payments are used for 30% of transactions, while carrier billing and digital wallets have a combined market share of 46%. Merchants who provide local payment options to their users are able to access new customer segments who are unable or unwilling to pay with credit cards.
Credit cards require merchants to collect a lot of information from users before processing their payment: their credit card number, security code, expiration date, name, address, ZIP code, email address. Every additional form field that needs to be filled out during the checkout process leads to some users dropping out of the checkout flow.
Carrier billing and digital wallets have a short checkout flow. Because the mobile operator or digital wallet provider already know all the required information to process the payment, transactions only require the user’s phone number and on-device confirmation to process the payment.
As a result, instead of filling out many form fields, users can complete transactions in only a few clicks. This results in more users entering the checkout flow and more users completing their payment successfully. In a recent report from the UK carrier billing authority, 50% of people said they use carrier billing because it is convenient. Convenience for users leads to increased conversion and more revenue.
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 and digital wallets require 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 and digital wallets are much lower than with bank-based payments.
Since personal data is also not collected during the checkout process, users have less fear of identity theft, making them more confident in completing the transaction, especially when they are a new user and paying for the first time.
If you have any further questions about carrier billing or digital wallets, please contact us.