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It was invented as a way for people to buy things like ringtones and wallpapers via text message before mobile phones could effectively connect to the internet.
In recent years, though, carrier billing technology has become more and more sophisticated and is often the preferred method of payment for app developers who are trying to monetize content.
And despite flying under the radar of most tech media, there is a huge amount of activity in the space. For example, in the last month, three Canadian telecoms partnered with Bango to offer carrier billing on the Google Play store, British telecom O2 also announced that its subscribers could use carrier billing to pay for content on Google Play, and Boku announced a partnership to bring carrier billing to the Playstation 4 in Canada, Germany, the U.K. and the U.S., with charges made on the video game console confirmed via text.
In a recent 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:
- Carrier billing is known for its prominence in emerging markets, but 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 and 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.
- We estimate that carrier billing will power $4 billion in mobile transactions in 2014, or 13% 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.