Carriers, payment integrators and merchants from around the world met up in London last week at the Global Carrier Billing Summit to share their progress and provide updates. The event was well attended by all stakeholders who openly discussed a wide range of topics, highlighting on-going challenges and the need for the sector to come together and implement workable solutions.
Over the two-day event, we identified the following trends:
1. Sector Growth
The opening day of the conference coincided with the release of the All Market Review, a comprehensive study published by the UK regulator (The PSA) on consumer trends and market growth. The report’s author, Nick Lane from Mobile Squared shared highlights:
- The UK DCB sector grew 19% to £220.4m from FY17 to FY18 and is forecast to grow 26% from FY18 to FY19
- There were 23.5m users of DCB in FY18 with charity donations the most accessed category with 6.5m users generating £37.5m in revenue. Games being the largest category, generating £97.1m revenue
- Customer satisfaction grew from 55% in FY17 to 65% in FY18 with music and books achieving 80% and 79% customer satisfaction respectively
The significant improvements in customer trust and customer satisfaction are great indicators of a maturing sector that is improving the range of services available and educating customers about DCB, which should be celebrated.
Unfortunately, increased adoption by customers in DCB is not driving cut through and adoption in key categories. For example, DCB accounted for just 0.004% of the UK Charitable Donations and 0.03% of the UK Computer Games Market and 0.03% of the UK Digital Entertainment Market (Video and Music) in 2017.
As a payment option, we must gain traction in these sectors as App Stores are not going to fuel sector growth forever, a fact confirmed by Martin Shurig from Telefonica Germany who reported a plateauing of revenue growth now all major app stores are live.
2. Role of Technical Integrators
The role of the Technical Integrator/Aggregator continues to blur with the introduction of API layers at the mobile carriers and the development of group hubs providing increased direct access to merchants. However, both Graeme Riddell (Microsoft) and Richard Wheeler (Google) were emphatic that they prefer to go via an intermediary than a direct connection as this delivers greatly improved revenue performance.
Ray Anderson (Bango) spoke about how they had started to leverage historical transaction data to create deeper insights within Bango Boost to increase App Store APRU. Nick Walters (Hopster) tackled the issue from a merchant perspective by challenging the sector to think broader than just payments and leverage their assets to support the distribution and adoption of OTT services, which could overcome the lower revenue shares of DCB.
No longer is it about how many carriers you can access, but how well they perform.
3. Market Evolution
Jon Prideaux (Boku) stated that the industry as a whole would soon realise that the DCB sector actually revolves around the merchants (and not the carriers) and likened this change to a Copernican Revolution. This thesis is not to diminish the role of the carriers who, as detailed by Peter Garside (EE), have a considerable investment to make to continue to support DCB. Instead it acknowledges the role merchants are playing in developing more sophisticated API functionality within the carriers and, as detailed above, the fundamental need for a DCB proposition that is optimised for merchants. As Technical Integrators we must ensure that these developments become part of the standard DCB offering and are not just kept for the likes of Google and Netflix.
4. Friendly or Family Fraud
An issue that impacts all stakeholders has been defined and innovative solutions are starting to appear to help combat the problem. Friendly or Family fraud is where the fraud is committed by the end user. For example, claiming that they have not purchased the product or that it was purchased without their consent by a family member. Dheeraj Soni introduced Docomo Digital’s new AI driven proposition to monitor customer’s behaviour in order to inform the merchant at the point of transaction about the likelihood of fraud and bad debt, which it is claimed could reduce losses by 50% to circa 2%.
This is an important issue that can undermine the DCB proposition for new merchants who are concerned about revenue leakage as well as the apparent poor levels of customer experience. For carriers this is problematic from both a financial and reputational perspective.
5. The need to learn lessons from the wider Payments Sector
Infomedia’s CEO, Michael Tomlins, closed the conference by presenting on the need to learn lessons from the success stories from the payment sector. Innovation from commercial enterprises within the payments sector have changed consumer behaviour, triggering inflexion points in usage. For example, the introduction of NFC technology into debit cards enabled the contactless revolution, growing the number of debit card transactions in the UK from 4.8bn in 2006 to 13bn in 2018, recently overtaking cash. Through the adoption of QR codes, WeChat (Tencent) and Alibaba’s developments with mobile payments in China have created a $9trn payment method in just 7 years.
The DCB sector continues to mature with the adoption of the payment solution by companies like Google, Apple and Microsoft accelerating this process. Tomlins concluded, that the sector must leverage the halo effect of these digital giants to cross the chasm to the Early Majority, delivering a simplified proposition for merchants that enables the easy deployment of DCB globally. To achieve this objective, key stakeholders must work closer together for the benefit of the sector, with a focus on innovation that makes DCB more accessible to new merchants and continue to educate consumers about DCB.
UK Video Games Fact Sheet (ukie 2018)
CAF UK Giving 2018 – An overview of charitable giving in the UK 2018