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What’s the Future for Direct Carrier Billing?

What’s the Future for Direct Carrier Billing?

January 1, 2014
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" The biggest advantage of direct carrier billing is simplicity of the payment flow. -Yarka Svalekova, First Mobile Cash  "

As hard as it is to fathom given the relatively short time the mobile phone market has existed, across the globe there are more people with mobile phone accounts than people with bank accounts and credit card accounts combined.

The gulf in market penetration between mobile and bank/credit accounts is most pronounced in emerging economies and developing countries, where it’s not uncommon to see a market penetration of under 30 percent for what industry analysts call “banked adults” (bank and credit card account holders) compared to rates upward of 90 percent for mobile accounts.

The potential implications of these numbers are staggering for the online adult industry, especially within the U.S. market, which has been decidedly credit card-focused throughout its history. Among other things, it’s yet more evidence that mobile is not “the future” of ecommerce, but very much the now of ecommerce.

On the billing front, however, mobile remains a frustrating mistress for the American sector of the adult entertainment business, and for adult businesses anywhere that want to provide mobile-friendly billing options to their American customers.

Take direct carrier billing, for example, the method that allows mobile customers to charge the cost of digital goods they purchase to their mobile phone bill. Wildly popular in some sectors for its convenience-driven performance (according to Juniper Research, direct carrier billing produces conversion rates five times higher than credit cards in app stores and other markets that sell digital goods), direct carrier billing remains only selectively available to adult merchants internationally, and essentially entirely unavailable to American consumers as means to purchase online adult entertainment.

“The biggest advantage of direct carrier billing is simplicity of the payment flow,” Yarka Svalekova, vice president of business development for First Mobile Cash told XBIZ. “It offers a frictionless payment experience — exceptionally important on a device with a short attention span such as mobile — thus naturally generating the highest conversion rates. Although this billing option is greatly successful in many geos, it is not adaptable globally due to stringent carrier regulations related to adult content.”

With the limitations imposed by strict and varying regulations, the current bottom line on DCB for the adult industry is that it’s great when and where it is allowed to work, and basically a non-factor everywhere else. This is unfortunate and significant for many reasons, not the least of which is that direct carrier billing is overtaking other mobile billing methods as the consumer option of choice in many markets.

“Until recently, premium rate SMS had been the main way to pay for mobile content, but it is quickly losing market share to carrier billing due to a number of disadvantages related to ease of use and fluidity of the payment process,” Svalekova said.

Daniela Ganick, senior sales manager for iTeleBill, noted that direct carrier billing transactions also are relatively anonymous in terms of identifying the user to the merchant, but that the central advantage to direct carrier billing comes back again to the market penetration.

“The main advantage to mobile payments is that they are anonymous (which, especially in the adult space, is preferred by many users) and accessible to literally everyone with a cell phone,” Ganick said. “In countries where the credit card/debit card penetration is very low, it is necessary to have an alternative payment method, and phone payments immediately give 100 percent of visitors to the site a way to sign up and pay for a premium service.”

Svalekova noted that despite its many advantages and popularity among mobile consumers, direct carrier billing has its downsides, too.

“From a merchant standpoint, what makes it weak are multiple transaction fees, lack of flexibility with price points, and a high revenue share cut by mobile operators,” Svalekova said. “Additionally, it is not ideal yet for converting Wi-Fi traffic. But as consumers and merchants start to further recognize the convenience, safety and efficiency of carrier billing, we will see a significant increase in its global adoption.”

As for whether direct carrier billing will ever be permitted as a billing option for adult merchants in the U.S., Svalekova said that while the current facts on the ground don’t provide much reason for optimism, if the carriers were to decide there was sufficient money to be made, their policies could change.

“It all depends on factors such as government and FTC regulations and applicable consumer protection requirements, as well as long-term strategies of mobile carriers,” Svalekova said. “As carrier billing will eventually become an unavoidable source of revenue for mobile carriers, there might be some considerations or actions to allow monetization of higher risk verticals such as adult entertainment via carrier billing.”


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