This week, Fortumo will be headed to the NOAH Conference in Berlin. If you are attending the event, get in touch and let’s set up a meeting.

NOAH is an event focused on digital growth. Telco partnerships are one way to achieve this growth. Companies from both traditional sectors such as transportation, classifieds and publishing, but also newer sectors such as or game development, streaming and social networking are using these partnerships to drive user acquisition, payments and loyalty.

If you’re interested in learning how Fortumo can help you with these goals, reach out and let’s find a time to chat in Berlin.

Nowadays, mobile phones are the lifeline of our society. Having a constant connection and access to different services has already revolutionized many fields and service delivery processes. The public transportation sector is not an exception - mobile solutions offer a single channel for transport providers to connect with their customers.

This promises to change the overall travelling experience. Travellers could access real-time information, maps, timetables, share opinions and pay for their trips, but it also changes the way of how providers manage their resources. Uncomfortable systems alienate customers and neither the companies or our growing cities can afford that.

This white paper focuses on the transportation sector and their challenge of matching the users’ actual needs. Be it scooter/bike rental, taxi, carshare, metro, train, bus or even highway tolls - they’re all part of a larger transportation system that functions as a whole.

We explain how telco partnerships are an organic match for all transportation providers. It helps build seamless payment solutions and generate growth in both the number of customers and revenue.

We also refer to our case study with EasyPark, who is able to offer an easily accessible payment method to more drivers, as well as expand into new countries with no additional development.

Download the white paper immediately by filling out the form below.

Other than Uber’s IPO, Google’s I/O and Apple’s WWDC, what else took place over the past month? For one thing, we published our latest market report profiling carrier billing in Latin America. For everything else, check out the summary below.

General mobile

• App Annie: Mobile Hit New Milestones in Q1 2019

• CNN: Google may just have killed Huawei's bid to become the world's top smartphone brand

• The Edge Markets: Axiata and Telenor in talks to merge Asian operations

Payments

• Mobile World Live: Amazon makes India P2P payment play

• Medianama: $350 million of Mastercard's $1 billion investment in India will be for local payments processing centre

• TechCrunch: Google to allow users to pay for Android apps using cash

Digital publishing

• Monday Note: Dear Publishers, if you want my subscription dollars (or euros), here is what I expect…

• What’s New In Publishing: “300% increase in new digital subscribers”: WIRED’s Nicholas Thompson on lessons from a year behind a paywall

• What’s New In Publishing: Micropayments can unlock “an entire economy” between ads and subscriptions

E-commerce

• India Retailing: How Paytm killed its e-commerce dream in India

• TechCrunch: Uber begins trialing e-bikes and bicycles rides in India

• TechCrunch: Amazon leads $575M investment in Deliveroo

OTT

• The Drum: All roads lead to the media and entertainment industry in India

• Telecom TV: Could local streaming services be a valuable niche for telcos?

Gaming

• TechCrunch: Tencent’s new alternative to PUBG is already topping the revenue chart

Fortumo frequently engages with approximately 60 industry analysts who research payments, carrier billing and innovation in the digital ecosystem. We share our insights and data with them, and they give the same back. Last week, we ran a short survey among our contacts, asking them about the future of bundling.

30 of them had time to get back to us and here are the results.

What digital segments have the most potential for telco bundle partnerships?

Music and video streaming services are today the most widely bundled products with telcos. But thinking ahead a couple of years, this segment will reach a saturation point. The majority of subscribers will either have activated their streaming offers, or the content proposition has not been valuable to them. So where should telcos look next? We gave analysts the following options to consider for the future of bundling:

• None, people are only interested in streaming

• Games (e.g. free games or in-game content)

• Newspapers, magazines & e-books (e.g. free subscriptions)

• Microfinance (e.g. discounted insurance)

• Transportation (e.g. free taxi rides or bus passes)

• Social networks (e.g. free sticker packs or premium dating services)

• Software (e.g. word processing, anti-viruses or cloud hosting services)

None of the analysts surveyed thought streaming would remain the only category of bundled content for telcos. Among the other segments, here’s how the breakdown looked like:

The dominance of gaming (26 respondents) is no surprise, as an estimated 2.4 billion people (32% of the global population) will be playing games this year, thanks to mobile gaming becoming widely accessible due to cheap mobile data and smartphones.

But what’s the potential in other segments? Here’s how we see the collaboration with telcos could happen, ranked from biggest to lowest potential:

• Microfinance (19): in case of microfinance, the best match is in insurance services (which are essentially a subscription service); among others, insurance could be bundled for the phone itself, other personal assets and healthcare
• Transportation (14): telcos can seek out partnerships with public transportation companies for free monthly passes to metro, bus and train rides; there is also the opportunity of working with ridesharing companies to offer free ride credits to users
• Newspapers (13): digital publications are quite similar to streaming services in terms of how they are consumed; audiovisual content produced by publishers (audiobooks, video and audio news stories) also supports telcos’ goal of increasing mobile data usage
• Social networks (9): the main opportunity would be to hand out free sticker packs and subscription access on networks where it’s available; zero-rating data for networks where (video) calls are supported can be another direction
• Software (6): based on the number of analyst responses, this segment doesn’t look to be too exciting; however, productivity tools (such as office software, anti-viruses and cloud hosting software) could be considered by telcos for their corporate customers

Telcos’ approach to bundling needs to be scalable

In the next few years, telcos will likely see the need and opportunity to bring aboard additional digital content segments. We don’t know what the next big category for bundling will be. But the first-mover advantage will be for telcos who have built their bundling infrastructure in a flexible manner, accounting for needs of many different digital segments.

Our own Trident Bundling Platform is also built this way: it doesn’t matter what kind of digital content is bundled and whether it’s for telco-merchant or merchant-merchant partnerships. Get in touch if you want to find out more about how we can support you in getting bundle partnerships off the ground.

• Merchants should stick to their existing business model

• However, payment methods and strategy need to change

• Reduce your subscription pricing and duration

• Implement grace periods to give users a chance to pay again

• Payment retry support by telcos increases revenue by 10%+

• Simple, clear audit processes help telcos keep the market clean

When it comes to payments, there’s two ways to monetize online content: subscriptions and one-time payments. Which one should you pick, and which should be recommended for carrier billing?

The answer is that it depends. When we look at the gaming industry, most casual mobile games have adopted a freemium strategy with revenue coming from in-app purchases. On the other hand, Microsoft (Xbox Game Pass) and Fortnite (Season Battle Pass) have been extremely successful with the subscription model. More recently, Google adopted the subscription model for its Stadia platform as well.

The situation is similar with non-gaming apps. In Indonesia, the ten highest grossing non-gaming apps are about equally split in their business model:

• One-off payments, 4 apps: Line, Line Webtoon, Bigo, Neobazar Webcomics

• Recurring payments, 6 apps: Smule, Google One, Tinder, Viu, Starmaker, JOOX

Merchants should pick the payment model that feel works best for their service in order to maximize user life-time value. So what has South-East Asia have to do with this? Simply put, digital content revenue models don’t work the same in the fastest growing internet market of the world as they do in France or the UK.

Firstly, traditional payment methods are not widely available as less than 10% people have access to credit cards. This requires merchants to adopt local payment methods, including carrier billing.

Secondly, consumer income is lower, meaning services priced at an acceptable level for high-income markets may not be attractive to the local audience.

Thirdly, subscription-based businesses face the challenge of converting people into paying users. This is due to a combination of lack of access to online payments, lower income and expectation of free content. Giving away too much content for free or offering unlimited free trials can lead to less than impressive results.

As carrier billing is a necessity to convert the local audience, here are a few recommendations on what to keep in mind with the payment method in South-East Asia.

Merchants: localize, localize, localize

The majority of mobile users globally are prepaid. In Indonesia, 98% of consumers use a prepaid SIM card. For the merchant, this means the majority of the user base of prepaid consumers has a limited amount of money available on their SIM card to make payments. Below we have put side by side information from telcos on what the average balance of a prepaid user is, and brought out the median transaction size in the country from our Asia market report:

• India: avg. SIM card balance $0.7; avg. transaction size $0.6

• Indonesia $2.1 / $0.6

• Malaysia: $8.1 / $2.2

• Pakistan: $2 / $1.1

• Philippines: $2 / $1.3

• Thailand: $5.1 / $3.3

• Vietnam: $2.6 / $0.6

Some users will of course have a significantly higher balance on their accounts, but for the majority, a price of say $9.99/month is far too much. How to get around it?

The most effective approach for subscription businesses is to modify how they collect money from consumers. In Western markets where credit cards are used, $9.99/month is a reasonable offer. For South-East Asia, the amount collected needs to be smaller. This means the duration of the subscription needs to be shorter as well. Merchants including Netflix and Spotify have adopted this approach.

The second approach to consider is implementing grace periods. This means that when a consumer’s recurring payment fails, they are not immediately churned out. Instead, they are notified of the incident (either via e-mail or SMS) and asked to ensure they have the money on their account. After a certain time period, the charge is attempted again. Involuntary churn can be reduced this way for prepaid SIM card users who may have simply forgotten to top up their account.

Telcos: develop new features and review your merchants

What about telcos and their ability to help digital merchants increase subscription revenue?

The goal of telcos should be to modernize their carrier billing infrastructure and support features that are on the same level with credit card solutions. A key feature that our Hosted DCB product also supports are payment retries. The grace period solution mentioned earlier for merchants only works if failed recurring charges can be attempted again in the future. How effective is it? We looked at the numbers recently for telcos who have implemented it: retries lead to 12% growth in revenue.

Telcos also have the responsibility of keeping the market clean. Subscription payments are an attractive target for fraudsters, especially if the consumer is not informed of the charges happening, or it is difficult for them to unsubscribe from a service. In the US and Australia telcos have been fined for lax oversight. To avoid this, our recommendation is to put in place simple, but clear audit processes which ensures only legitimate merchants can launch subscription payments.

Summary

There is no one-size-fits-all business model for selling digital content. But the booming mobile population in South-East Asia gives telcos and merchants an opportunity to grow their user base and revenue. However, to make subscriptions a success in the region, both sides need to take extra steps to optimize their platforms.

If you’re interested in learning how Fortumo can help you process both one-time payments and subscriptions with help from our Subscription Engine (which takes care of user management, renewals and notifications), contact us.