Here's our Emerging Markets Payment Index update for Q3. This report is intended to be used by digital media companies for benchmarking their revenue in markets with high smartphone growth and low credit card penetration.

The Emerging Markets Payment Index focuses on countries highlighted by GfK in its global forecast as the largest tech device growth markets. These countries are India, Nigeria, Pakistan, Vietnam, Brazil, Egypt, Indonesia and the Philippines.

These markets differ significantly from mature Western countries, where the current user base of most digital merchants is located. The main trends in the industry driven by these countries are:

• Emerging regions drive new smartphone adoption, while sales in mature markets decline
• Mobile data consumption in these regions is growing faster than in mature markets
• Service quality on mobile needs to equal desktop, as emerging regions are mobile-only
• Emerging markets have tipped web usage in favour of mobile devices

As a result, digital merchants who want to sustain their user base and revenue growth need to focus on these countries, but do so through a customized, localised approach to user acquisition, monetization and retention. The Emerging Markets Payment Index provides an overview data that merchants can use to account for of the individualities of these fastest growing mobile markets of the world.

The payment index aggregates data from all platforms (web, mobile web, feature phones, smartphones, smart TVs) and app stores connected to Fortumo’s carrier billing platform.

Should you have any questions about the report, please get in touch with us at bd@fortumo.com.

Every other article about the telco industry today speaks about the game-changing digitization and all the challenges and opportunities that come with it. However, on the positive note the telcos should probably be used to the state of certain uncertainty, because all sorts of market disruptions have been their companions from the beginning of (telco industry) time. Here are some examples of telecommunication industry disruptions that have literally come from the sky or even from the bushes. Of course we hope nothing of this sort ever happens to our partners (and all furry animals are also left unharmed).

1. Price war in India

In 2017, Reliance Industries' Jio triggered a brutal price war in Indian telecom sector, offering free data and calls to its subscribers. This has brought along a 33% fall in consumer spends and is becoming a heyday for the subscribers and a nightmare for the other telcos.

By some sources the current revenues can barely cover operational costs, sparking rumors about the other operators being on the verge of bankruptcy. It has also brought on a rapid wave of consolidation, leaving three major players on the market.

2. Hurricane Maria in Puerto Rico

In September 2017, the category 5 storm Hurricane Maria hit Puerto Rico, leaving 95% of its cell towers out of service. The situation was dragged on by electricity outages and fuel shortages.

The lack of cell service hindered the necessary logistics for helping people in need, also the people couldn’t contact their loved-ones or the outside world. 25% of the population was still without service more than a month later.

Since people are more and more reliant on mobile phones, maintaining cell service during natural disasters is becoming increasingly critical. For example, AT&T tested placing portable cell towers on drones as a temporary solution.

3. Energy crisis in Nigeria

Even though Nigeria is Africa’s largest economy and also largest oil producer, it has to import refined petroleum products due to a lack of local refineries. The country is also not able to generate sufficient amount of power.

The constant energy crises is burning a hole in the pockets of telcos, who have to power their own services with fuel generators. In 2015, telecommunications in Nigeria were almost shut down due to the fuel crisis.

4. Drug cartels’ private networks in Mexico

This mobile network might not be open to the general public, but it’s an industry nevertheless. The Mexican and US government have been engaged in a war on drugs for decades, including busts on cartels’ private mobile networks.

Over the years there have been a myriad of news about the private communications networks the gangs build and use. The authorities have broken up extensive networks that stretch 500 miles along the border and another 500 miles in Mexico’s interior.

But it seems like battling the 100 headed dragon, because the equipment is hidden in remote locations and connected to solar power. The cartels kidnap and enslave engineers to help them build and maintain those networks. Just this year a Canadian CEO was arrested for supplying extra safe encrypted phones to Mexican cartels.

5. Raccoons attack in four states of Southeast USA

Depicted raccoon was (probably) not harmed in the incident

In 2015 a massive cell phone outage hit four states of Southeast USA - parts of Kentucky, Tennessee, Alabama and Georgia were left without service. The reason was believed to be vandalism or a raccoon (or why not both - a vandalist raccoon).

As a matter of fact, big portion of different infrastructure issues are brought on by animal attacks. Squirrels have probably caused way more power outages than cyber-criminals. Even underwater is not safe - sharks nibble on transoceanic fibre cables, as they are probably attracted to the electromagnetic fields.

The role of telcos is changing: from selling telecommunications devices and services to being a channel of digital entertainment for their subscribers. This means that for customers, subscribing to Spotify or Netflix should be as simple as recharging their SIM card or buying a new phone.

Opening up almost any telco homepage gives you options to easily buy the card or phone, but not digital services. 3rd party offerings are usually kept hidden under separate “Deals & Offers” or “Entertainment” categories. Every additional step it takes for to reach the activation window means a growing number of subscribers never reaching it.

For telco digital teams, this can be frustrating. The integration is complete, the partnership is launched but subscribers are not activating the service. Furthermore, with several different partnerships in place, the subscriber has no simple way of viewing all of them and deciding which one they want to purchase.

The solution is a digital storefront. This digital storefront should consolidate information on all available bundled and reselling services, enable subscribers to quickly get an overview of their features and activate them on the spot. A growing amount of telcos (such as Globe, Indosat and Singtel) have such solutions available. But what should those who don’t yet have such a storefront available keep in mind when building it?

What to avoid before you start?

When mapping out feature requests for a digital storefront, things can escalate quickly. Contextual recommendations, automated discounts based on business intelligence and scalable partner onboarding sound like great features in theory. As a result, the expected storefront RFP becomes bloated and will include many features that will go underused.

For example, even the biggest telcos usually don’t have more than 3-5 partnerships in each major content category: music, video, gaming, sports, security, kids. If all the offers available to the subscriber can be viewed on one page, does it make sense to invest in creating a contextual recommendation engine that accounts for the subscriber’s profile and past spending? Probably not.

Most third party partnerships need to be configured only once. If the deal content changes, for example with a follow-up campaign, these changes usually require minor tweaks. Instead of building a complex and expensive product right off the bat, the digital storefront should have an MVP approach.

This leaves the door also open for when future digital partnerships are different from existing ones. Most major digital service providers have their own user eligibility and activation logic and API-s, so developing too many complex features can instead limit integration capabilities with these providers.

Digital storefront: discovery, authentication and payments

Creating a great digital storefront for mobile subscribers requires the following:

• Easy findability of the storefront and simple navigation between offers in the storefront
• Seamless UX for subscriber authentication and eligibility validation
• Simple transition to paying for the service

For promoting the storefront itself, many of the same tactics can be used as for individual bundle campaign promotions. Features of the storefront for discoverability should include:

• Services consolidated into categories: music, video, games, security, sports and kids
• Dedicated pages for each service: value proposition, features, pricing and FAQ-s
• Capability for the subscriber to activate the service directly from the offer page
• Responsive design that works well for both desktop and mobile users
• Analytics solution for evaluating the conversion funnel of subscribers

There also needs to be a mechanism to identify the user. Identification can be done through:

• Another service (e.g. if the user is already logged in to the self-service portal, their identity can be used for the storefront)
• Header enrichment on mobile devices
• Broadband account, if the user is on their home network
• SMS PIN-code based authentication
• MO SMS/USSD based authentication
• OAuth or GSMA Mobile Connect based services

Finally, while most third party offers include a fixed discount period for the service, the goal is to get the user to convert to a paying customer. The consent for charging can be acquired when the user is identified and either charged directly to their (mobile or broadband) invoice or alternatively, direct carrier billing can be used. In order to motivate the customer to buy the service through telco channels, an additional incentive can be provided, such as an extended trial or a discount.

The portfolio of services should be periodically reviewed and new categories included. While today streaming services are still the main bundle partners for telcos, it’s worth evaluating all services that are consumed through smartphones. These could include productivity tools (Office365 or DropBox subscriptions), communication apps (Viber or WhatsApp credits) and transportation (Uber or Taxify credits).

In summary…

When OTT partnerships are already launched, the goal is to maximize the value from the work already done. Creating a digital storefront that is easily accessible through the telco website means customers become more aware of the offers available to them, and thus more likely to purchase them. For bundle and reselling integrations done through Fortumo’s Trident bundling platform, the authentication, eligibility and payments part is already solved which means all the services can be directly plugged into the storefront.

October has kicked off and time to summarize the biggest stories from the digital ecosystem.

Beside the articles below that caught our attention, make sure to also check out our Asia and India market reports, as well as the Emerging Markets Payment Index for Q2.

General mobile

• Developing Telecoms: "Everywhere was an emerging market at one point"

• TechCrunch: Alibaba goes big on Russia with joint venture focused on gaming, shopping and more

• Business Insider: Adobe will acquire Marketo for $4.75 billion

Payments

• Bloomberg: Google and Mastercard Cut a Secret Ad Deal to Track Retail Sales

• Medianama: Apple India halts plans to launch UPI based payment service

• Business Times: Grab, Go-Jek biggest winners in S-E Asia's e-payment war

• Medianama: After Whatsapp, Paytm trains its guns on Google Pay

E-commerce

• TechCrunch: Taxify is entering the e-scooter game

• Bloomberg: Uber Is in Talks to Acquire Dubai Ride Hailing Firm Careem

Digital content

• VentureBeat: Streaming now generates 75% of music revenue

• TechCrunch: AnchorFree, maker of Hotspot Shield, raises $295 million in new funding

• Inside Sport: Sony confirms acquisition of UEFA EURO 2020, UEFA Nations League media rights

• NY Post: Sirius XM to buy Pandora for $3.5 billion

Gaming

• IT World Canada: What turns gamers into buyers? PayPal study seeks answers

• PC Games Insider: Vivendi plans to sell all shares in Ubisoft by March 2019

At the time the developed countries are talking about the rise of smartphone addiction, for millions (or even billions) of people around the world it might be the only way of getting online. Internet access via smartphones is also closely intertwined with the topic of financial inclusion. Financial inclusion - or lack thereof - is seen as a critical development challenge and it’s an enabler for 7 of the 17 UN’s Sustainable Development Goals.

Who keeps money under the mattress

Today more than half of the world’s total adult population do not have a bank account. Even though it’s more common in developing countries, it might even be a bigger isolator in developed countries because the level of unbanked people isn’t perceived as a pressing problem. For example, in the US there are around 7% of unbanked people compared to around 40% in India. This means that there might be more efforts to close that gap in India than in the US.

Not having access to financial services leaves people operating in what is known as the informal economy. Meanwhile they still live their day-to-day lives. Imagine having all your money in cash - would you put it under a mattress or carry it with you? Whatever the case, it leaves a person very vulnerable to crime and accidents - you might get robbed, lose it or your house (with your mattress) just burns down. It also keeps people in the poverty trap because they don’t have access to credit to improve their lives themselves. If you don’t have family or friends with sufficient resources, you might get exploited by moneylenders at very high interest rates (as high as 50-60%).

Private sector steps in

Until recently, the efforts to relieve people from financial exclusion have been mainly shouldered by different governmental and non-profit organizations. For example platforms like Kiva that offer P&P lending to people with the help of local field partner organisations. Now it’s been realized that all this excluded population is also huge and largely unharnessed market potential. There has been a rise of collaborative approaches either between public and private sector or in the private sector segments. The business which was mainly lead by charitable development work, is now becoming a playfield for tech giants.

It’s hard to overrate the role of technology as an enabler in the process. Digital financial technology and particularly the global spread of mobile phones, has helped give a growing number of people access to financial services. For example the new Juniper Research report, Mobile Financial Services in Emerging Markets: Mobile Money, Loans, Savings & Insurance 2018-2023, shows that mobile merchant transactions by unbanked individuals alone will grow from 1,8B per year in 2018 to 3,8B by 2023. Kenya and India will be core incubator markets for merchant services.

Financial institutions and fintech can leverage mobile operators to reach the unbanked audience. Direct carrier billing is the best way to engage mobile subscribers who lack access to the basic financial services. The mobile phone penetration rate is remarkably higher in many developing countries than it is for debit or credit cards. Mobile-based financial services are hoped to be the most beneficial to remote areas. In countries like India already more people have access to mobile networks than they do to electricity.

Furthermore, telcos have one of the closest relationships to consumers in emerging markets: they know who the user is, give them access to digital services and collect money for it. This way the telcos are a natural gateway to establish financial identities to yet unbanked part of the population. So far these capabilities have mainly focused on telco services and digital entertainment, but the potential for direct carrier billing is tremendous.

For telcos it’s an opportunity to step up and fill the gap in a vital and necessary field, while harnessing their existing client base and infrastructure. Telcos should establish themselves as the main digital infrastructure for services - this can include financial services, which until recently have been mainly operated by the banks. If telcos can offer a comprehensive solution package of everyday services, it enhances the client loyalty and their position as the digital enablers.

How to make the best of it

It is important to build the suitable and affordable infrastructure for all the users. Open application programming interfaces (APIs) help make integrating to the system efficient and competitive. When infrastructure providers like banks or telcos open up their APIs, it removes technical and cost barriers for small companies and helps them get started with digital transactions.

The challenges of digital financial services include converting digital money to cash, when needed. While digital payments become more common, cash is still not going anywhere. Even in Norway, where digital payments have a bigger share than anywhere else, 17% of all payments are still in cash. These “cash in, cash out” services must be easily accessible, trusted, and available at low-cost for consumers in order to work well and enable digital financial service use by more people. Also unfavorable taxation and government policy regimes tend to be the biggest barrier for the spread of direct carrier billing within specific territories.

Financial inclusion is undoubtedly a hot topic for both public policymakers and private sector fintech players. Digital financial service providers can capture aforementioned opportunities while benefiting underserved people.

Fortumo has the platform that can help you become a provider of full stack digital services, including financial services. We can support you with anything from user acquisition to customer lifecycle management and retention. Want to hear more? Get in touch.