India’s mobile population is booming. According to COAI, there are now more than 1 billion mobile users in India, with approximately 10 million connections added each month. India already overtook the US in smartphone users at the end of last year. India’s digital ecosystem growth is primarily driven by two trends.
The first is low-cost smartphones becoming affordable for people in smaller cities and rural areas, while previously smartphones were mainly available to higher-income people in metro areas. The second reason is the significant reduction in data tariffs due to fierce competition between telcos, kicked off by Jio giving Airtel, Vodafone, Idea and the other existing players a run for their money.
Digital merchants have not overlooked this growth: local companies like Hotstar, ALT Balaji and VOOT have already been entertaining the audience for years and international companies including Netflix, Amazon and HOOQ have also entered the market.
Approximately 10% of India’s mobile audience consumes at least one streaming service, reflecting the quality of content provided by these platforms. But the providers are now facing a major challenge: how to monetize these users? Even Hotstar, which captures the majority of the streaming market, has been able to successfully convince just 3-5% of its user base to start paying for the service. Why?
In January 2018, India had 850 million debit cards and 37 million credit cards in use. Therefore it would seem almost all of the mobile population would have easy access to online payments. Yet when we look at the usage of payment cards, the picture is different: 80% of transaction value done with debit cards accounts for ATM withdrawals only, which means India is a long way from using banking services for online and digital transactions.
The main issues causing low usage of cards for online payments are low income in smaller cities and rural areas; fear of online scams and frauds, as well as the apprehension to sharing their personal details in online environments. The alternative that consumers have available are digital wallets, but their main use cases so far have been restricted to utility payments and SIM card recharges. So how can digital merchants convert more of their users?
To begin solving the challenge, digital merchants need to review their pricing. Lower consumer income and the expectation to get content for free means services need to cost less - there simply is no way around that. Amazon Prime is excellent proof that localised pricing works: despite offering only a premium version of their service, they have managed to grow into the third largest streaming provider in the market by keeping pricing low (<$2 per month).
The other approach to take is to review the payment methods supported. 80% of bank-based transactions occur offline (ATM withdrawals) which means consumers need some other means to pay for online content.
Direct carrier billing offers this, as a secure and convenient payment mechanism that’s available to any mobile phone owner. Beside the increased consumer coverage with payments, it also opens up doors for digital merchants to work with telcos on marketing. Digital services require mobile data consumption, which in turn is the bread and butter of telcos: meaning there is strong incentive for telcos to promote these services.