In Western markets, the payment needs of mobile commerce merchants are covered by card-based and banking (direct debit) payment solutions. Virtually everyone has a bank account and two thirds of consumers are credit card owners. When expanding internationally, collecting payments becomes problematic.
In rapidly growing emerging economies of the world where most new users are coming from, traditional payment methods are not available to most of the audience. In India, just 53% of people have a bank account and 4% own a credit card. In Nigeria, the numbers are at 44% and 3% and in Indonesia, 36% and 1% respectively. Even in a relatively advanced market like Poland, 28% of people don’t have a bank account and 56% don’t have a credit card.
This means mobile commerce merchants entering new markets need to adopt additional payment methods in order to bring new paying users on board. This gap is increasingly being filled by mobile network operators (MNOs). There are more than 500 million mobile money accounts in usage globally, with 43 million transactions occurring each day and $22 billion processed on a monthly basis.
90% of these mobile money services are provided by MNOs and their financial subsidiaries such as Airtel Money, Easypaisa, Indosat Dompetku, M-Pesa and Axiata Boost. In addition to mobile wallets, most MNOs also provide carrier billing by default to their subscribers, meaning online payments through telcos are available to any mobile phone owner.
Carrier billing in the past has been a niche payment method, due to its limited technological capabilities and low payouts compared to bank-based payment solutions. Today, this is no longer the case.
Companies including Apple, Google, Amazon, Netflix and Spotify have adopted the payment method because the commercial terms match what they get from card-based payments. Carrier billing today is a tokenized, card-grade payment method with bigger reach and a better user experience, especially on small-screen devices.
Whether it’s working together on mobile wallets or carrier billing, MNOs and mobile commerce merchants need each other. On one side, MNOs are struggling with subscriber and revenue growth, creating the need to seek out new business lines.
On the other side, it’s increasingly difficult for merchants to collect payments from users. For example, India smartphone ownership has grown from 13% to 40% in the past 5 years while credit card ownership has essentially stood still, growing from 1.4% to 1.9%.
Compared to “regular” payment service providers, MNOs can bring much more to the table for merchants. Beside the abilities to charge users, they have mechanisms in place for user authentication, locational and behavioral tracking, online and offline sales enablement and promotion of online services.
This means mobile commerce merchants can leverage MNOs in three strategic areas: as customers for reselling of their content and goods, as marketing channels for merchant promotions and as payment partners for enabling purchases of said items.
Such partnership are growing increasingly frequent across the world: Easypaisa customers can make purchases in Xiaomi’s online store; international companies are using M-Pesa for paying local employee salaries; Telia provides travel insurance to its subscribers through its insurance partners; GCash works with remittance service providers to enable international wire transfers to its users; Telenor has integrated MasterCard into its wallet and PayMaya offers subscribers a VISA card tied to their wallet account.
For mobile commerce merchants, MNOs are a powerful partner not just in enabling payments to more users, but also in user acquisition and promotion of their services. If you’ve not yet reached out to telcos in markets you plan to expand into during the upcoming years, what are you waiting for?