Making transportation more accessible through telco partnerships

Making transportation more accessible through telco partnerships

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.

May in the digital ecosystem: overview of the biggest industry stories

May in the digital ecosystem: overview of the biggest industry stories

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

Payments

Digital publishing

E-commerce

OTT

Gaming

Survey: what do industry analysts think of the future of bundling?

Survey: what do industry analysts think of the future of bundling?

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.

Digital content revenue models in South-East Asia: recurring or one-off payments?

Digital content revenue models in South-East Asia: recurring or one-off payments?
  • 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:

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.

4 new ways of looking at your payments data

4 new ways of looking at your payments data
  • Modify pricing based on payment success rates
  • Account for currency fluctuations in pricing
  • Incentivize heavy users and block friendly fraud
  • Target users by their SIM card type

Improving payment conversion is one of the most significant ways how companies can increase their revenue without investing additional resources into user acquisition and marketing. Simply put, growing your payment conversion rate from 4 to 5% means 25% more paying users and revenue.

We have previously written about traditional ways of increasing user conversion: optimizing checkout flows to remove noise and unnecessary steps, localizing pricing to match consumer income, timing promotions to days and weeks when users are most likely to engage, and offering alternative payment methods to reach the underbanked.

Here are 4 more data-based tactics you can use to increase your revenue.

Pricing localization based on payment success rates

If we leave aside technical errors, carrier billing has two primary reasons for payment failures: insufficient account balance (prepaid SIMs, no money on the SIM card to complete the transaction) and spend limits (postpaid SIMs, daily, weekly or monthly payment limit reached).

Local legislation may also require telcos to set the upper amount that a consumer can spend through carrier billing. For example, in Europe PSD2 allows telcos to process transactions up to €50 if they do not have a financial license. This can also cause high-value transactions to fail.

Looking at payment success rates gives an indication on whether your pricing is suitable. Price points that are above the average account balance of prepaid SIM users will cause a number of payments to fail, and they can also bump the postpaid SIM users over their spend limit. A sample success rate might look something like this:

  • $1.9 - 91.9% success rate

  • $4.49 - 84.2% success rate

  • $10.99 - 45.9% success rate

Combining the success rate data with the total amount of transactions helps evaluate whether it makes sense to close the price point and direct users towards smaller purchases. Conversely, if higher price points have lower success rates and transaction volume but bring in more total revenue, the pricing can be pushed higher.

Pricing localization based on currency exchange rates

Selling services or goods internationally means the currency exchange rate impacts how much money you are making with each transaction. Let’s say you are are selling something to consumers in India at a price of 99 INR. On the date of writing this post, the dollar value of that transaction was $1.42. On October 10th last year, it would have been $1.33. On June 6th last year, $1.47. Without changing anything on your end, the money you receive for each transaction has fluctuated by 10% over the year.

We don’t advocate changing prices when the exchange rates fluctuate by a few percentage points but it’s worth keeping an eye on longer term trends. If there are substantial changes taking place with currencies (as has happened with the Russian ruble) pricing can be modified to account for the shift in purchasing power.

Encouraging positive and discouraging negative behavior

Not all customers are created equal. For mobile games, 80 to 90% of the revenue is generated by only 10 to 20% of the users. Filter out heavy users and create targeted upselling offers to them, in order to incentivize them to continue making payments in the future.

On the reverse, negative payment behavior should be discouraged. Negative in this context means friendly fraud. It happens when a user knowingly makes a purchase, later disputes it and demands their money back. Our own internal practice is that when users request a refund from Fortumo, we block such users from making future purchases. We recommend merchants dealing with their own refunds to adopt the same approach.

Why? The risk that they will attempt friendly fraud again is higher than average. Not only do refunds usually involve a substantial fee (getting the money somehow back to the user), but encouraging users to sign up for a paid service and later reverse the decision can become a headache, especially for subscription businesses.

Targeting users based on their SIM card type

With carrier billing, postpaid users tend to have a higher ARPU than prepaid users. They are not limited in spending by their account balance and generally people with a fixed telco contract have more disposable income. On the other hand, the prepaid SIM card user base is much bigger in almost every country, compensating for the lower ARPU.

Today, telcos usually do not pass on the SIM card type data during transactions. However, when transactions fail, it’s possible to identify what type of SIM card was used. This can be used by merchants for two purposes:

  • Postpaid accounts: focused marketing and incentivization to make more payments

  • Prepaid accounts: guiding users towards more suitable (lower) price points

Summary

Out of these 4 recommendations, only the last one is applicable exclusively for carrier billing, while the other principles can be adopted even if you are using only bank payments or digital wallets. In case of carrier billing, merchants using Fortumo can easily pull the data on payment success rates, refunds and user type (prepaid or postpaid) from our Reporting API. Want to discuss how to better use the data Fortumo provides you? Get in touch.

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