By Charles Damen, Vice President, Mobile Billing and Payments
Last month saw the launch of our Direct Billing Gateway (DBG) on the main mobile networks in Germany, an important step towards seeing the benefits of direct operator billing (DOB) extended across Europe. From our perspective, direct operator billing – and its sister technology, in-app billing – represents the future for mobile content and application payments.
To date the apps market had been dominated by Apple. Critically, individual app developers have been hindered in their efforts by a lack of a solution to help them effectively monetise their apps and thereby offer a workable alternative to Apple’s service. As the market reaches maturity, app stores and content providers need to start looking at how they can maximise their revenue streams if they are to gain market share.
DOB provides the best means of addressing this. To understand why, it is worth reflecting on the evolution of operator billing over the past ten years. The Premium SMS represented the first stage of the operator billing lifecycle: however, this was a promiscuous charging model which was ambiguous by nature in terms of how consumers were being charged and what they were being charged for. In parallel, consumers have relied on a credit card for payments: this is by no means the most efficient way to pay for anything over mobile, as it relies on the subscriber entering their card details, which evidence has shown can lead to a drop in sales conversion.
Fundamental to the value of DOB and more specifically, MACH’s DBG, is the strong return on investments which it provides, beginning with its one-click billing capability. Additional clicks are estimated to lead to drop-off rates of between 30 and 50 per cent and thus a simplified, one step process leads to higher conversion rates. The real-time charging element ensures instant authorisation of a transaction (either confirmation from the operator if successful or a detailed error code identifying cause for failure) which in turn reduces the risk of revenue leakage. Finally, the flexible pricing which it affords also provides the operator with greater merchandising options and similar pricing between payment mechanisms.
Operator billing has already proved itself to be the most popular method for consumers to pay for apps. George Linardos, Nokia’s vice president, product and media, noted at last year’s Nokia World that it has seen the use of operator billing directly drive up downloads from the Ovi Store due to its popularity with end-users. The figure cited by Nokia was that the one-click billing enabled by operator billing leads to 13 times more payments being made than over credit cards, providing tangible proof of the opportunities this payment system affords app stores and content providers. Research from analyst house Strategy Analytics backs this up, demonstrating that nearly 40 per cent of users in Western Europe prefer this payment mechanism to any other. DOB represents the most effective form of operator billing as, through features such as one-click purchase, real time charging, flexible pricing points and direct refund capabilities it is ideally suited for Pay per Download and in-app purchases to the apps ecosystem.
As well as improving the success rate of apps sales, DOB also increases the market size. By removing the requirement for a credit card, a whole new market segment is opened up, while those who have concerns about using payment card details online will have their worries removed as DOB eradicates the need for any sensitive information to be given out.
It is clear that to fully monetise mobile applications and provide a flexible payments infrastructure, there needs to be a sea-change in the approaches used for payments today. In our opinion, DOB is the best means of effecting this change and we expect to see it becoming the main operator billing mechanism over the coming years.