The Global Carrier Billing Summit held in October 2020 brought together telcos, payment service providers and analysts to discuss the carrier billing market, how worldwide Coronavirus lockdown restrictions have impacted the way consumers engage with and pay for the digital content and services they buy online, and if the changes in their behaviour will persist long term. I was privileged to represent at this panel discussion. And here are some of the excerpts from the discussion.
Martin Schuring, head of financial and enabling services at Telefónica Germany reported that the last six months has brought fundamental changes in working practices which have significantly boosted the network traffic from video streaming and gaming content for example, as well as downloads of productivity, conferencing and collaboration apps.
Sudheer Chawla, senior vice president head of revenue, management and assurance at Indonesian telco Indosat Oreedoo, has seen almost double-digit growth in digital content consumption during the pandemic which has been accompanied by a greater penetration of DCB. That hasn’t happened by accident – the telco has also worked harder at marketing its digital content services and DCB as a payment option to increase user acquisition.
“Telcos are driving DCB in terms of ease of use and convenience, making it easy to top up mobile accounts in real-time for example. There have been multiple campaigns to drive engagement and loyalty, and all of those things have worked for over the top (OTT) services and DCB.”
DOCOMO Digital too has seen an overall increase in the level of engagement with DCB because of the millions of employees and students that have switched to working from home this year. That includes a 35% jump in revenue from app store content in the first phase of lockdown restrictions back in March and April, though growth has decelerated since as countries emerged from lockdown. In Japan, that trend has led to a 20% reduction in cart abandonment. (See report)
I mentioned that we have seen that DCB as a payment option has moved up the list of merchant priorities as more consumers have wanted to access digital content. That has led us to see engagement with a much wider range of merchants, such as those selling virtual private network (VPN) software clients, productivity, and educational apps, for example.
Switch to cashless payments for physical goods
That does not mean to say that all the barriers to DCB adoption have been overcome. The complexity of the implementation – including integration with back-end payment systems, regulatory compliance, dealing with foreign exchanges and onboarding merchants – makes it tough to deliver in the sort of timescale that merchants and carriers would like.
Coronavirus lockdown restrictions may have pushed up revenue streams from app stores, video streaming and gaming, but they have also hampered the development of DCB in the physical goods space, where regulations allow, because fewer people now travel into their place of work or study.
“The immediate impact was very negative because our portfolio in Germany involves things like non-digital parking, train and bus tickets and restrictions saw demand for those plunge and revenue decrease,” commented Schuring. “But we also see a big opportunity ahead because one of the biggest effects of COVID-19 in Germany was that alternative forms of payments other than cash immediately began to rise.”
By the end of March, more than half of card payments in Germany were contactless, for example, compared to just 35% before the coronavirus crisis hit, according to the German Credit Agency (DK). Research conducted by Euromonitor International also found that card payments will surpass cash transactions for the first time in Germany, in 2020, as the pandemic changes shopper behaviour, while cashless transactions rose 48% year on year in May 2020 according to the National Association of German Cooperative Banks.
“Now it’s natural to pay a small amount of money with a [contactless] card or smartphone [for goods less than €25 in value]. That was impossible up until six months ago, because the infrastructure was not there,” said Schuring.
I mentioned that while Coronavirus has sped up the transition away from cash payments in Germany and other countries, that trend was already ongoing before the pandemic began. Many companies in the transportation industry for example, had developed plans to remove cash from their businesses sometime before, to improve their operational efficiency.
One of the challenges is that DCB is perceived to have high costs, relative to the costs associated with other forms of payments and that that has caused delays in adoption in some cases. But we all agreed that COVID had caused a renewed sense of urgency, which has prompted compromises that enable Merchants and Carriers to move forward with applicable business models that can be executed and launched quickly.
Other markets remain hampered by regulation that does not allow the purchase of physical goods using electronic wallets (eWallets), despite the growing popularity of apps like Gojek’s GoPay in Indonesia and GrabPay in Malaysia that have opened up significant opportunities for telcos as well.
Changes in behaviour inspire trust
While regulation is expected to catch up eventually, there is little doubt that changes in consumer behaviour now will drive the adoption of new payment mechanisms in the future. As such, telcos must make sure they move quickly enough to offer those different payment options; otherwise, they risk losing customers and revenue to rivals that do.
Indosat’s Chawla believes that lockdown restrictions have delivered a great opportunity for operators to change their long-term go-to-market strategies by aggregating payment channels and acquiring merchants eager to make the most of increased e-commerce spend once the pandemic is over. Spending money wisely on the acquisition of new customers now is likely to reap the rewards over time.
“It is about having different business models in developing markets like India, where people may not be willing to pay for subscriptions upfront, but will on a consumption basis,” he said. “If you target the right segment and develop behaviour, where they [consumers] get used to it, that will continue even when COVID has disappeared.”
“Now is the right time to get people to adopt DCB with the right marketing, end-user communications and a focus on relevant services,” added Schuring. “People will be up for a good deal if it is relevant to them. Still, the main method of promoting DCB is teaming up with merchants in our portfolio to engage with users and offer cashback on digital purchases.”