As the rich communications service (RCS) protocol finally gains traction, mobile network operators (MNOs) have a chance to drive direct carrier billing (DCB) revenue by embedding simple payment mechanisms into multimedia messages.
RCS was first defined in 2008 as the eventual replacement for SMS/MMS messaging, adding features such as the ability to use more than 160 characters, read receipts, perform group messaging and multimedia capabilities like animated stickers and the embedding of audio, video and image files. It supports file transfer, chat, location-based services and audio/video messaging, and does not require a client app to be installed. RCS also enables customisable user interfaces and branding, and messaging analytics that will help application to person (A2P) providers track user engagements, such as video exit rates and button clicks.
Because features are now supported natively within most of today’s Android smartphones (or via downloadable apps), high levels of interoperability between senders and recipients using Android handsets at least are almost guaranteed (iPhone users are another story for the moment).
Shrinking SMS revenue demands rethink
It has taken a long time for the telecommunications industry to recognise the value of RCS and supports its implementation; however, with telcos initially put off by the need to undertake network infrastructure and software upgrades. And although the volume of SMS messages that subscribers send has been steadily declining over the last ten years as people switched to using over the top (OTT) messaging apps like WhatsApp and Viber, the numbers are still significant and deliver a healthy stream of income for the industry. Ovum’s Mobile Messaging Traffic and Revenue Forecast: 2017-22 report calculates that global, person to person (P2P) SMS revenue fell from US$70bn in 2017 to US$59bn in 2019 for example and is on a further trajectory to hit US$40bn by 2022.
Other forecasts suggest that A2P SMS volumes are stable; however, as developers integrate automated messaging within their software. Banks and retailers now commonly send one time passwords (OTPs) via SMS for security purposes, for example, with other companies distributing various alerts, notifications, branding and marketing messages through the medium. Statista estimates that the number of A2P SMS messages sent worldwide between 2018 and 2020 has stayed roughly the same for example at around 1.25bn, with Ovum forecasting that business spend on A2P decreased only slightly from US$47.3bn in 2017 to US$46.5bn last year .
Elsewhere Analysys Mason predicts that business spend on A2P will actually grow from US$27bn in 2019 to US$40bn by 2024, though both SMS and RCS will continue to face competition for A2P market share from OTT apps over the period. And forecasts from Mobilesquared suggest there were 203m P2P RCS users at the end of 2018, a number that expanded to 790m a year later and will grow further to 2.8bn in 2023.
Interoperability barriers smoothed
Delays in the agreement and implementation of a single universal RCS profile that supports chat and multimedia features across different handsets and networks have undoubtedly interrupted progress, but fresh impetus from Google in 2019 is now set to drive RCS adoption forward.
The company has rolled out RCS business messaging via its Android Messages app, currently being promoted in the UK, France and Spain for example. Elsewhere Google Chat (based on the RCS platform acquired from Jibe in 2015) is the brand name for the RCS protocol or RCS Universal Profile, currently available on two apps: Google Messages and Samsung Messages. The former ships by default with most Android smartphones, although its features still need to be supported by the mobile operator carrying the message.
T-Mobile has already signed a deal with Google that will allow users on its network with capable handsets to send RCS messages to other users on different networks using Google Messages. Autumn 2019 saw the then four major US carriers — Verizon, AT&T, T-Mobile and Sprint — form the Cross Carrier Messaging Initiative, a joint venture to concentrate on standardising RCS according to the Universal Profile outlined by the GSMA.
There is no doubt that interoperability issues remain, particularly when it comes to Apple’s iMessage app and smartphones though reports suggest the company is at least considering introducing support for RCS at some point in the future. But progress has been sufficient for operators to start experimenting with what they can do with the RCS protocol and think about how it helps them extend the revenue they derive from DCB.
Operators accelerating RCS deployments
Increasing numbers of MNOs are launching services on a country by country basis after successful trials. As of June 2020, the GSMA reported there have been 90 launches of RCS services in 60 countries worldwide with support from smartphone manufacturers including Alcatel, Asus, Huawei, HTC, LG and ZTE as well as Samsung.
Vodafone launched an A2P RCS business messaging solution in 2018 for example and trialled a project that allows users to press a “pay” button within its RCS messages to buy tickets through its partnership with social live music marketplace Wegow in Spain. The telco also collaborated with IMImobile to trial an RCS-based marketing campaign in the UK in Spring 2020 and delivers RCS services in Germany in partnership with global conversational commerce provider CM.com (which has previously worked with Booking.com for hotel reservations in the US). An initial German customer is Lieferando, a subsidiary of Takeaway.com, which uses RCS to offer an app install button within marketing messages that it hopes will deliver higher conversion rates.
Chinese operators China Mobile, China Unicom and China Telecom were reported to have unveiled a 5G-enabled RCS service in April[i], with Canadian carrier Vidéotron stating that it was deploying an RCS service in July[ii]. Many operators are expected to execute similar “soft” launches to enable a seamless transition from SMS for their subscribers.
Reports earlier this year suggested that Japan’s RCS-based +Message service is seeing strong consumer adoption[iii] following its 2018 launch by our parent NTT DOCOMO, KDDI and SoftBank. In its report RCS Business Messaging in Japan, the GSMA estimates that the number of active +Message users in the country will rise to 17.5m by the end of 2020 (up 35% year on year) and hit 40m by 2021. Japanese MNOs pre-load an +Message app with a standardised interface onto new Android devices distributed to their subscribers, and also offer a downloadable client for other Android and iOS devices via app stores.
Embedded DCB payment potential
In addition to enticing new consumers and A2P merchants onto their messaging platforms, RCS also holds the potential to drive telco DCB revenue by making it much easier and more attractive for subscribers to purchase goods and services using their smartphones.
The concept of consumers making payments within RCS message conversations rather than clicking on a link that takes them to a specialist payment page to enter their contact and bank card details.is explored in a white paper – Getting Ready for RCS Payments – published by the Mobile Ecosystem Forum (MEF) last year.
The benefits to the user include fast, seamless mobile payment transactions which can be initiated simply by clicking a “pay” button embedded in the message, protected by enhanced security and authentication measures on the device itself. The MNO that underpins the DCB service can also certify and approve the different merchants involved, while providing them with access to large numbers of potential customers within their subscriber base. KDDI for example already uses its +Message RCS app to distribute marketing and promotion messages from merchants certified within its Wowma! Internet shopping mall, and allows them to authenticate themselves using its au ID service via their web browser before making a payment via DCB.
RCS can be used to deliver marketing messages and promotions that highlight specific events and services, simultaneously offering the ability to buy from that message which one click using DCB. Mobilesquared estimates that global RCS subscribers open 75% of the messages they receive, compared to just 3% of direct mail, illustrating the potential for substantially higher conversion rates.
MNOs can use their existing APIs to process DCB payments in the background, as if an RCS message was an SMS message. And to deliver the flexibility to support different consumer payment choices whilst maximising conversion rates, buyers that prefer to purchase using their debit/credit cards can be routed to specialist web payment pages.
The GSMA gathered views on what changes in its RCS specification were needed to enable embedded payments in 2019. In its white paper – RCS and Payments: Discussing RCS as a payments channel and its potential under PSD2 Strong Customer Authentication – published in February 2020, the it posited the use of RCS as alternative authentication method to one-time password over SMS (OTP-over-SMS). When and if RCS becomes the default authentication method for the banking industry for example, it paves the way for mobile payments to be safely and securely embedded directly in RCS messages to simplify the transaction process.
Global mobile messaging provider mGage has already launched a platform that embeds mobile payments technology within RCS channels in September 2020, built in partnership with unspecified UK MNOs and the Phone-paid Services Authority (PSA – the regulatory body governing content, goods and services charged to mobile phone bills). The mGage solution allows consumers to fund purchases made within a native RCS messaging app, using premium SMS and DCB to collect the payment.
Japan’s +Message service already provides a good indication of what can be achieved, with particular interest from financial services, transport and media companies looking for new routes to market and seamless mobile payment experiences for their customers. If a standardised approach to embedded DCB payments that works seamlessly across different networks, countries and smartphones can be agreed, the sky is the limit for RCS which then provides a channel for merchants to facilitate direct e-commerce purchases via DCB quickly and easily whilst bypassing web browsers and complex payment interfaces that could rapidly increase their conversion rates. Many now recognise that potential, but it is up to MNOs to deliver.
[i] China’s big 3 telcos offer 5G Rich Communication Services (RCS), IEEE ComSoc, 8th April 2020
[ii] Vidéotron says it’s currently deploying RCS support, mobilesyrup, 4th August 2020
[iii] Japan’s RCS service seeing strong momentum and growing business messaging opportunity, TelecomTV, 26th March 2020