Direct Carrier Billing vs. Card Payments: A Look at User Experience

December 16, 2020

Merchants and consumers worldwide have already acknowledged the benefits of paying for digital services and products using direct carrier billing. And with the rise of digital content consumption, especially during the pandemic, paying for it via DCB has also become more common, expected to reach 22% of total digital content spend by 2024. 

There are many reasons for the growth of DCB, many of them tied to a better user experience, especially when you compare it to credit card payments. Let’s look at how that works for both merchants and consumers. 

The benefits of direct carrier billing compared to card payments

Ecommerce and online entertainment have been steadily growing for years, now accelerated by the pandemic, lockdowns, and social distancing measures. This growth has not only translated into more gains for streaming services, entertainment apps, gaming platforms, and online stores. It’s also meant more transactions for payment service providers and mobile network providers, all groups benefiting from direct carrier billing.

And it’s not just digital content. Direct carrier billing has found its way into digital ticket or parking transactions. A recent study by Juniper Research predicts transaction volumes in this field will rise from 12.7 billion in 2020 to 32 billion in 2022. 

The growth of direct carrier billing is evident – and so are its key drivers.

It enables merchants to reach more people

Depending on the smartphone adoption rate for individual regions of the world, direct carrier billing helps reach the population of the unbanked and those with a bank account but no credit card. It’s a compelling alternative when you own a smartphone you’re already paying for.

Juniper Research estimates that in 2020, 28% of the adult population are still unbanked, with the number predicted to fall to 18% by 2025. North America and West Europe are estimated to have the lowest proportion of the unbanked. But statistics show Asia Pacific, Africa, and the Middle East still have a considerable population of unbanked adults. 

Direct carrier billing is also becoming a practical and attractive alternative for younger demographics where credit card adoption is also lower. A single example of the US shows that Millennials are the least likely to have credit cards versus Generation X and Baby Boomers.

Direct carrier billing allows all those groups to pay for goods and services online in their familiar currency and following a simple, intuitive checkout process, adding the payments to their phone bills. 

It’s easier, quicker, and more convenient than card payments

Direct carrier billing has a 7 times lower dropout rate than credit cards, with 5% dropout rates compared to 35% for cards.

And it’s not surprising when you look at the entire payment process and the steps you need to take to make a successful payment online using a card.

Take a look at this video to see how DCB works with DOCOMO Digital and how it stacks up against card payments:

In a nutshell:

–    A DCB payment takes fewer clicks than card payments. Users only have to enter their phone number and then a 4-digit PIN code instead of their credit card details, including a 16-digit card number and a CVC code. There are no lengthy forms to fill in, and signing up with carrier billing requires just 8 clicks compared to 18 for credit cards.

–    The payment flow is seamlessly integrated into the native app experience. This means the user doesn’t have to leave the app, switch screens, and then go back to make the payment. And this affects dropout rates, around 50% of which is typically driven by friction in the checkout process. Purchase abandonment rates which are typically much lower for DCB than other payment methods, directly affecting merchant revenues. 

–    Everything is included in one payment flow, which is less frustrating for the user – and more beneficial for the customer. This is reflected in conversion rates, which can be 3x (in Europe) or even 5x (in Asia) higher than the rates for credit cards and PayPal. 

–    The payment is authenticated instantly and added to the mobile carrier bill. This not only affects the time and success rate of the transaction, but also is an important factor in reaching consumers who don’t have a credit or debit card or are afraid to pay online using one. 

It’s more secure 

The same reasons that make digital carrier billing payments quicker and more convenient also make it more secure. And the fear of trusting a website or app with sensitive data is a significant deterrent from card payments for some.

Direct carrier billing doesn’t require any sensitive data from the customer, as is the case with card payments. The mobile phone number is automatically identified, charging the amount to their monthly phone bill. 

And for the merchant, there are multiple fraud management measures to ensure secure and successful transactions.

Summing up

The ease with which a user can pay for both monthly service subscriptions and one-off purchases using digital carrier billing is bound to be a key driver for digital carrier billing growth in the coming years. 

If you’re interested in providing your customers with DCB as one of the alternative payment methods, get in touch with our team here.

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