Carrier Billing Works for App Stores, Can it Work Elsewhere?

In past decades, it has been possible for third party merchants to offer customers payments billed directly to a phone bill. The capability was necessary after 1984, in the U.S. market, since long distance services had to be billed by a third party, as the breakup of the old AT&T "Bell system" separated the "local telcos" from the "long distance" provider, originally just AT&T. 

Up to this point, such transactions have been small ($50 or less) and relatively expensive. In past years, it might have been common for a merchant using carrier billing to pay a fee of perhaps 30 percent of the transaction amount for the privilege. 

In recent years, with volume, those fees have declined to perhaps 12 percent of gross, in some cases. That is a charge substantially above the fees charged to merchants for use of Visa-branded, MasterCard-branded or other payment network cards issued by banks or brands. 

The new surge of interest in carrier billing has been driven by sales of content and virtual goods, beginning with ring tones, but now more generally important for sales of other content and virtual goods. The prevailing wisdom is that sales of virtual and content goods will likely remain the primary use for carrier billing.

But there is at least some thinking now about ways carrier billing could have application in sales at retail locations. The amount of the transaction fee remains an issue. So is the limitation on purchase amount. And while PayPal, for example, is using prepaid mechanisms to make its foray into retail payments, carrier billing does not obviously and intuitively lend itself to that approach. 

A carrier could issue prepaid cards that are refillable, then link the prepaid card to the phone bill. But then there is no obvious need for use of the carrier billing mechanism. 

The ability to use a mobile phone as a payment vehicle does present new opportunities, of course. Conceivably, a mobile could be used to "carrier bill" transit fares, bridge tolls, parking fees or other generally small transactions. The issue now is how many of those scenarios might be adaptable to carrier billing mechanisms using the mobile phone, compared to other approaches.