Is Carrier Billing an Opportunity?

“Low profit margin” and small revenue opportunity generally are good reasons for a service provider to avoid offering any particular service, and direct carrier billing provides a reasonable example of both drawbacks, despite periodic efforts to popularize the service.

Direct carrier billing has been a low­-margin opportunity and might, perhaps best case, account for less than one percent of total mobile service revenue, according to Mobile World Live. So even if successful, most service providers might simply find they have more-important priorities. 

One can make the argument that the opportunity is greatest in emerging markets, as banking system inclusion is generally underdeveloped there. But there are other alternatives, including mobile money services, mobile banking and internet-based payment apps as well.

A tier-one service provider simply cannot afford to chase every conceivable revenue opportunity. In fact, for the largest tier-one service providers, any potential opportunity generating less than $1 billion in annual revenue is too small to tackle. Even success does not move the revenue needle. 

For that reason, many service providers will continue to look elsewhere for revenue growth, since even carrier billing success generates too little incremental revenue, compared to other possible alternative growth initiatives. 

source: Mobile World Live

The shortcomings have been clear for purchases of  physical goods, where carrier billing costs to merchants have been so high that other alternatives are preferable. Nor is it clear most service providers can get costs down low enough to compete with other alternatives. 

To compete, carrier billing charges to merchants would have to drop to no more than three percent of sale value, but “their cost structures simply aren’t set up for this.”

Carrier billing also comes with  increased risk of bad debt exposure, and also could shift prepaid customer purchasing away from connectivity services.

In many markets, that simply makes carrier billing a non-starter as a payment mechanism for physical goods. 

Digital goods possibly are another story. In 2018 Apple accounted for 10 percent of global carrier billed digital goods and services revenue while Google represented 19.3 percent, according to Ovum.

Still, Mobile World Live still says the value of carrier billing might not be “direct revenue.” In fact, that could be the least valuable outcome. 

“Enhanced customer lifetime value, higher ARPU and improved customer loyalty” arguably are the chief benefits. That might not be sufficient to convince many operators to enter the business.