CNP Expo: Direct-Carrier Billing in the Crosshairs
May 21, 2013
On the first full day of educational sessions at the CNP Expo, panelists looked at direct-carrier billing: the ability to use a mobile phone number to initiate and authenticate a purchase that is then charged directly to the customer’s phone bill through their carrier. Experts on stage said the mobile payment method allows merchants to create an easy experience for customers and avoid cumbersome authentication processes that can cause them to walk away before the transaction is completed. Though the cost to merchants can be upwards of twenty percent of the transaction (as opposed to 3-5 percent for a typical credit-card transaction), the panelists believe that the higher conversion rate and increased ROI on merchants’ marketing initiatives makes direct-carrier billing worth the cost.
“The adoption of this process is driven by simplicity,” said Fraser Thompson, executive vice president of operations for Payvia. “Customers already have their phones, and anyone with a phone is a potential customer. Plus, app stores have helped customers get used to a two-click process that doesn’t involve typing in a ton of information for every transaction.”
Currently, direct-carrier billing tends to be used for purchases under $25, for anything from apps, to donations to media subscriptions. According to Thompson, “carriers tend to be more comfortable with the digital goods space than physical goods, simply because phone companies generally don’t want to get involved in shipping processes and quality issues with goods delivered.”
But they are moving toward physical goods in places that blur the line—for instance, parking and ticketing. Carriers can refer customer satisfaction issues back to the merchant directly, and chargebacks can be done through either entity.
According to Paris Leung, vice president of sales for BilltoMobile, one great benefit of direct-carrier billing for merchants is that “cellular customers with accounts in good standing are considered ‘good buyers’—they are paying their phone bill each month. And of course, delinquency rates tend to be low, because the phone company will turn your phone off if the bill isn’t in good standing.”