Remember Carrier Billing? It’s Poised to Triple by 2022, Research Indicates

It doesn’t get a lot of attention in these days of EMV, mobile payments, and digital currency, but carrier billing, one of the oldest forms of digital payments, is poised for growth. Total payment volume globally will triple by 2022, rising from $2.9 billion last year to $9 billion, according to a projection released on Wednesday by Juniper Research, a United Kingdom-based firm that concentrates on payments and other financial services.

Driving growth will be moves by telecom companies to expand the service into content markets beyond games and other digital goods, along with adoption in countries with a high percentage of underbanked consumers. There are more than 2 billion unbanked adults globally, and in more than 80 nations unbanked consumers exceed half the population, Juniper says.

Carriers also have fresh fields in front of them among smart-phone-owning consumers too young to have a credit card and in transactions for physical goods, Juniper says.

With carrier billing, users typically enter a mobile-phone number to check out. They then receive an authentication code via text message. But some third-party providers have over the past few years introduced one-click features to streamline checkout, another factor generating more volume. For example, San Francisco-based carrier-billing processor Boku Inc. introduced a “Phone-on-File” feature in 2015.

Growth opportunities lie in the expansion of connected devices into the so-called Internet of Things. Mobile phones aside, the installed base of connected devices globally totaled 3.27 billion in 2017, including 259 million vehicles, according to Juniper.

But there remain obstacles in the way, Juniper warns. Chief among these is the fee mobile carriers charge for transactions. Operators typically claim 15% or more of the purchase total, far in excess of credit card rates. Juniper advises this cut will have to drop to 5% or less for a move into physical goods or other new markets to succeed. “In most cases,” Juniper says, acquirers are charging the merchants mobile operators are targeting less than 1% for debit card transactions.

Indeed, physical products and ticketing will likely account for no more than 2% of carrier-billing revenue by 2022, the firm forecasts. Games, by contrast, will still command slightly more than half of these revenues.

Also hampering growth in new markets, particularly physical goods, is a tendency among carriers to impose transaction limits in an effort to manage the risk of fraud. Carriers could address the problem by adopting “improved reporting platforms,” Juniper advises.

Carriers are also handicapped by lackluster promotion of the billing capability. Instead, Juniper says, operators are pouring marketing resources into “smart phones and package differentiation.”