Direct operator billing and direct-to-bill mobile payments are two different animals. Here’s a look at the subtle differences between the two models, why they matter, and a look at the initial results of our survey on U.S. mobile users’ readiness to adopt direct-to-bill mobile payments in lieu of credit and debit cards.
Direct-Operator-Billing Is For Apps and the Like
Direct operator billing entered the mainstream spotlight back in September when Facebook announced it would work with Bango to enable its users to charge their Facebook purchases directly to their mobile bills. Direct operator billing reportedly has provided a big boost for app stores and mobile storefronts, helping operators to increase their digital content and app revenues. In my opinion, the behavior that defines direct operator billing is where a user makes an online purchase through a mobile device, and often – though not always – for goods or services that are related to that device. Typically, direct operator billing is used to buy digital goods – anything from a paid app to virtual currency in a Facebook-based game.
Direct-to-Bill Mobile Payment is When Users Displace Debit and Credit Cards
This form of behavior is slightly different from what we might call direct operator billing. This is a highly semantic argument, but we need to make an important distinction. Direct-to-bill mobile payments, which can use very similar if not the same mechanisms as direct operator billing, are specific to retail or hard goods transactions. The first phase of this would be, for example, paying for purchases from a web retailer like Amazon with a mobile direct-to-bill charge. But the next step happens in the real world, where people begin using mobile payment technology to utilize direct-to-bill charging as a form of payment in lieu of credit and especially debit cards.
It seems to make sense that if you buy a mobile app that you might have it charged to your mobile bill. The app ecosystem owners, like Apple, want to own those payment transactions. Obviously we’ve seen Apple rake in the revenue with their hefty fees for facilitating app store and in-app purchases. Those ultimately bill to the instrument – usually a credit card – that the user has on-file with the iTunes store. But operators want to compete for those sales and direct-operator-billing helps them do it.
Changing Consumer Behavior
It’s a bit of a bigger stretch for users to move away from using credit and debit cards and use direct-to-bill mobile payment instead. I’ve suggested in previous posts that if operators can dictate the mobile wallets that ship on their devices and make direct-to-bill charges the default payment methods, they are highly likely to win transactions as a result of pure laziness; good old inertia will prevent many users from bothering to add debit or credit cards to their mobile wallets, especially if they can pay via mobile, get some extra float time, and pay their mobile bills automatically via credit card anyway.
Make no mistake though – operators want a piece of this business. If they can become a significant transaction facilitator, they stand to add billions in revenue. If they can dominate the scene, the revenue potential is exponential. Back in 2010, Visa – the world’s largest credit and debit payment processor – processed $3.27 trillion dollars worth of transactions. Debit cards surpassed credit cards in terms of total transactions back in 2007. This is a huge market for operators to win and it’s all about shifting an already mobile population to new subtly different forms of purchasing behavior.
Our Survey Finds 15% of U.S. Mobile Users are Ready to Give it a Try
BillingViews has conducted a preliminary survey of 500 U.S. consumers across a range of demographics which found that 15 percent of AT&T Wireless, Sprint, T-Mobile, and Verizon Wireless subscribers think direct-to-bill mobile payments – rather than credit or debit card purchases – sound like a good idea. We figure that amounts to a bit over 30 million people if you consider a) the US is 100% mobile penetrated; b) there are nearly 218 million adults over the age of 18 in the United States; and c) the Big 4 operators own about 93% of the market. D2B mobile payment hasn’t even really rolled out yet, but 30 million people has to be considered critical mass. Think of it this way – that’s more than the entire populations of Australia and New Zealand combined.
We are going to continue to measure consumer sentiment toward direct-to-bill mobile payment adoption. Our goal is to see whether sentiment shifts over time and to measure that sentiment with larger survey panels both within and outside of the United States.