Asian mobile operators can disrupt the online payments industry
By Gerri Kodres, chief business officer, Fortumo
In 2016, Asia is the driving force behind global smartphone ownership growth. The economies in the region are outperforming other emerging markets. For mobile operators, this means an opportunity to acquire subscribers with more disposable income than ever before at a rate higher than ever before.
The growing mobile population makes more calls, sends more messages and consumes more digital content, all of which drives revenue for the carriers. To handle the ever-increasing flood of data, telcos have invested heavily in building their network. At the same time, traditional telco services are increasingly eaten into by OTTs such as Skype, WhatsApp, WeChat and others, especially so in many Asian countries.
With customers getting used to services that erode into standard telecom fees, is there a way for mobile operators to make it up? Well, there is. Telcos own impressive asset base - established billing and CRM relationship with their users, ability to collect demographic, identity and location data, a strong distribution capability etc. By auditing and packaging these capabilities, it is possible to offer them to OTTs and form mutually beneficial partnerships.
Among the most valuable telco assets is the established billing relationship with end-users. The less available credit card and banking infrastructure is in a selected country, the more valuable is the telco's ability to charge end-users. In addition to local and regional digital services, Asian users do have access to most of global content: Google Play and App Store is available in almost all countries, Netflix's recent expansion enabled global video streaming service in the region, Spotify expanding its footprint etc. However, with credit card penetration relatively low in most countries, these services need way of monetizing their users - and that is where carriers have the opportunity.
Smartphones have become cheaper and more widely available which means the demographics of online users are becoming broader as well. So far mostly people from the middle and upper classes have been able to afford smartphones but with device prices going down, lower income people get online access as well, increasing the need for non-bank payment options.
China, India and Indonesia — markets driving half of the global smartphone growth — are severely lacking in traditional online payments penetration (World Bank Global Financial Inclusion Database, 2014):
● China: 16 percent of people have a credit card, 49 percent have a debit card
● India: 4 percent credit cards, 22 percent debit cards
● Indonesia: 2 percent credit cards, 26 percent debit cards
With more than 200 million smartphones in India and less than 50 million credit card owners, a majority of users are unable to pay for online content. This is also the reason why many digital merchants have not put much focus on expanding into these regions. They simply do not see the possibility to monetize the audience. Even financial services providers are seeing the challenge of dealing with a primarily unbanked audience.
Meanwhile, digital merchants are seeing a slowdown in growth of digital economies in the West. India is set to overtake the US in smartphone ownership by 2017. SuperDataResearch estimates digital gaming spend grew by 67 percent in APAC and 60 percent in MENA in 2015. Meanwhile, the growth is only at 21 percent in Europe and 13 percent in North America. Average revenue per user is high in these countries. But less users means more competition and increasing acquisition costs.
This means almost all global digital merchants are increasingly focusing on Asia to sustain their growth. And, this in turn, provides, the opportunity for Asian carriers to offer their unique properties in billing, distribution and marketing for those digital merchants. Working together with these merchants brings two major benefits to carriers:
- By bringing globally popular services into their market, mobile operators give users a bigger incentive to switch on their mobile data connections.
- By enabling payments for these services, mobile operators can earn a margin from the transactions generated by unbanked audiences.
Brands like Google, Apple, Spotify or Uber appeal to a much broader audience than a single online game or a local app developer. This means a bigger user base for payments as well. And the success of carrier billing — much like that of any other payment method — relies on large volumes that generate sustainable revenue. Mobile operators who bring on board merchants that almost everyone wants to use have an opportunity to conquer the payments landscape in countries where bank-based payments are lagging behind.