Beware of BOB!
As this very publication has made clear, Direct Operator Billing, or DOB, is "the world's most popular mobile payment method."
DOB (or Direct Carrier Billing — DCB — as it is sometimes called) is the state of the art, allowing smartphone users to charge the cost of a digital purchase to their phone bill, in one-click. It's achieved through a direct integration into the billing systems of the world's carriers. This is what our clients, Google, Amazon, Facebook, Microsoft and others, demand of Bango.
But Bango has noticed a dubious practice within the industry. Many of today's mobile payment providers have chased quantity at the expense of quality. They boast hundreds of what they call "Direct Billing connections," but in reality they are dependent on an inferior approach. This approach is usually not the high performance charge-to-bill payment that it appears to be, and frequently it is not even direct. It is not what it claims to be. It is, to coin a phrase, "Bogus Operator Billing." We call it BOB for short.
BOB allows users to put a charge on their phone bill, but only through fiddly and error-prone Premium SMS messages. BOB's so-called "direct" billing is often a proxy through additional third parties, unknown to the merchant, to achieve high aggregate coverage. Premium SMS is a slow, outdated technology which is all but banned in the U.S.A. BOB brings with him increased settlement risk throughout this indirect chain, a degraded user experience and, ultimately, lost sales.
Caveat emptor, let the buyer beware.
November 2013 saw a major blow dealt to Premium SMS. The U.S. network operators AT&T, Sprint and T-Mobile entered into an agreement with 45 states to stop billing customers for Premium SMS messages that they send and receive. Verizon Wireless, while not part of the settlement, has said that it too will discontinue the practice. The move was forced by the persistent problem of "cramming": unauthorized billing for third-party services forced onto customers' bills.
Today a handful of global Premium SMS providers continue to exist, particularly for billing charges authorized from a PC or other premium messaging services, but the industry mood is that Premium SMS technology is a technology moving toward its sell-by date.
Unfortunately this period of transition between Premium SMS and superior DOB has created an opaque environment, where BOB has thrived. Some unscrupulous mobile payment providers speak the language of DOB, while actually deploying Premium SMS.
So what's so bogus about Premium SMS?
Premium SMS normally relies on SMS delivery reports. But text messages are often delayed. Even where the user is known to be "online" and has sufficient funds, responses can take minutes or hours. This frequently leads to consumers being told that there's a failure and that no charge has been taken — only to find that they were charged after the "waiting window."
Then there are the problems of "false OKs," MNO pricing errors, the straitjacket of fixed price points, incorrect and illegal tax treatment ... The list goes on. The final nail in the coffin has been the problem of mobile cramming, which has forced many markets to tie Premium SMS up in tight regulation, or as seen in the U.S., to withdraw support for all but a few niche applications.
So why is Premium SMS hanging on, obscured behind opaque language on mobile payment provider websites? The answer lies in a numbers game. All mobile payment providers would surely agree that Direct Operator Billing is more reliable and offers a superior user experience, but it's also a complex integration challenge. It demands commercial agreements between app stores, operators and the payment provider. Rather than work to put these vital building blocks in place, unscrupulous mobile payment providers want to get some service , any service, in place so that they can claim huge coverage numbers. Gaps are filled in with Premium SMS — Bogus Operator Billing — at the expense of reliability.
There's a legitimate debate to be had over when it's best to be deploy an inferior technology over no technology at all. However Bango's experience is that this debate doesn't take place. Instead, the reality is obscured behind vague terminology, forcing mobile merchants to interrogate payment providers to understand exactly which technology is being used in this "charge-to-bill" scenario.
BOB remains at large in the operator billing space. A "Direct Operator Billing" connection may be just Premium SMS, and may not even be direct. For a business that doesn't mind an inferior user experience, dropped charges, uncollectible funds or the risks from multiple intermediaries, BOB might just work. For everyone else, only approved DOB meets the requirements.
Bango's advice? Find a partner who has invested in a market-proven DOB platform, and beware of BOB!
Read Bango's new "Beware of BOB!" white paper here.
Topics: Direct Carrier Billing
Richard Leyland - Good white paper guys, top work Richard is an entrepreneur, writer and Head of Marketing Communications for Bango, the world leader in mobile payment and analytics. Richard has written for the BBC, PwC, Nokia and others, focusing on the impact of technology on how we live and work. www