How Subscription Platforms and Telcos Can Both Win from Carrier Billing Integration

October 11, 2022

Today’s consumers have access to a staggering amount of media content—from videos/movie streaming and music to massive online multiplayer games. Never before has the consumer had so many options to choose from. The OTT media industry, the official term encompassing all these media platforms, was valued at $97.4 billion in 2017, a figure that is estimated to grow to $332.5 billion by 2025, representing a rapid annual growth rate of 16.7%.

Despite this growth, it is a competitive industry. And with bigger players such as Disney and Amazon entering the scene, the competition will only intensify. To fuel growth, these platforms must expand their customer base. And one of the most effective ways of doing so is through direct carrier billing integration.

Understanding the Concept of Direct Carrier Billing Integration

Direct carrier billing enables the end-user to pay for OTT media content—whether on a subscription or ad hoc basis—through their mobile carrier. Such payments will simply be added to whichever method the user is already using.

For instance, if a postpaid user purchases a monthly subscription to Spotify through their mobile carrier, Spotify’s monthly fee will be reflected in their monthly phone bill. Prepaid users can purchase ad hoc media content, e.g., a mobile game from gaming platform Steam can be purchased directly from their prepaid balance (which they can top up using cash). The user’s payments to the mobile carrier are then routed to the OTT media provider, minus a direct carrier billing fee.

Two Key Benefits to Direct Carrier Billing

To integrate direct carrier billing, these OTT media providers must pay a percentage fee of transacted amounts to mobile carriers. However, many media platforms are more than willing to bear the added cost in exchange for an increase in customer revenue.

Here are two reasons why direct carrier billing allows OTT platforms to boost their revenues:

#1: Expanded customer base from reaching the unbanked population

Over the past decade, smartphones have shifted from being a luxury item to practically a daily necessity. In 2019, there were 3.2 billion smartphone users worldwide, representing about 40% of the total global population. This figure also includes children, which means that penetration rates among adults would be far higher.

Contrast this with the number of people who have a credit card, which requires having a bank account. According to the World Bank, about 1.7 billion adults remain unbanked, without access to banking facilities. However, with direct carrier billing, many of the unbanked can now consume OTT media without having to use credit cards.

#2: Increased conversion rates and transaction sizes from greater convenience

Purchasing OTT media services through direct carrier billing is generally far more convenient than the alternative. There is no need to submit extensive personal details—which many are understandably reluctant to do—speeding up the payment process. Besides, transaction success rates are also typically higher. This means both lower abandonment by the consumer at the point of purchase plus increased uptake of OTT services. This leads to higher conversion rates, bigger transaction sizes, and, thus, higher revenues.

The Solutions Providers Connecting Mobile Carriers with OTT Media Providers

While direct carrier billing benefits consumers, OTT media providers, and mobile carriers—who benefit from a percentage fee—setting up the system, which necessitates various technical back-end integrations, can be a hassle, particularly if one mobile carrier has numerous OTT platforms wanting to implement a direct carrier billing arrangement with them.

This is where direct carrier billing solutions providers like DOCOMO Digital come in. These companies operate a platform that allows them to connect mobile carriers and OTT media providers. For instance, DOCOMO Digital:

  • Handles all the complex back-end payment API integration between the mobile carriers and the OTT media providers via their platform—simplifying the whole process
  • Takes responsibility for the maintenance and uptime of the payment capabilities
  • Offers second-level customer support on top of what the mobile carriers already provide
  • Gives mobile carriers greater control over things like user spending limits on OTT media services—which allows them to improve their bad debt metrics
  • Provides substantial data analytics and insightful business intelligence that mobile carriers can leverage on

In return for these services, these direct carrier billing solution providers take a percentage cut of the fee that the OTT media providers pay to mobile carriers. However, the benefits these mobile carriers obtain in return more than makeup for it.

At present, the top three players in this space are DOCOMO Digital (a subsidiary of Japan’s largest telco NTT DOCOMO), Boku, and Fortumo. While their core offerings are similar, DOCOMO Digital’s features and market share remain well ahead of the competition. With these advantages, plus continued backing from its strong parent company, DOCOMO Digital will likely continue to maintain its lead in this growing industry for the foreseeable future.

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