Direct Carrier Billing with Swisscom:increased revenue and expanded business opportunitiesCase study by Fortumo

NATEL® Pay is also used by international merchants like Sony to enable users to pay for PlayStation Plus subscriptions and Google to enable in-app purchases on Google Play. The advanced billing platform is also used for the sale of physical services, for example movie tickets.

Swisscom has seen increased revenue and customer satisfaction thanks to the launch of NATEL® Pay. Direct carrier billing has also expanded business opportunities for the carrier as new segments of merchants can now use carrier billing as an added payment method.

Carrier billing experience.Swisscom is the leading mobile operator in Switzerland. Their subscriber base is 4.7 million people or approximately 58.5% of the Swiss market. Fortumo has been working together with Swisscom on direct carrier billing (DCB) since October 2013.

Swisscom’s DCB platform NATEL® Pay gives end-users with a true 1-click direct carrier billing experience. When payments are done on a mobile device, NATEL® Pay automatically detects a user’s phone number. Payments are completed in a matter of seconds and the user does not need to enter any extra information:

For individual merchants and payment providers like Fortumo integrating Swisscom’s platform is simple. The integration is XML-based and the fastest merchants have connected Swisscom’s billing API in a few days.

Why did Swisscom launch Direct Carrier Billing and what were the results?

According to Thorsten Hau (OTT Business Development Manager, Swisscom) the main motivators for Swisscom to launch NATEL® Pay were:

● Involvement in the modern mobile payment business: mobile payments in Western markets are card-based (e.g. adding a credit card to a mobile wallet) and carriers are not involved in the value chain; adding direct carrier billing to its services enables Swisscom to compete with alternative mobile payment providers;

● Increased revenue from carrier billing: 1-click billing and high payouts allowed Swisscom to enter new business segments (e.g. physical services) and earn more revenue from existing ones (virtual & digital content);

● Increased customer satisfaction: Premium SMS billing is prone to user-originating billing errors as well as fraud; NATEL® Pay gives Swisscom’s customers the benefit of a secure and convenient payment solution

Swisscom’s Premium SMS platform evolved into NATEL® Pay over several years. Due to the evolutionary approach with many system integrations being in place already, moving over from the old platform to the new one took only a few months for Swisscom.

The implementation of a direct carrier billing platform has resulted in significant end-user uptake of carrier billing due to the increased amount of modern services which users now have access to. For Swisscom the main benefits of direct carrier billing are:

● New merchants: Swisscom now works with top merchants in new business segments (app stores, digital content, physical services) which would not have been possible on a Premium SMS platform;

● Direct carrier billing enables Swisscom to reduce churn: by having a unique direct carrier billing offering in the Swiss market, Swisscom can provide customers with services other carriers do not have available; Swisscom research shows that direct carrier billing is most likely used by the most profitable and high ARPU customer segments;

● No cannibalization for merchants’ existing business:The biggest fear for merchants from using direct carrier billing is cannibalization of revenue from credit cards. 45% of Swisscom DCB users are below 25 years of age and 69% are below 35; this audience has the least access to credit cards and most engagement to online content, negating the issue for merchants using Swisscom

How do merchants benefit from Swisscom’s DCB platform?

Merchants who have connected to Swisscom’s direct carrier billing platform through Fortumo have seen the following impact from the new billing solution:

● 31% higher conversion for web payments and 118% higher conversion for payments on mobile devices compared to the global average thanks to header enrichment enabling 1-click true billing (especially important on mobile devices where phone numbers are detected automatically for Swisscom customers)

● Revenue from payments on par with carrier’s market share: 64.1% of web & mobile web payment revenue in Switzerland for Fortumo merchants comes from Swisscom precisely representing its market share

● 22% higher transaction size compared to Western European average: the average transaction size on Swisscom’s platform is 2.75€ for web & mobile web payments compared to the Western European average of 2.24€

● 0% error rate in transactions: thanks to direct carrier billing, not a single payment has failed due end-user mistakes (e.g. incorrect reply message sent to confirm the payment)

NATEL® Pay has increased revenue for Swisscom & become a competitor to credit card payments

Fortumo estimates that if all the carriers globally would adopt Swisscom’s approach to direct carrier billing the turnover from payments through carrier billing can exceed $1 trillion and carrier revenue can exceed $100 billion annually:

Thorsten Hau from Swisscom explains: “Carriers could most definitely compete with credit card providers in certain business segments such as wallet top-ups and physical services like ticketing and travel booking. The unique selling proposition of direct carrier billing compared to credit cards is its ease of use. Carriers bring lots of customers to merchants who don’t need to sign up or enter data to pay - this asset is relevant in all online settings where conversion counts.”

In summary, technical platform maturity and competitive payouts are the two key factors influencing adoption of carrier-based billing by merchants with high revenue potential:

85% payout 90-95% payout

Market type App stores, digital content M-commerce

End-user spend $57 billion $1 trillion

Merchants' revenue $48.45 billion $900-950 billion

Mobile operators' revenue $8.55 billion $50-100 billion

75% payout

Premium SMS & web payments

$3 billion

$2.25 billion

$0.75 billion

Flat-lined business segments Growth opportunity

Market type Web payments

App stores & digital content

Global Market size $3 billion $57 billion

Transaction size up to $20 up to $50

Technical platform Premium SMS & DCB DCB

VAS services

insignificant

up to $1

Premium SMS

M-commerce

$1 trillion

up to $200-$400

DCB

Most Carriers are here

Reve

nue

Carrier platform technical maturity

Movies & TV

Homepage: https://fortumo.comBlog: https://blog.fortumo.comE-mail: partnership@fortumo.com

Homepage: http://www.swisscom.ch/natel-pay