Painless Payments

While Google’s Android platform continues to see its market share grow, with 350,000 terminals activated each day, the company’s Android Market application store continues to be outpaced by competitors such as Apple’s App Store. According to a report by Strategy Analytics, in January 2011, Apple apps surpassed 10bn downloads, while Android users had, by comparison, reached just 3bn. This is a major opportunity for platform developers if they can monetise it effectively.

The catalogue of downloadable apps, both free and paid-for, is crucial to the success of any platform, as it serves to build user interest and loyalty, making the cost of switching to alternatives costly, both financially, and in terms of effort. The use of apps also drives device usage, which in turn generates revenues through mobile advertising, as illustrated by Google’s purchase of Admob, and Apple’s iAd service. All platforms are keen to create the largest possible loyal user base, in order to maximise revenues from these sources.

In-app payments
Looking beyond the simple model of initial payment for the download of apps, payments within apps have entered the mainstream as another potential revenue stream. To take advantage of this model, however, platform developers need to make the purchasing process as simple as possible. If the user is forced to enter credit card details into an app, or visit the internet to create a stored value account, it will significantly reduce user appeal and have a negative impact on revenues. One way of solving this problem is via carrier billing, which significantly streamlines the process for consumers.

There are two forms of carrier billing which can be used, both of which remove much of the inconvenience associated with buying applications and content. Direct charging, which enables the purchase of physical goods as well as digital content, works by users simply entering their phone number, carrier and city of residence. Transactions are then charged directly to the consumer’s monthly bill, or removed from their credit for prepay. In-app billing works in a similar way, with purchases made directly through apps, with the interaction being as simple as the push of a button. These purchases are then billed to the user’s mobile subscription. Any purchases made (for instance extra credits for in-game use or new levels) are then charged either via Premium SMS or WAP billing. Similar to direct charging, users aren’t required to use their credit cards to make purchases.

By creating an easy-to-use mechanism for consumers, sales of paid-for apps and in-app payments for additional content are likely to increase. Furthermore, carrier billing is an extremely reliable payment method, boasting the highest possible purchase completion rate.

In an attempt to reduce purchase friction and increase app downloads through app stores, platform vendors are looking to partner with carriers to improve their billing processes, including the addition of in-app purchasing. However, there are certain considerations that need to be made.

While many platform developers are large enough brands to be able to approach operators, they shouldn’t underestimate how time-consuming and complex a process this is. Without a specialist billing provider, platform developers would be forced to individually build connections with operators, rather than take advantage of the long-term relationships that companies such as Ericsson IPX have already forged. Without the help of dedicated billing providers, they would be faced with the difficult task of agreeing deals with operators of varying size across diverse geographies.

Remember the carriers
In recent years, the increased focus on platforms has, in many ways, marginalised the operators, with consumers picking their new handsets primarily on the operating system, rather than which carrier it’s on. However, carrier billing represents a huge opportunity for platform developers and mobile operators alike. Platform developers are able to utilise what is a smooth and easy purchasing process for consumers, which in turn will help drive the sale of apps and in-app content. Meanwhile, operators receive access to revenue streams from which they are increasingly being excluded. Yet, without a dedicated billings provider, the process can be time-consuming and complex. By engaging with a billing provider, however, platform developers are able to take advantage of existing relationships to ensure that their new carrier billing services are delivered with the minimal amount of fuss.

Tobias Johansson is head of product management and business development at Ericsson IPX