Carriers in danger of losing $142bn m-commerce revenue

04 May 2016 |

Big mindset changes and stakeholder collaboration are needed to let carrier-billed payments reach their full potential says a new Ovum report

According to a new Ovum report, carrier-driven payments will make up a smaller share of global m-commerce revenue if the market barriers that currently constrain their growth persist. On their present course, carrier-driven payments will make up only 0.8% of m-commerce revenue by 2020.

However, if carriers and market stakeholders work together carrier-driven payments – to which carrier billing and mobile money services are the biggest contributors – could equal 11% of m-commerce revenue, or $142bn, in five years.

Carrier-driven payments have carved out a niche in the digital goods space via carrier billing in gaming and mobile apps but they have yet to make any significant impact in the physical goods space, which represents the largest opportunity in the growing market for e-commerce payments on mobile, otherwise known as m-commerce.

For carrier billing especially, says Ovum, there are some formidable barriers stopping it from penetrating further into the physical goods space. These are the need to reduce billing fees from commercially-crippling levels; the need to upgrade billing systems to offer much more robust guarantees to merchants and the need to jump through regulatory hoops, such as acquiring a special operating license. 

Guillermo Escofet, Principal Analyst, Digital Media Ovum said: “There are also barriers holding back mobile money’s potential to play a greater role in merchant payments: a lack of aggregated access to mobile money services; the unwillingness of mobile money agents to encourage e-wallet adoption; and the reluctance of cash-based merchants to embrace fee carrying e-payments.”

Both carrier billing and mobile money have powerful use cases, including extending financial inclusion to the unbanked; providing the most seamless payments user experience on mobile devices and helping cash-based societies migrate to more secure and more traceable money flows.

However, Ovum is sceptical that mobile operators, regulators and other stakeholders will not let the huge business and societal benefits that carrier-driven payments can bring slip through their hands.

The report believes that if the carriers work together to lift the barriers holding back this opportunity, not only could the operators’ stake in the m-commerce market be hugely increased, but the size and breadth of the market could be increased too.