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How COVID-19 Could Change the Future of Payments

Domagoj Rakitić

Head of Mobile Payment Sales

Living in the age of COVID-19 has completely redefined our sense of normal. But, this situation has also had an unexpected effect on the mobile industry. Here’s how it could affect the future of payments.

(This article was originally published on my LinkedIn profile).

Humans are adaptable beings. As such, we have found many new ways to cope with social distancing, isolation, and ‘cabin fever’. Since travel has become difficult, people are spending more time online. We learned how to fulfill various needs using online services.

More and more are shopping online, playing video games, or watching Netflix. “Online streaming services provided by brands such as Netflix… are likely to see 12% growth this year… Ecommerce will be the other sector that will see a revenue boost as a result of the pandemic”, said Maria Rua Aguete, executive director at Omdia. Others are focusing on self-improvement. They’re using e-learning services to gain new skills. According to The Conversation, “Massive open online classes, or MOOCs, have seen a surge in enrollments since March”.

The consumption of digital content has significantly increased because of the pandemic: “As millions of people go online for entertainment and more, total internet hits have surged by between 50% and 70%, according to preliminary statistics.“ (Forbes, „COVID-19 Pushes Up Internet Use 70% And Streaming More Than 12%, First Figures Reveal“).

Changing the ways people spend free time, as well as how we view both cash and cards seems to be having a boosting effect on the entire mobile payment industry.

Infographic – Silver lining for the mobile payment industry

Furthermore, many consumers worry about the health risks associated with handling cash and cards. Analysts say people now perceive cash as “unclean”. “This crisis is clearly pushing us even farther away from using cash in our everyday legal transactions… And it’s for obvious reasons. No one wants to touch something you or someone else just touched. That’s not going to change any time soon”, said Kenneth Rogoff, a Harvard University economics professor.

This is where mobile payments come in

In some countries, cash is already a thing of the past. Little by little, people are replacing their wallets with smartphones. “I believe it will take at least five years for 50 percent of adults in the U.S. market to replace their wallets with mobile payment mechanisms,” predicts Patrick Moorhead, a veteran tech industry analyst at Moor Insights & Strategy.

As reported by Statista, “Mobile money services have rapidly proliferated in frequently underbanked markets in Africa, Asia and Latin America, fueling the global growth of mobile consumer payments services by enabling hundreds of millions of people to participate in a multitude of electronic transactions for the first time.”

All in all, mobile payment is becoming the preferred payment method among consumers and it continues to grow rapidly. As reported by Market Reports World, “The companies are rigorously investing in mobile payment technology owing to significant growth in the industry…The mobile payments market was valued at USD 897.68 billion in 2018 and is expected to reach a value of USD 3695.46 billion by 2024.”

Telco payments – the preferred mobile payment option?

As stated by the World Bank, 1.7 billion people don’t have a bank account. Do you know what (almost) everyone in the world does have? A mobile phone. According to the data from the International Telecommunications Union (ITU), the World Bank, and the UN, there are more mobile phones than there are people on Earth.

Since most people don’t own a credit card but own a mobile phone, payment via mobile operators (or carriers) proved to be an excellent solution. Not just for end users, but for content providers and mobile carriers as well. So, the logical move for mobile operators was to move further into payments, which has in turn been a breakthrough for the entire mobile industry.

The more complicated the payment method, the less motivated people will be to buy. Of course, nobody wants to waste any time. With mobile carrier billing, they don’t have to. It’s not complicated, it doesn’t require registering, filling out forms, or sharing private information (other than the phone number required for payments). It’s fast, safe, reliable, and convenient. All it takes is an active SIM card. 

How can mobile carrier billing help your business?

Telco billing, or mobile carrier billing, essentially consists of charging customer purchases to their SIM cards. This is a great option for merchants, as well as content and service providers. According to the GSMA, almost 7 out of 10 people in the world are subscribed to mobile services. This is a potential market of more than 5 billion customers for your digital content.

Introducing a mobile payment solution will, therefore, help bring in more revenue to your business. It can significantly increase conversions because it is faster and easier than other types of payments.

What types of carrier billing are there?

There are several types of solutions available. These three are the most popular: 

1)     Premium SMS (PSMS for short) – This mobile payment method is one of the most popular in the world, because it’s simple and convenient. All it takes is to send and receive an SMS text message – a feature supported by every mobile phone. With PSMS, users can buy various digital goods by sending a single text message to a short code, after which the amount is charged to the mobile user’s phone bill.

2)     Direct Carrier Billing (DCB for short, also known as Direct Operator Billing or DOB) – With this online payment method, anything the user buys is charged to their mobile phone bill via mobile internet or Wi-Fi. Payments are made through mobile operators, with whom the users already have a trusting relationship. DCB doesn’t require a registration process, short numbers or long form fills like the ones needed for credit cards. It’s a fast, simple, one-click procedure. The best part? Transaction costs are minimal, there are no hidden fees or additional costs involved in the payment process. Besides, most popular online app stores (e.g. Google Play), digital merchants, social networks, and other content providers support DCB.

3)     Premium IVR (Interactive Voice Response) or Premium Voice – This payment method requires the user to make a call to a premium number to buy goods or services (e.g. entertainment services, live TV shows, etc.). The user then interacts with a company’s host system via a telephone keypad or by speech recognition. With premium phone numbers, users can also vote (e.g. at Eurovision Song Contest), or use them for donations and other micropayments. An IVR system can handle large call volumes and is more intelligent than many predictive dialer systems.

Interested in opportunities with mobile payments?

If you’re looking more info on these payment methods and how you can use them for monetization, feel free to contact us for more info.

You can also connect with me on LinkedIn to start the conversation.