KEY POINTS

  • Carrier billing allows mobile users to buy digital goods like ring tones, music, apps, e-books, and in-app purchases by adding the cost of the purchase directly to their mobile bills. While carrier billing is very simple and seamless from the consumer's perspective, it depends on a complex set of relationships between wireless carriers, app stores, platform vendors, and app developers. Those relationships also vary substantially country by country, depending on each market's mobile ecosystem.
  • Though it's often associated with emerging markets, carrier billing companies actually make most of their money in developed markets like North America and Europe. The reason users like it in developed tech markets is that it's an extremely low-friction way to pay. Since your carrier already has all your payment information, there's no need to create a new account or deal with layers of authorizations.
  • But carrier billing's huge opportunity is to help carriers and developers monetize mobile users in the developing world. In emerging markets like India, where mobile penetration is high, but hundreds of millions of people lack credit cards or bank accounts, carrier billing has especially big potential as a way to get more people paying for apps, music, and in-app purchases on mobile devices.
  • How big is the opportunity? We speak to executives from four leading companies to get a feel for the market. In terms of numbers, we estimate carrier billing powers $3 billion in mobile transactions, or 12% of the global market for mobile digital content. In 2017, we think carrier billing will up this share to 22%, for $13 billion in mobile transactions. Carrier billing is seeking to handle a bigger and bigger slice of this market, much of which is funneled through credit card purchases on the main app stores, Google Play and Apple's App Store. Carrier billing can work within the app stores and outside of them, but so far only Google Play has shown an interest in working with carrier billing.
  • Carriers are beginning to lower their once-prohibitive fees for powering carrier billing transactions, in the hopes of seeing revenue explode as more people adopt it as a payment method. Mobile operators charge fees between 25% and 40% of the total cost of purchased goods. But as carriers struggle to maintain revenue, and [...]