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May 3, 2016updated 06 Sep 2016 2:10pm

Mobile network operators could miss out on $142 billion mCommerce revenue

News: Old billing systems and other tech barriers could see operators lose out on mCommerce market share.

By Alexander Sword

Mobile network operators (MNOs) are at risk of missing out on a $142 billion revenue opportunity in mobile money and mCommerce if they fail to address billing system shortcomings and overcome other technical barriers.

A report conducted by Ovum and commissioned by DOCOMO Digital warned that significant technical barriers stood in the way of MNOs monetising the opportunity.

Mobile network billing systems are currently unable to comply with the standards of merchants, it warned. The operators would be required to add new components to their billing systems to enable third-party payments to be charged through sol called ‘carrier billing’ in which the operators charnge and bill users through their phone bills.

In addition, the amount of mobile traffic travelling over wi-fi could prevent operators from being able to charge.

Some of the main obstacles Ovum saw to these revenue streams being realised were a lack of profitability and the hostility of operators and merchants to cannibalisation caused by carrier billing.

Also in the way were governmental obstacles, such as unfavourable tax regimes that impose duties on money flowing out of a country, as well as taxes added post-sale. In addition, many jurisdictions have regulation limiting the uses of carrier billing.

The report called for regulators to lower barriers to boost financial inclusion and provide a greater local stake in global eCommerce.

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Citing carrier mentality and attitudes as a problem, it added that operators should recognise the assets they have available and proactively prove to merchants the strong business cases.

If these issues could be overcome, Ovum identified two main opportunities: carrier billing and mobile money. Carrier billing means paying for services or goods by having the cost added to a mobile bill, with examples in the past including paying for add-on products such as new ringtones.

Ovum identified several major areas of growth in carrier billing, including OS app stores, indie stores such as the Amazon app store and spending on online PC fames.

Mobile money, which Ovum says is having a much larger impact on finance than carrier billing, means a carrier offering separate prepaid accounts from which users can make payments. This form of payment is already being widely adopted in developing countries such as Kenya and Uganda where traditional finance is not available.

The prediction is that these revenue streams mean carrier-driven payments could equal 11 percent of mCommerce revenue, or $142 billion, in five years.

Otherwise, if these obstacles are not navigated, carrier-driven payments as a share of total mCommerce spend could fall from 4.1 percent in 2014 to 0.8 percent in 2020.

Mobile operators, regulators, merchants, and other market stakeholders must take a more collaborative approach to seek out opportunities for carrier-driven payments, prove their business case, and lift the barriers holding them back. And it is up to operators to lead the charge in this respect,” the report said.

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