Direct Operator Billing is getting a lot of attention of late. Why wouldn’t it with all its advantages. But is it really the next wave in Mobile Payments and is is their still space for Premium SMS and and other alternatives going forward?

Direct Operator Billing allows for customers to experience true one-click mobile billing and make digital transactions without sending a Premium SMS message to a short-code. Premium SMS requires a text message to be sent and received to bill the customer.

Co-Existing with Direct Operator Billing

I personally believe Premium SMS, WAP billing and Credit Card payments on mobile will co -exist with Direct Billing, at least for the short to medium term anyway.

Premium SMS will still have its suitability for interactive events like American Idol and X-Factor where the user is required to send a SMS message to vote. Premium SMS will also have suitability for smaller service providers that cannot get approved for Direct Billing, don’t have the traffic levels, nor have a suitable service. P-SMS will also be prevalent in markets where Direct Billing is yet to make it’s mark or even roll out. e.g. parts of South America, parts of Asia.

The reality is that mobile payments companies face the challenge of high mobile operator rates. Mobile operators charge roughly 30 to 40% to process transactions made via mobile, making it very difficult for mobile payment companies and service providers to move beyond just virtual goods and mobile content. To avoid these costs, Mobile Payments and Mobile Aggregator, txtNation has direct relationships with the mobile operators in multiple markets around the world, as a way of passing on higher revenue share to the service providers.

The current main methods for charging for mobile content and digital services include:

Premium Rate SMS
Credit Card

There are many forms of Premium SMS but the most common is the reverse billing mechanism where the user is charged for receipt of a Premium SMS message. This process involved a user sending a message to a short code to trigger the billing event. Payouts from Premium SMS result in operators taking up to 40% of the users billed amount.

Credit Card transitions on the mobile device are subject to many drawbacks including a low conversion rate due to users filling out forms at the point of purchase. The larger issue being that it does not cater to everyone – not every mobile user has access to a credit card or wishes to pay such small amounts for a one time transaction.

The new kid on the block. Direct Operator Billing seems to address head on the drawbacks of customers completing purchases on off-portal sites.

Direct Operator payments use the operator’s own billing system in much the same way as Premium SMS. Unlike Premium SMS, however, it does not involve a series of network messages that can lead to potential revenue leakage. With Direct Operator Billing, purchases can be uniquely charged and listed on the customers bill, thereby reducing complaints and reducing operator costs. This in turn allows more resources to be directed to content creation and promotion.

Direct Operator payments also has many technical and commercial advantages over other mobile billing systems.

In terms of making Direct Operator Billing more widespread and mainstream then nevertheless, it will only replace Premium Rate SMS ‘if’ it can be demonstrated to be commercially attractive for both the content owners, mobile aggregators and the mobile operators. For example, Nokia’s Ovi store is now completely integrated with Operator Billing in markets where it is available and Premium SMS where Direct Billing is yet to be launched.

The future for Direct Operator Billing

By 2020, Direct Payments will have expanded content owners’ revenues from US$5 Billion to nearly US$40 Billion. This is something that cannot be sniffed at, especially considering the other ways to pay in the mobile market. The move to this billing mechanism will for sure happen, used for certain services, but Premium SMS and Credit Card will remain until Direct Billing is i) easier for approval, ii) more mainstream – will the mobile operators push this like they have for Premium Billing as a primary billing option iii) and available in more markets.

Direct Billing will encourage market development and stimulate revenue growth both for the mobile operators and the content owners. Thus, by 2020 the operator revenues generated from Direct-to-Bill will be more than double the amount they can expect from Premium Rate SMS.

txtNation, leading Mobile Billing provider, claim that no other payment experience allows for a true one click purchase like Direct Billing provides. Who can argue with the facts, with complete visibility, more flexible charging, higher payouts, less revenue leakage and simple customer care. All part of the reasons why txtNation are backing this revolutionary mobile payment platform.

As has so often been the case in telecom related services, the charging and payment mechanisms have become the most important point of the chain, to which the success or failure of the industry itself hangs.

The future looks set to embrace Direct Operator Billing, of which will co-existing with Premium Rate Billing which is here to stay for a long time to come.

Author: Michael Whelan, Director, txtNation