An issue I’ve been giving some thought to is how can it be proven that charging Internet-discovered, electronic goods to the mobile phone bill (whether through premium SMS or direct to carrier bill) is a good idea for the online merchant and more importantly, an idea that will increase their revenues? In this article, this method of charging is what I refer to as “mobile billing”. To give a practical example – would an electronic publisher selling online access to their newspaper, make more money and get more customers, if they also allowed potential customers to pay for the product using mobile billing?
Instinctively, many people in the mobile billing industry think the answer to this question is yes, the online publisher (Netflix, The Guardian, William Hill, Sony) would undoubtedly attract more custom and generate greater revenue. However, as an industry (at least in the UK and the US), we haven’t been able to prove or normalise this billing method so far. If we had, there would be many more examples of online merchants accepting mobile payment and mobile billing revenues would be rising significantly and in line with mobile Internet consumption. As it is, phone-paid revenues are falling in the UK and US. So, we must be doing something wrong. What is it?
Ultimately, online merchants with no background in mobile billing need to be shown the empirical evidence. Why should they go to the time and expense associated with integration, and incur the costs charged by mobile aggregators otherwise? How much more money will they make? The vicious circle is created by the fact that the aggregator needs a merchant to use mobile billing and share the results, before they can provide the answers to these questions. So, the merchant wants the proof from the aggregation community in order to try it out, but the aggregation community needs to add mobile payment capability to a merchant site and have that merchant selflessly share the analysis on what impact this has on revenues, abandonment and comparisons with other payment types, in order to prove the concept.
Before we get the proof, we need to therefore get buy-in from a merchant that it’s a good idea to even try out mobile billing. To do that, we need to articulate the benefits more clearly.
More than ever before, I think there are some compelling reasons why online merchants should now, at least, try out mobile billing:
1. The potential financial pro’s far outweigh the cons.
With aggregators so sure of the results if online merchants would give it a chance (I’m aware of a big name company seeing a 300% uplift in micro-transactions on their site by adding mobile payments as a payment option), many will waive set up fees to reduce any financial barrier to entry.
Worst-case scenario is half a day of merchant developer time is spent integrating with a standard billing API. Best-case scenario is a three-figure increase in transaction volumes as a result.
2. Online basket abandonment of around 60% and visitor conversion rate of less than 6% surely necessitate incorporating easier alternatives?
According to IBM’s Benchmark Cyber Monday Report 2011 (US Retail), as well as many other reports, abandonment rates once consumers get to the checkout are very high. To be clear, this is consumers who decide they wish to purchase but when they get to the payment page, decide against it.
Paypal research puts this down to factors including consumers being unable to find their preferred payment method (24%), concerns around providing their bank details (21%) and a lack of money to pay with (36%). Mobile billing can address each of these issues:
Payment method – an additional payment method will therefore reduce abandonment
Providing bank details – solved by only having to provide a mobile number
Lack of money – for post-pay/ contract users, mobile billing provides an interest-free credit facility!
3. Abandonment issues will become even more acute as mobile Internet usage as a proportion of total Internet usage, continues to surge.
If argument 2. doesn’t convince you, how about the following:
KPCB say mobile-accessed Internet usage is now above 10% of total Internet usage globally whilst in India, the mobile is more prevalent for accessing the Internet than a desktop device (PC or laptop). Facebook confirmed, in their IPO filing, that 50.3% of access to their site is now via mobile.
The point is, if you think poor conversion rates are an issue in the desktop environment, they’re a lot worse again where the consumer accesses your site via a mobile device. In many cases, that’s now more than half of the time and growing. It stands to reason – providing card details can be a pain at the best of times. I would probably provide them on my laptop. I would perhaps consider providing them through my iPad. I wouldn’t dream of providing them through my mobile device. Even if you feel it’s safe and you have a card, it’s way too much hassle, particularly for smaller-value transactions with merchants who you don’t trust to save your details (i.e. most sites other than Amazon).
The same IBM research backs up the point – of the 10.75% of users accessing their online merchants via a mobile device, the conversion rates drop by almost a half – from the 6% mark (5.71% to be precise) to 2.99%.
4. Accepting mobile payments can offset or overcome falling advertising revenues.
If you accept that accessing the Internet is becoming more prevalent via mobile than desktop device and you accept Mary Meeker’s Internet Trends 2012 figures, which state that advertising revenues are five times lower where a user is on a mobile versus a desktop, alternative means of monetising mobile usage of sites must be enabled. Whilst improvements to the context and quality of mobile ad serving will no doubt improve mobile advertising revenues in time, it’s hard to see how they can ever achieve parity with those derived from desktop-Internet access. That’s where accepting mobile payments comes to the rescue. You could certainly arrive at that conclusion as to why Facebook have now launched mobile payments.
In conclusion, mobile payments won’t benefit all online retailers. However, if the transaction value is relatively low and conversion rates could be better, then it makes sense to test it out, particularly as Internet consumption continues to migrate to mobile. In the right environment and verticals, it will lead to a massive uplift in merchant revenues. Hopefully the visionary early adopters will be kind enough to share their results and in future we can prove it’s a good idea rather than just providing reasons why it might be. If there are any visionaries who have already done this or do so in future, I’d be very interested in hearing the results.