Carrier Billing. Unlocking the Opportunity through Outsourcing. Featuring a customer case study from Yoigo, Spain.

Transcription

1 Carrier Billing Unlocking the Opportunity through Outsourcing Featuring a customer case study from Yoigo, Spain.

2 Direct carrier billing is the market opportunity that could generate $14 billion for operators inside five years. There s a huge array of digital content out there waiting to be connected to your billing systems. (Source: Juniper Research) But this is technically complicated, timeconsuming and expensive to do in-house. In this white paper, you will find out how outsourcing can unlock this amazing potential and make it: Simple Affordable Fast Compliant Future proof Transparent Introduction Why operators are exploring non-core telco services, and how best to build them Today s mobile content market presents a huge opportunity for mobile operators. The arrival of the smartphone has changed the way consumers get their entertainment. They listen to music, play games, read e-books and watch TV on the go. It s all very different from the PC-led approach that dominated little more than five years ago. And there are obvious reasons for the switch. One issue remains: how to pay for these services? Not everyone has a credit card. And even those who do don t always want to use them. There are security fears. And the user experience can be poor. Carrier billing presents a compelling alternative - one that can bring vast new revenues to operators, and tremendous brand visibility too. The first is the emergence of the app store. This solved the distribution problem in mobile content. Suddenly content makers could reach millions of people from one or two portals. Then there is 3G/4G and always-on data. As consumers have become used to mobile broadband, they have grown more comfortable with downloading and streaming content on their mobile devices. 2

3 Analysis by Juniper Research revealed that content paid for via carrier billing could deliver more than $14bn to operators over the next five years. It says this will come not just from mobile, but also from services offered on tablet, console and smart TV. But delivering it is not straightforward. To connect (potentially) hundreds of content partners, every operator needs to ask: Do I have the APIs to connect my network with merchants? Is every service compliant with local regulations? Can I find the best content providers? Can I easily on-board many different merchants? Can I make sure hundreds of diverse content providers are remunerated fairly and on-time? Will I be able to generate accurate real-time activity reports? Can I be sure that end-customers get a good and ethical experience? These are all time consuming considerations, requiring expert knowledge and skills. It s why more and more operators are discovering the power of managed services using SaaS (software as a service). Forward-looking carriers are already working with specialist partners like Netsize to speedily enable hundreds of content services for charge-to-bill. But it s not just about speed and convenience. Outsourcing is also cheaper. In some cases, it can cost half as much to run (once CAPEX is taken into account) as an in-house solution. In this report, you will discover the many benefits of managed services to a specialist intermediary. Specifically how managed services Can be cheaper than in-house solutions Bring in more revenue than in-house solutions Connect operators to hundreds of content partners Speed up on-boarding of new merchants Give operators a real-time single view of content activity Put the operator brand into millions of consumer transactions Remove the hassle of compliance, customer care and complex merchant pay outs The $14bn potential of carrier billing More and more operators are working with digital merchants to give customers the chance to pay via the phone bill Much has been written about the benefits of charge to mobile. As a channel it can reach the unbanked and underbanked - and there were an estimated 100m unbanked people in Western Europe alone in 2013 according to MasterCard. It can also offer a better user experience than card payments. People can make payments merely by entering a mobile number. Indeed, in some instances, the phone can automatically identify the user. This makes it possible to reduce the payment process to a single click. It can also be very safe, when used in association with a one-time password sent to the user s phone for verification. Live services have shown that these benefits can significantly increase paid conversion rates when compared with credit cards. And carrier billing can also support extras like recurring subscription billing. Thanks to the explosion in app-based services, there s now a fabulous market opportunity for carriers to make the most of their billing relationships with millions of customers. 3

4 Value added services option 1 In-house content management It is possible for a mobile operator to build its own systems for connecting and managing merchants. But it is complicated Mobile operators have been active in value added content since the first ringtones emerged 15 years ago. But to be honest, these projects were not too successful. Many mobile content storefronts offered a poor user experience. Discovery was difficult. Downloads were slow. Product information was scarce. In truth, it was all a little early. The phones and the data networks could not support slick retail portals and speedy downloads. Today, the situation is different. Those conditions do exist. Yet it s Apple, Google, Microsoft, Amazon and a few others that control the retail experience. But operators still have an opportunity to work with content merchants. They can connect them to their billing networks. The question is: should they do this in-house? Of course, it is possible for a mobile operator to build and run such a department. This team has to provide the following functions: On-boarding and connecting every new merchant Developing the billing APIs to connect these content providers Ensuring these APIs are regularly updated to support improved features Building a dashboard to monitor realtime transactions and other activity Keeping up with local regulations and staying compliant Collecting and distributing revenues However, history reveals how difficult this is. In reality, a telco needs to allocate budget and personnel to the operation and often other in-house projects get priority. As a result, platforms can be neglected. It becomes hard to scale the content services or to add exciting new features as they emerge. Meanwhile merchants find themselves having to access multiple APIs and agree different terms with every operator. It s not unusual for an operator to simply be unable to answer every question a merchant has. Ultimately, value added services are not the core business of an MNO even though they are becoming more strategically important. Of course, the technical and commercial considerations of merchant and operator are not the only ingredients in deals of this type. There is also compliance. Thanks to many bad practices, individual countries have their own regulators, each with their own rules. So, for example, some regulators will have rules around stop commands in PSMS messages. Others may insist on a specific design of check-out pages. These rules can and do change regularly. It takes an expert to stay on top of these amendments. A failure can result in a fine. And ignorance is no defence. 4

5 Value added services option 2 Value added services option 3 Working with on-demand systems integrators When in-house systems fall short, an operator can call in an IT provider to keep the business running in the short term. But there are downsides Calling in short term help with value added services is flexible, of course. It means the operator doesn t have to commit to an on-going service contract. But it s also expensive, and comes without a commitment to future maintenance, service improvements or business development. Typically, an operator will call in a systems integrator to assist with the on-boarding of merchants. The operator may have some relationships with the content providers, but lack the resources to connect them. In most cases, the service provider will be a large global IT company that may already work with the operator on infrastructure projects. They may prove very capable of on-boarding merchants. But they will invariably know little about regulation, compliance, consumer trends and user experience. They will also lack the ability to bring new merchants to the attention to the operator VAS team. Managed services This is a pain-free alternative to building in-house solutions. And it s more affordable and future-proof than working with short-term technical partners If you don t wish to create an internal system to manage merchants, and you don t want to rely on just in time contract partners, managed services is the logical route. Outsourcing some or all of your merchant connections to a specialist third-party comes with some compelling benefits. You can be sure that: You will have potential access to hundreds of merchants worldwide Your managed services partner can on-board new merchants in days Any new content service will be fully evaluated before going live Merchants will pass technical and compliance checks You will view real-time transactions on a web-based dashboard You will have the power to control your content services. You can block merchants, terminate subscriptions and so on Your managed service will constantly update with improved features All players in the ecosystem will be paid accurately and on time The acceptance of outsourcing In virtually every market sector, businesses are choosing to hand over operations to specialist providers The emergence of the cloud and software as a service has transformed the way business works. Most large organizations do not run their own servers or program their 5

6 own accounting systems or build their own CRM systems. Instead, they pay modest subscription fees to expert partners. According to a report by Markets and Markets, the global managed services market will increase in value from $ billion ( 69 billion) in 2014 to $ billion in In its study, it revealed that managed services can reduce recurring IT costs by between 30 and 40 per cent, while delivering efficiency improvements of 50 to 60 per cent. Of course, mobile operators are part of this change. Another market analyst, IHS, says worldwide telecom outsourcing revenue stood at $66.6 billion in While much of this came at the equipment and infrastructure level, outsourcing applies across all areas of a mobile operator s business. That includes value added services, as telcos explore new digital revenue streams. Two managed service options A purely technical integration or end to end Operators can pick and choose the service level that s right for them All operators are different. Some already have good and longstanding billing connections to major digital merchants. That s fine. In these cases, a managed services provider like Netsize can offer a technical integration. Here, the operator retains control of the commercial side. The integrator, meanwhile, looks after the on-boarding of new merchants. Netsize NOS: a modular system Netsize offers services on a sliding scale to suit the needs of a given operator. At one end, the modular offering works for the new MNO/MVNO with no technical or commercial background in billing for premium services. Typically they will have no APIs available to content providers. Outsourcing is especially compelling here. Managed services specialists can plug in their own APIs, so that merchants can quickly connect to operator billing via native and web apps or even the desktop web. And they can do so across various models, such as pay per use and subscription. But NOS also serves the experienced carrier with a history of content partnerships, which may need purely a technical integration with merchants. Thus, Netsize s modular offering comprises four levels: Platform The ability to connect the merchant to the operator network, provide payment records and data management. APIs Netsize can offer a variety of APIs for hooking many different products into an operator s billing systems. They include in-app billing on Android, web apps, ISP billing and more. Service controls For operators who want more than just technical integration, Netsize can offer many features for controlling the customer s experience of value added services. Features like the payment flow, limits on subscriptions and spending caps. Needless to say, they all conform to local regulatory rules. Smart tools Operators and merchants who request a real-time dashboard of activity can have one. These tools reveal exhaustive and searchable records of activity across the network. 6

7 How managed services work in practice Merchant on-boarding explained At present, Netsize has on-boarded more than 2,000 merchants in over 50 countries to more than 150 operators. This process typically takes from two days to a few weeks for each new partner. Here s how a merchant signs up to Netsize Operator Services. 1 Welcome message. Merchant requests sign-up details. Netsize sends documents, which are completed and returned. 2 Security configuration. Netsize reviews the registration of the content provider. 3 Technical information. Netsize checks the technical specifications, generates a new account, and registers the merchant on the system. 4 Approval. Netsize defines and approves the type of services being offered as directed by the operator. 5 Service provisioning. Netsize defines the name, pricing flow, User Experience, compliance limits etc of the new service. 6 Testing. A new test account is created and tested. 7 Integration support. At this stage, any issues regarding the billing APIs are addressed. 8 User acceptance test. The new service is tested across multiple devices and platforms. 9 Service validation and launch into production. Giving operators and merchants control Carriers and content providers can use Netsize tools to identify problems fast and act on them immediately It s very important that consumers are protected from bad practices. That goes for any market sector - but especially in value added telco services, where rogue traders have generated bad publicity in the past. Managed services companies like Netsize stay in constant touch with industry regulators. They also perform passive and active audits of merchants every month. Even more important, they allow operators to retain control of the services using their billing systems. Similarly, they help merchants to police rogue end-users. These controls include: Consumer fraud checks Subscription spending limits Retry thresholds Consumer blacklisting Automatic termination of subscriptions after a number of failed retries MSISDN recycling Subscription duration limits Possibility to unsubscribe via MO Event limit per period SMS notifications of subscription reports To give operators a single real-time view of all the activity on their networks, Netsize created a dashboard: the Netsize Business Manager Tool. From one screen, operators can instantly see what s happening on their network. Every service, every service type, every customer. They can use it to: Block or unblock merchants Block or unblock services Filter, search and terminate subscriptions See all transactions and traffic Refund transactions Create, save and export reports View user profiles 7

8 Case study: Yoigo Spain Outsourcing is already working well for a number of mobile operators. Here, Jesús Ramírez, product manager at Yoigo, talks about his experience of using Netsize Operator Services In 2006, Yoigo set out to provide Spanish mobile users with a new and different option, basing its communications and services around what it describes as honesty, transparency and simplicity. The approach served to make Yoigo the fourth largest mobile operator in the Spanish market. In 2014, it signed up its four millionth customer.. From day one, the business model was based around outsourcing. Yoigo wanted to keep its team small and focus on selling and marketing its brand and it services. That meant outsourcing all non-core business to partners. Here, Jesús Ramírez, product manager at Yoigo, talks about his experience of using Netsize Operator Services. How did you manage your content partnerships before working with Netsize? Actually, we were not managing any content partnerships before. The company staff target is very small, below 100 people, so we don t have the structure and resources to do this ourselves. Instead, we have a very strategic model based on working with partners, but with us defining the rules for how they work. So we started from scratch with this solution. The first phase came in 2007, when Netsize (IPX at that time) connected our first PSMS customers, and after that there was WAP. Now, we provide carrier billing for many different online services. Which industry verticals do you address? Apps, games, books, TV, music and also tarot, dating and so on, all of them from content providers. We re also looking at ticketing and parking, etc. How many content providers are you now connected to via NOS? Today we have over 70 CPs doing traffic in Yoigo, and almost 100 technical accounts. We can support direct billing, SMS onetime, SMS subscriptions, and also mobile (WAP) one-time and subscriptions. What kind of customer/technical support do you receive from Netsize? They provide the complete service to content providers. We define the commercial rules, but Netsize looks after the contract, validation, technical integration, activation, day to day operations, settlements, payout to content providers, reporting and statistics. Netsize offers its customers a Business Manager Tool dashboard that shows real-time activity for all the content providers. Do you use this? Not yet. For the moment, Netsize provides regular reports - and this is fine for us. I look after other issues, so I m pretty busy. I trust my partners! However, we have defined strict procedures to control our partners work. At the moment, I am assessing the Business Manager Tool. I can see the benefits of it. How often does Netsize introduce new content partners? Every week they propose new potential services to be added. I assess them and we agree to go ahead or not. They constantly suggest new business ideas and improvements to the service. What kind of new ideas? Well, ticketing and parking are interesting. To be honest, Spain is not as advanced here as other countries, so we have to wait till the market is ready. There are also issues around the regulation because parking, for example, is controlled by many different local authorities. But this is where Netsize can help, because it has experience in other markets. 8

9 Has your revenue from value added services grown? Yes it has. But it s not straightforward. As many people will know, the PSMS market used to be inflated by some unscrupulous providers. We worked with Netsize to introduce new controls on this market to reduce bad debt and give consumers much clearer information when buying content. That s reduced revenue there, but obviously we believe other areas/services can grow. What do you look for from new content services? Well, we have guidelines. So, for example, we don t permit adult services to use Direct Carrier Billing. Otherwise they have to be the kind of products that fit with our positioning. And we re quite careful with price. We can t allow services from content providers to charge much more with mobile billing than they would on the desktop internet. Summary In every market, operators are waking up to the immense potential of opening up their billing systems to digital merchants. At the same time, they recognize that it is expensive and complicated to do this in-house. They are already outsourcing the management of their equipment and infrastructure to expert third partners. Now, they are doing the same for value added services. Here are eight reasons why: 1 It s simple. There s one connection for hundreds of merchants 2 It s affordable. There s no upfront investment required 3 It s uncomplicated. No need for in house technical resources 4 It s safe. Services always comply with location regulations 5 It s high quality. Instant access to an international array of the best content providers 6 It s fast. On-boarding of new merchants takes days or weeks 7 It s future proof. Managed services experts stay on top of new market innovations 8 It s transparent. Operators and merchants can use dashboards showing real-time activity If you would like to know more about Netsize Operator Services, contact your local friendly sales person, or About Netsize Netsize powers micropayment and messaging services for operators. We help our customers to monetize mobile services, improve brand awareness, acquire new customers, manage customer relationships and optimize business efficiency. The Netsize payment network connects more than 1000 companies to over 160 mobile network operators and reaches more than 2 billion consumers. Netsize all rights reserved - January