State of the Nation – from World Telemedia 2013

There’s no denying the Premium Rate Services (PRS) market has had a difficult year. Unlike previous economic blips, the sector has not been recession proof, as the sustained pressure on the consumer’s cost of living has altered consumer attitudes towards small value spending, whilst the growing prevalence of free content and over 130 rival payment types is forcing provider to demonstrate more value.

During 2012, the UK Mobile market grew by 4% and Payforit 19%, whilst fixed line services saw a 14% decline.  Regulatory hardening in recent months has also injected a new market risk and the resulting market paralysis that followed the regulatory response to rogue affiliates is likely to show sharp market decline when 2013 revenues are reported.

On a wider European level, EU regulation has introduced new threats to the markets of all member states, with examples of such threats clear in the proposed redraft of the Payment Services Directive (PSD). According to market analysis, this will cut PRS sector revenues in half as early as summer 2014, unless providers join forces behind the AIME campaign to convince a majority of EU member states to vote the proposal down.

Despite this difficult backdrop there are prospects on the horizon. OpenMarket has been key in driving growth of 17% in the Charity sector, whilst providers IMI and Velti have been at the forefront in driving growth of 152% in the ‘other entertainment’ services vertical. Mobile personalisation also remains a growth sector with a 7% growth reported in the most recent market research.

Elsewhere in Europe, PRS markets have sought to evolve to provide billing for quasi-physical goods, tapping into the consumer requirement for low friction purchasing of everyday necessities, such as travel tickets, toll roads, vending and parking.  In Sweden, PRS has enabled bus drivers to dispense with carrying cash, reducing the incident and risk of robbery while reducing boarding queues. In Eire, PRS also proved a more convenient method than that of physical cash, with Oxygen 8’s joint venture with O2 providing 10,000 daily toll road users with the option of a charge to mobile bill payment channel. Without the current threat of PSD, this success could be repeated in the UK.

PRS still holds all the cards when it comes to customer acquisition, with some mobile gambling providers reporting conversion rates of up to 70%, far higher than any rival payment types on offer. The mobile gambling market itself is a behemoth, with mobile-billed revenues exceeding growth of 50% on last years’ figures, as new markets such as mobile in-play sports betting begin to swell. 29% of user now access betting services via smartphones, providing a fertile ground for sector leaders txtNation, backed by a strong suite of international connections, to provide the global coverage that gambling operators increasingly require.

The continuing challenge for PRS remains in tapping the $100B potential of this worldwide market, as gambling operators are habitual in moving consumers on to debit or credit card for future deposits and wins. For this to change, improvements to mobile payout rates, know-your-customer verification capabilities, and cross-network account crediting capabilities need to be discussed and developed.

In much a similar fashion, the Publishing market presents a growing opportunity for PRS billing. With digital circulation increasing by around 275% and online advertising securing only a fifth of the revenues achievable from a similar print based campaign, there has been a resurgent interest in publisher paywalls.  The success of the Financial Times’ to bill directly for online content has this year led publications such as the Telegraph and The Sun’s to introduce paywalls.

Results have reportedly been mixed with The Sun, whose payment consultant (we are told) omitted to advise them to introduce a charge to mobile payment route, causing a sharp decline in circulation, contrasting with the other publications who have echoed the Financial Times success. Executed correctly, charge to mobile is well placed to cater for main and niche digital publications, high quality editorial analysis or customized content delivery in the form of subscriptions or pay per page billing.

Thinking outside the box to pair services naturally accessed on mobile devices with a streamlined consumer payment experience is now imperative for success, as innovators Impulsepay have demonstrated through the use of the Payforit Scheme to open up new niche verticals such as WiFi access on Virgin trains, and premium access features on leading room site website,

With the imminent launch of Payforit 4.1 due to bring a seamless charge to mobile billing experience to the exploding Gaming App market (worth $70 billion worldwide), this could well be the next success story.

There is work underway to stabilise the market, continue collective discussions with mobile networks and open discussions with App Stores, regulators; and market players in different verticals. The full degree of success relies upon all providers joining AIME; strengthening the collective industry voice and speeding up the pace of change. This support is not about philanthropy; members stand to gain and it can be no accident that the leading industry successes are being driven by AIME members.