Turkey Mobile Payments: From Gold Coins to Carrier Billing
To facilitate trade between the east and the west in the 4th Century, Constantine the Great established the gold solidus as the standard of currency. This coin retained its status for about 1,000 years. In its most flourishing periods, the Byzantine state may have produced as many as several hundred thousand gold coins and a million or more copper coins each year. At that point, coinage became the standard for global trade.
Once again, the land of Constantinople may be re-inventing the world of financial liquidity. Carrier billing — paying for something with an extra charge on a mobile phone bill — has historically been limited to purchasing digital goods like video game credits or digital media. In Korea, Japan, Russia and Scandinavia, where carrier-billing fees are low enough that ecommerce, transportation, and ticketing merchants have adopted, the technology is more widely used. But to date, there have been few mass-market examples of carrier billing for offline, physical goods. That’s starting to change, and carriers and merchants in Turkey (along with those in the UK through Boku’s e-Money initiative) are among the first to make carrier-billed payments available for nearly any product.
Working together to drop fees:
Turkish mobile carriers once charged a 20%-30% fee for the use of billing. In some cases, that’s nearly 10 times what merchants pay in credit-card processing fees. As a result, brick-and-mortar merchants stayed away. Dropping the fees to a more credit-card-like 2%-3% was untenable to carriers. Yet they finally reached a deal.
How? The carriers, merchants, and local telco service provider 3pay worked together to find the benefits for the adoption of carrier billing. Partnerships — rather than profits — could create a better user experience, an increase in customer loyalty, and marketing promotional value for each party.
Merchants realized they could attract a younger customer base, offer a better user experience than credit cards and cash, and build brand affinity through a cool, new technology. Carriers wanted the brand affiliation with merchants but also a new revenue source for their networks. As voice and data sales decline, carrier billing offers another way to exploit carrier infrastructure and customer relationships. Both parties compromised on fees. The results have been remarkable to anyone who has worked in or followed the history of carrier billing.
The Revolution is Real – From Gas Stations to Pizza Hut:
Pizza Hut was the pioneer in accepting the new carrier billing fees. It implemented carrier billing to consumers ordering online, on the phone, and in the store. The online and mobile integration increased new paying users by nearly 10%. The conversion of customers who use carrier billing while calling in and order has exceeded even that. When a someone orders a pizza on his mobile, the call-center agent can simply ask the user if he would like to pay by phone. If the user accepts, he receives a text message and immediately replies ‘yes’ to accept the charge. There’s no credit card information to share. It also reduced risk of nonpayment for Pizza Hut — a problem it often encounters with students.
Turkcell and Shell launched the first use of carrier billing at a gas station so that users never have to get out of the car. First-time users must register their license plate and phone number at the Shell store. Then, after the attendant has pumped the gas, they enter the phone number at the register, and the user confirms the text payment. The customer never has to leave the car – imagine how convenient that is when the baby is in the back seat! A large marketing campaign attracted new customers to try the technology, but users returned because subsequent purchases were so easy. Shell and Turkcell also ran marketing promotions sending consumers text messages to lure them back to the same gas station. It worked. They came back again and again. In an industry that typically competes on price, this kind of single-station loyalty is almost unheard of.
The Future – Growth in Turkey and Beyond:
Carriers have achieved so much success they are now increasing spending limits for users and working on ways to further reduce their fees. This should entice even more merchants to sign on. Meanwhile, existing merchants are actively marketing their ability to accept these payments and winning new customers as a result. Turkey’s businesses took a big risk to adopt carrier billing. The reward has been so great, they are working to make it a standard payment method, just as they did with coinage.
It is this kind of cooperation between merchants, carriers, and carrier billing providers that will continue to change the way consumers look at their mobile phone numbers around the globe. Boku is already leading that charge across Europe with its e-Money initiative that started in the UK with Vodafone, O2, and EE. These carriers allow for any purchase of any type of good. As Turkey has shown, the opportunities for real world, carrier-based payments are limitless.