Direct Carrier Billing: The New Way to Pay?

BY AVIRAM EISENBERG NOVEMBER 29, 2018

If asked which technology had owned up to its promise to simplify the lives of its users, few people would point to the cell phone. With the relentless barrage of emails, texts, account balance alerts, and voicemail messages, the cell phone seems to have given us more to do rather than less. Even mobile payment processing has become a confusing mesh of technologies that do not always get along well with others. For once, wouldn’t it be nice if your cell phone offered a way to actually saved you time?

Now it can.

One not-so-new technology has evolved into a tool that can make your cell phone a real time-saver. It’s called Direct Carrier Billing (DCB), and it may well set the new standard for how we pay for things.

What is Direct Carrier Billing

Also known as Direct Mobile Billing and Direct Operator Billing, DCB allows anyone with a mobile phone to buy goods and services using only their cell phone number, with the purchase costs being added to their cell phone bill.

Like many fantastic ideas, DCB had humble beginnings. Originating many years ago as a convenient way to buy ringtones and wallpaper by adding their cost to the user’s phone bill, DCB has evolved into a fast, convenient, and secure means of paying for a wide variety of goods and services.

In order to use DCB as a means of making payment, the user’s cell carrier must offer DCB as an option for the user’s account. Rather than process purchases directly, most carriers partner with 3rd-party service providers, known as Electronic Money Institutions (EMI), which facilitate payment transactions between merchants and carrier providers.

While not all carrier providers, also known as Mobile Network operators (MNO), offer the DCB option to their customers, most major providers already do so, with others onboarding at a rapid rate. Also increasing is the number of EMI companies and the number of retailers they serve.

When a customer makes a DCB purchase using a pay-as-you-go cell phone account, the costs of their purchases are added to their monthly bill. For carriers that offer DCB to their prepaid clients, the customer’s prepaid account balance is reduced by the amount of their purchases.

Benefits of Direct Carrier Billing

DBC offers a full menu of benefits to customers and retailers alike.

Simple to Use

Customers do not need to register for a new service, and they do not need to install additional software on their mobile device. DCB simply appears as an additional payment option when checking out, provided the carrier offers DCB for the type of account the customer uses.

The most obvious appeal to customers is the ability to make purchase transactions with a minimal amount of hassle. With DCB, there is no need to pull out a card and manually enter account information. Even the digital wallet—which seemed so convenient just yesterday—can require more steps before authorizing a payment transaction.

With DBC, the customer simply selects mobile billing as the payment method on the mobile device they are using to make the purchase. They are prompted to pay using the phone number of the device being used, or using the phone number of another device. If they select the current device, an authorization request is sent to the carrier and the user is notified of the approval. Almost immediately, the merchant is also notified that the payment has been processed. The entire transaction is generally completed in less than 10 seconds.

If the user indicates that the payment will be charged to another number, an SMS one-time code is sent to the device assigned to that number. Entering the one-time code on the device being used completes the authorization and the payment is processed.

Far removed from the early days of DCB, when only digital products could be purchased, and only through online retailers, most DCB providers now also facilitate offline purchases.

A Secure Payment Method

With consumers’ ever-increasing concerns over security of personal information, DCB offers a warm and fuzzy alternative to signing up for another card or online payment service. Since the customer already has an established relationship with their carrier provider, most are very comfortable paying for those purchases through an itemized cell phone bill.

Two-factor authentication and risk management engines provide excellent fraud protection, without adversely affecting the purchase experience. As with payment tokenization systems, most DCB keep the customer’s personal information protected and unavailable to merchants.

An Accessible Payment Method

For many, DCB offers more than a fast and convenient method of paying for purchases. In many developing nations, DCB offers the only way to pay for goods and services, especially those that are purchased online. 95% of the world’s 7.14 billion people have a cell phone account, while only 49% have a bank account and only 30% have a credit card. Allowing purchases to be added to the cell phone account opens new markets for retailers, and can improve the quality of life for billions of people for whom goods and services would otherwise be inaccessible.

Better Conversion Rates

DCB has proven to be a boon to online app stores. Analysys Mason reports that DCB results in a 5 fold increase in conversion rates for app stores, compared with credit card purchases.

In Indonesia, alone, DCB accounts for 83% of all purchases made from the Windows Phone Store.

Reduced Customer Support Cost for Merchants

As with any payment processing system, customer support is important to both the retailer and the customer. In the event of unauthorized or disputed charges, both buyer and seller expect someone to resolve the issue. DCB providers, such as Cloud telecom, provide customer support for carriers and merchants via Partners.

SMS Billing (PSMS)

SMS billing represents a less advanced form of DCB. Using SMS billing, or reverse billing, as it is also known, the payment is processed by sending a Premium SMS text message to the customer’s cell phone. The payment is applied to the cell phone bill or deducted from their pre-paid account credit. The customer must pre-authorize the Premium SMS service, and fraud is not uncommon.

SMS billing works best with low-value purchases. Software and 3rd party providers are available for incorporating SMS billing into purchases made through the seller’s website.