India’s new carrier billing policy, which enables prepaid users to pay for digital apps services using their mobile balance, but also imposes additional taxes (WPC charges), won’t impact pricing of digital apps and services but it will hit the content providers, Uday Sodhi, EVP and Head (Digital Business) at Sony Pictures Networks India said, responding to MediaNama’s queries on the impact of the new policy. “Basically, 15-18% (of the revenue) has gotten shaved off, and I would prefer a means which don’t have so much of a shave-off in it. Services like ours prefer credit cards, debit cards, wallet payments, compared to telecom payment options, because what finally comes to us is significantly more. If the services are non-telco, we get between 95-98%, because most of it is credit card or wallet, and there are only payment gateway charges. This is how it should be for payment collection services.”
“Our preference,” he added, “is obviously towards the 95% range, even though fundamentally it is natural for us to prefer carrier billing because the carrier ecosystem is far larger than any other payment collection ecosystem, whether debit card, credit card or digital wallets. The people who have balances on their mobile accounts is a billion people. It becomes a great way for transacting for digital goods.
Carrier billing is used by many key content providers, including music streaming services like Times Internet’s Gaana, Sony’s SonyLIV, ALTBalaji, among other services. Key players offering carrier billing include Fortumo, Boku and Dailyhunt’s ipayy. However, the big deals last year were at the platform level, bypassing the aggreagtor: both Airtel and Idea Cellular signed up with the Google Play store to offer purchase of apps using carrier billing.
Google India hasn’t commented on how this will impact their arrangements with Airtel and Idea, even though it is evident that those arrangements cannot continue the same way they used to. Airtel and Idea also haven’t responded to questions sent via email, and despite reminders.
“App store providers need to pay out 70% (or in some cases 85%) to app developers,” Sanjay Sinha, Head of Fortumo India, a global carrier billing platform operating in India, “Digital streaming services have a similar fixed cost that they need to pay as royalties or license fees to music and movie companies. In case of physical services and goods, such as mobile insurance, ticketing or e-commerce, merchant margins are in the low single digits. The only workaround here would be surcharging users, something which such merchants are highly unlikely to do. As a result, applying a 15% tax for carrier billing in these segments with already a thin margin means carrier billing becomes unfeasible for them. This puts the payment method in an unfair position compared to bank cards and digital wallets.”
Content providers, Sodhi told MediaNama, get in the range of 50-60% of what consumers pay via carrier billing. “It’s moved up a little bit because the value chain is giving far more to the content providers now since the VAS days.” Platforms are changing too. Karan Bedi, COO of Eros Now, speaking in his personal capacity, added that “Apple and Google both have revised their subscription commission rates over the standard 30% that they take for app sales (formulas vary), recognising the value of the content that publishers bring on to the ecosystem. This also goes beyond media and entertainment to education publishers as well.”
Impact of inclusion of prepaid users
Until this new policy, carrier billing was limited only to post-paid users, thus not applicable for 95% of India’s mobile user base. In a statement, Google India said that the inclusion of prepaid users “This expands the choice of payments for users and is a great step for digital content consumers.”
ALTBalaji CMO Manav Sethi believes that this will enable consumers “pay for micro purchases towards content or otherwise.” “As content creators we know”, he added, “how challenging and risky it is to create content and then its an uphill task to get to Indian consumers to pay for the same.” Sodhi concurs, saying this is principally a step in the right direction. Bedi (Eros Now) expects that anything that enables payments from prepaid users “will be a significant driver of volume in the medium term at least. This is good not just for entertainment and media products like ours, but also for a number of other intangible goods. Even though wallet penetration in India has gone up significantly, and initiatives like UPI are further pushing the envelope, mobile prepaid accounts and bills still form the largest chunk of digital transactions.”
Sinha added that Fortumo, an Estonian company which operates in over 90 markets globally, sees “a clear majority of revenue being generated by prepaid users, despite post-paid revenue per user being substantially higher for telcos.” Fortumo expects “a significant uplift in payment volume for digital merchants and mobile operators. This decision makes perfect sense as there should not be a difference to online services access based on whether the user pays for a service in advance or is invoiced for it after the fact.”
No justification for WPC charges
Content providers are not happy with the charges: Sethi (ALTBalaji), likens the users balance on the SIM card to the balance lying in his Paytm (one of the many wallets operating in India) account. “And that’s why,” Sethi adds, “WPC and any form of other charges applied by government at the time of user transacting using his prepaid balance is unnecessary and is antithesis of ‘digital India’ vision of PM,” because no other service, apart from Mobile, reaches 1 billion people. “Prepaid charges attract service tax anyway. So how justified is the governement is to slap charges on every transaction for which the service tax has already been paid by user and collected by the Telco? Does a user pay WPC on every card swipe or every wallet transaction? If not then why treat money on SIM card differently?”
Sinha (Fortumo) adds that this “simply does not make sense. In the case of data, messaging and calls, the mobile operator is the actual service provider while for payment processing they are an enabler for other merchants. While carriers can impact their revenue from other telco services via pricing, they are not the ones who define pricing for the 3rd party digital services. Often, even the merchants themselves are limited in how much revenue they can make from each transaction.”
Sodhi (Sony) concurs, adding that OTT services “are completely off the deck, and are not payments related to telecom services. My fear is that it becomes a double-dip, because you’re once charging for the service, and then if the consumer uses data, then again there is another charge. WPC charges will come on both. If telcos are going to look at it as a payment collection charge, they should look at it as financial services.”
He added that while the company welcomes the move to enable carrier billing for prepaid users, they “hope the DoT revises its current stance on taxation of mobile payments. Otherwise, India’s digital economy will be hampered as many merchants, especially from high value segments, are unable to provide paid services to their customers.”
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Note: We’re awaiting responses from Gaana, Boku, ipayy, Hungama, Airtel and Idea. Will update in case they respond/have anything new to say.