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Fortumo to start carrier billing for cab rides & movie tickets; regulatory hurdles in India

Payments operator Fortumo said that it will be introducing carrier billing to pay for services such as cab rides, movie tickets, and payment of insurance premiums. To begin with, the company will be introducing this in middle eastern countries and the service is expected to launch early next year.

Carrier billing is a payment mechanism where users can pay for goods and services by deducting the charge from their prepaid phones or charging it to their monthly phone bill. This is important in India where most mobile users don’t have credit cards while debit card usage is low.

However, Sanjay Sinha, country head for Fortumo in India, said that the company will not be introducing this service to India due to lack of regulatory clarity. “There are regulatory constraints in this market so we won’t be able to move that forward in India right now,” he told MediaNama in a phone call.

“As far as our understanding is concerned, the regulations for carrier billing, the products which can use the service needs to be consumed on mobile. So currently for something like ride sharing or movie tickets, the definition of the regulation will have to be stretched right now,” Sinha explained.

This is significant as  Fortumo had said that over 80% of payments for digital content in India is from mobile devices. Carrier billing offers the most frictionless payment service at present, though wallets come close. Online cab hailing companies like Uber have long been complaining that there isn’t a seamless payment mechanism in India. As such, cab rides and movie tickets are services which are consumed on mobile phones.

Regulatory environment in India

Note that the Ratan Watal Committee report on digital payments was mooting for telecom operators be allowed Direct Carrier Billing for low-value transactions be allowed in a “sandbox environment”, with light touch regulation, open to regular evaluation “The Committee recommends that telecom companies be permitted to roll out DCB Payment model within the telecom entity for all low-value payments. The threshold may be defined by RBI in consultation with TRAI and reviewed periodically.”

In April, the Department of Telecommunications allowed mobile users to purchase digital content, like apps and e-books, by making payments from their prepaid balance and post-paid bills, up to a value of Rs 20,000.

However, the DoT said that “such purchase of digital content shall not be treated as pass-through revenue for the purpose of computing Adjusted Gross Revenue (AGR) for license fee and spectrum usage charge.” This created a massive disincentive for carrier billing. One key reason why content creators did not want to integrate carrier billing was the additional charges that were levied on the content. Telecom operators charge around 15% of the revenue to enable carrier billing.

The Indian government takes a certain percentage (around 8-10%) of a telecom operator revenue as Adjusted Gross Revenue. Historically, these charges amounted to 12-13% in total. On top of that, telecom operators would keep their own revenue share, the aggregator (like Google Play Store would keep theirs, and the remainder would go to the content creator. In 2014, Vodafone was giving 60-70% of money to the aggregator, post taxes.

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MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

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    © 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ