The world’s population is constantly growing, and there are not enough banking services to meet the demand. DCB helps to solve this problem.
Consumers can pay for goods and services online, without a credit card, using only their mobile phone account.
When we talk about alternative payment methods (APM), we first represent electronic wallets. This was the case, until recent times, but now the situation is gradually changing, and direct carrier billing is also becoming part of the sector. According to analysts, this year the world expects an increase in the number of digital payments to $6.6 trillion, and by 2025 the sector could grow to $10.5 trillion.
Almost everyone now has a smartphone, and all existing mobile electronic accounts are about $2.5 trillion in monetary equivalent. This means, they make up 37% of the total cost of all digital payments. Analysts predict that DCB will continue to grow and, by 2025, its volume will reach 77 billion US dollars. The market is already aware of this potential, so new sellers are constantly appearing in it.
The year 2020 and the global pandemic put everyone in a situation where they are constantly using their smartphones, in order to watch and download content and make online purchases. According to Jonathan Kriegel, CEO of DOCOMO Digital, this has greatly accelerated the development of the mobile money sector and the introduction of alternative payment methods, such as DCB and electronic wallets. Mobile money has only recently entered the world market, but Japan, South Korea and China have been using their advantages for a long time. 15 years ago, NTT DOCOMO introduced DCB in Japan, and now it is the main payment instrument there, even when it comes to offline retail.
One of DCB advantages compared to bank payments is the speed of the process. To pay for any purchase with a credit card, the user must make a lot of clicks: you need to enter confirmation codes, pass a security check, «prove» that you are not a robot. DCB makes everything much faster and easier. For example, to buy a Netflix subscription, you only need to enter the confirmation code from an SMS. Everything is also agreed with security, since identity verification takes place using a unique identification phone number (MSISDN).
In Asian countries, DCB was implemented quickly, while other markets went the other way, and at first provided this option only for Apple Store and Google Play stores. But now the situation has improved. Mobile operators and trade brands have realized that DCB is a tool that can play in their favor. Operators can achieve greater loyalty from subscribers by offering them different services and content, and brands can grow faster if they start cooperating with mobile operators.
Today, the field of data transmission is rapidly developing in the world (this applies to 5G technology, among other things). Therefore, in order to stay afloat, companies must constantly develop their infrastructure. So, they have increased expenses, which means that they need to expand their income. Therefore, DOCOMO Digital believes that DCB is a good option for mobile operators. Because they can offer digital services to customers and collaborate with over-the-top (OTT) brands.
When brands enter emerging markets, they may face problems with low credit card usage, and in order to offer their services, they need to team up with mobile operators. This is more expensive than the cost of the usual credit transactions, but in this case, the brand and the operator can jointly connect to marketing in order to better solve the marketing issue.
DCB is developing rapidly, but brands still lack knowledge in this area. Because of this, they have difficulties in using the tool, especially when it comes to selling physical goods. This is facilitated by the payment rules, which differ in each country. Therefore, brands are often afraid to use DCB.
Often, companies are afraid to use DCB. This happens, first, as already mentioned above, due to a lack of knowledge. Also, brands are concerned about security issues and bad debts, and some still think that DCB does not make a profit. This situation was very common before the pandemic, DOCOMO Digital said about it in a report published in 2020.
But the pandemic changed everything. Consumers have completely switched to online shopping. All payments have become digital. People have learned from their own experience that DCB is more reliable than other payment methods because of its connection with a mobile phone.
As for low profitability, Jonathan Kriegel considers this opinion is not accurate. Brands that adhere to this vision simply did not use DCB completely, and therefore missed the benefit.
Bad debts are, indeed, a problem. They accumulate in the case of unsuccessful transactions, so this side of the DCB needs to be constantly monitored and analyzed. For example, DOCOMO Digital uses a special machine learning-based solution for this, which can predict bad debts for telecom operators in advance.