Europe’s revised Payment Services Directive (PSD2) is a great example of how industries can achieve more by working together, argues Peter Garside, partnership lead at EE, a British mobile phone network.
As regulation is open to interpretation, countries have had to talk to each other to ensure they are bringing about the most effective implementation of PSD2, Garside said at the annual Global Carrier Billing Summit in London this week.
“If you decide…not to talk to anyone else then you are missing a trick. You are not going to grow,” said Garside.
“Talking to competitors and regulators is the only way you are going to develop the market.”
EE is looking at the changes to direct carrier billing (DCB), where a customer can charge items to their mobile phone bill, a growth opportunity.
The DCB payments industry in Europe is significant due to the high conversion rate that makes it very effective, said Ricardo Madeira, principal at Roland Berger, a German consultancy firm.
“The DCB business is significant in Europe. There is a high conversion rate that makes it very competitive,” he told the conference.
However, “the global carrier billing business has a lot of stake under PSD2,” said Madeira.
Not everyone in the DCB market is excited about PSD2’s impact. While the new regulation opens windows, it also places restrictions on the market.
PSD2 has tightened the rules on direct carrier billing meaning consumer accustomed to buying digital content via their mobile phone and charging it to their phone bill will see their options curtailed. Under PSD2, single DCB transactions will be capped to a maximum of €50 per transaction with a maximum monthly limit of €300.
However, PSD2 continues to allow Electronic Money Institutions (EMIs) to extend the scope of DCB from digital content to the purchase of physical goods.
Until now, the EU’s initial version of the regulation, PSD1, restricted what goods, such as ringtones, music downloads and eBooks, could be billed to a mobile phone user’s bill after purchase. This regulation was holding back the market for carriers and retailers, so there is plenty of reason for optimism in the DBC market, despite more stringent regulations.
Based on 2016 Juniper Research data, the average transaction value for billing digital content via carrier billing in Western Europe was over €4 in 2016, much higher than the €1.50 achieved in Central Eastern European countries.
If payment methods such as DCB are to be successful under PSD2, operators and regulators need to consider the user experience, Martin O’Driscoll, senior global communications managers for operator billing for the Universal Windows Store at Microsoft, said at the conference.
“When it comes to imposing price limits [on DBC payments], we question whether that is the best user experience?” O’Driscoll asked.
“When someone tries to buy something at €45 on DCB, the transaction goes through but when they try to buy something at €55 carrier billing doesn’t even appear as a payment option.
“Consumers don’t know that there is a regulation for one and not the other payment. It looks like it just didn’t work which is not necessarily great,” said O’Driscoll.
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