There's so much to do on our mobiles nowadays — newspapers to read, apps to use, and games to play. We expect these mobile services to be delivered to our convenience and on demand. If we have to pay, we want the payment experience to be as seamless as possible.
Of the many mobile payment options available (credit card, Paypal, etc), you will find that paying with your phone bill is the most convenient and secure. All you need to do is tap a few times; money is then deducted from your phone credit or added to your monthly phone bill. There are two payment models that enable this simplicity — premium SMS and direct carrier billing — as well as thorough regulation from various stakeholders.
In this article, I’ll compare both technologies and find out which is most used at mobile casinos. I’ll also look beneath the surface to find out how stuff works — technology, costs, regulations and everything in between.
- Premium SMS
- Direct Carrier Billing
- Technology behind phone bill payments
- The different stakeholders who deliver phone bill payments
- Cost of Phone Bill Payments
Premium SMS – The earliest mobile payment method
Premium SMS came about in the early 2000s. Just as text messaging became popular among users, clever businesses quickly learnt that they could make money via SMS. The idea behind premium SMS is simple and elegant:
- Users simply send a text message to a shortcode.
- They are then billed when the premium SMS is sent or when they receive a reply. Every message to the shortcode costs a certain amount of money, such as 10p, £1, £2 and £5.
Premium SMS was first used to sell ringtones, wallpapers and games. Later, users could use them to enter competitions and to vote during TV shows like X Factor. Nowadays, Probability-powered casinos uses a variant of premium SMS called premium voice rate calls to accept payment via BT Landline. The customer / player calls a premium rate number and is given a reference code to enter into the casino website. Their casino deposits are then added to their BT Landline bill.
You’ll see that most casinos have moved on to the next iteration of this technology – direct carrier billing. This is due to the limitations of premium SMS. Premium SMS is susceptible to scamming and unscrupulous services. How many among us have received strange text messages from unknown 5-digit numbers, or found mysterious charges on our phone bill? Besides its nasty reputation, premium SMS is also inconvenient for businesses because it can only accept fixed amounts of money.
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Direct Carrier Billing – The next big thing
Direct carrier billing is a payment engine for mobile websites and apps. Direct carrier billing is also known as direct operator billing or bill-to-carrier. As you can tell from the name, it means, bill this item to my operator and my operator will pay for it first.
Direct carrier billing merges the convenience of premium SMS and the reliability of credit card payments. It applies a two-step authentication process, which requires the user to have his phone on hand during the transaction. The user experience goes like this:
- You’ll enter your mobile number at the cashier
- You’ll receive a text message. The text message may provide a PIN code, which you’ll have to enter at the website, or instructions to reply and confirm the payment.
And that’s it – the payment is completed and you can go on with your mobile activities! There are less steps than any other payment method, and is extremely secure if properly implemented. All communications between your phone, the network and the merchant is also encrypted using a valid SSL certificate.
Direct carrier billing solves one of the largest problems of PSMS – the fixed price points of shortcodes. In direct carrier billing, the merchant can choose whether to accept arbitrary amounts or to set fixed and discrete amounts. The choice depends on the nature of the businesses – at a newsstand, you may want to add several magazines to their shopping basket and pay for them together. In a game, you’d select fixed virtual currency packages or top-up amounts.
Direct carrier billing is growing fast these days, and is widely used in social gaming, dating sites and mobile casinos. Everyone is jumping onto the bandwagon, including Facebook, Google Play, and Windows Phone app store. In June 2014, Amazon turned on its very first carrier billing services for its German appstore! Some more astounding figures: digital content purchases will reach $60 billion in sales by the end of 2015, and $13 billion of that amount is charged through direct carrier billing.
Technology behind Phone Bill Payments
First of all, a shortcode (with four, five or six digits) is configured and the price for the shortcode is set (10p, 25p, 50p, 75p, £1, £3 or £5.) In the UK, numbers are reserved and allocated via Shortcode Management Group (SCMG). Then, the merchant decides on one of these billing models – Mobile originating billing or mobile terminating billing. In MO billing, the user is billed when the premium SMS is received (example, your daily horoscope text message); in MT billing, the user is billed when the user sends the text message (example, donations to a charity.)
Before businesses can accept money via PSMS, they must set up a SMS gateway between their website and the mobile networks. This SMS gateway is the channel in which http requests are sent and received. These requests follow the http communication protocol – your mobile device requests a file, the server responds with the status and the requested content. The content can be delivered in a MMS or via a website. There are other implementations, such as SMPP, UCP, CIMD and xml.
Let’s put this into a mobile casino context. When you send a text message, your mobile phone is basically says to the casino “Please add £x to my casino account.” The casino confirms this information and confirms via text message. After confirmation, the casino tells your mobile network to pay up.
In a physical sense, this SMS gateway consists of a series of servers with gsm modems, which delivers information between networks and users. Different aggregators provide different SMS gateways – some offer a raw communications package. This means the aggregator only delivers the request to the server and the merchant has to set up the appropriate response. Other aggregators manage the entire process and offer a plug-and-play solution.
Direct Carrier Billing
The payment intermediary builds the billing engine and offers a software development kit (SDK) to the merchant. This billing engine consists of the payment panel, a web-service API and an integration portal. Within the integration portal, the business can decide how to price their products, when the payment pop-up should appear, which page to redirect the user to after the payment is completed, and other decisions.
After all these parameters are chosen in the portal, a web developer would integrate the payment system with their website using an application programming interface (API). This is the set of protocols and tools which the merchant can use in their mobile cashier. The merchant’s development team will receive a technical manual, which tells them which API to call and at which point of the payment process. They have to configure the whole payment process, from showing the payment options, displaying prices, initiating transaction and showing the status of the payment to the user.
Who delivers these mobile payment services?
There are a few parties involved in delivering premium SMS and direct carrier billing services, and we can broadly place them into the following categories:
- Payment Intermediary
- Mobile Network Operator
- Regulatory bodies – PhonepayPlus, Payforit, AIME, Ofcom
1. Payment Intermediary
The payment intermediary (or the aggregator) is the middle man in mobile transactions, connecting mobile networks, customers and merchants. You could say that aggregators work behind the scenes, solving complicated legal and technical issues!
To begin with, the payment intermediary sets up a billing engine and provides technical expertise to help businesses integrate the payment system with their respective websites. Some payment intermediaries also provide reporting tools for companies to monitor and analyse their transactions.
Then, payment intermediaries sets up relationships with different mobile network operators in a country. Different countries employ different regulatory processes, and the payment intermediaries are well-versed with the different local regulations. If there are changes to the regulations, the payment intermediaries will make the necessary changes to their billing engine and back-end processes, without requiring any developmental efforts by the merchant. The payment intermediary also has a role in enforcing these regulations, by conducting risk control audits and approving the type of goods sold.
Direct carrier billing solutions by Dialogue, an Accredited Payforit Intermediary
Premium SMS aggregators set up the shortcode number, SMS gateway and passes text messages from the customer to the network. Companies that offer premium SMS services include: Dialogue, Oxygen 8 and Mobivate. On the other hand, direct carrier billing aggregators provide the payment panel and SDKs to integrate into websites. Accredited Payforit Intermediaries include Boku, Bango, Oxygen8, Impulse Pay, Dialogue and txtNation.
2. Mobile network provider
The mobile network provider sends the actual text messages when asked to, collects payments from customers and transfers money to the aggregators. At the end of the month, each mobile network provider issues a Payout Report and the money that they have successfully billed from its customers. In the UK, the main mobile network providers include EE, Virgin Mobile, O2, Three and Vodafone.
Each network also issues their own guidelines. For example, O2 UK limits its users to £30 a month and issues Red Cards or Yellow Cards to merchants that breach its standards. EE enforces strict guidelines on how marketing messages should be phrased.
The term merchant refers to the customer-facing businesses that require robust money-collection methods. These merchants would contact a bank to set up online credit card terminals, or other payment gateways like Paypal. Similarly, if a business decides to accept payment via mobile, they simply contact a payment intermediary of their choice. There are a whole range of businesses that would want to accept payment via mobile, such as apps, newsstands and mobile casinos.
4. Regulatory bodies
There are a few regulatory bodies, whose primary roles are to protect every stakeholder involved in a mobile transaction. There is PhonepayPlus, a UK non-profit organisation that regulates all phone-paid services and payments via mobile phone. PhonepayPlus is responsible for the Code of Practice that all businesses must obey, which outlines how prices must be communicated and how consumers’ privacy must be maintained; among others.
As an independent body, PhonepayPlus also investigates complaints if these rules are broken. It also has the authority to bar the company and the individual(s) responsible from running any other phone-paid services. Every business in the UK must register with PhonepayPlus; membership costs £150 + VAT yearly.
PhonepayPlus is an agent of Ofcom, who regulates communications services in the UK (including TV, radio, mobiles, fixed lines and airwaves.) There is also AIME, an industry trade association that protects the network providers and aggregators.
In the UK, these regulatory bodies and the 4 UK mobile network operators have partnered up to create Payforit. Payforit is a framework or a set of standards, defining mobile consumer experience flows and security standards. It is also a trust mark. Payforit regulations are applicable to all operators that provide services via mobile websites.
Businesses operating in different countries are subject to different regulations. In Italy, merchants must submit service detail paperwork to mobile operators, whereas in the US, merchants must complete an application and signed certification.
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Complete guidelines are laid out to protect consumers, which include:
- Clear and accurate pricing information
- Honest advertising and service content
- Appropriate and targeted promotions
- Protection of consumers’ privacy, including the option to stop messages and disable premium rate services free of charge.
- The ability for consumers to set limits or caps on spending
If you come across merchants that fail to comply with these regulations, you may report them to PhonepayPlus. Users are also allowed to opt-out of phone carrier payments at any time. We’ve written an extensive guide on how to block phone bill payments. In a nutshell, users can protect themselves by:
- Being aware of your phone credit limits
- Contacting your mobile network provider to disable premium rate services
- Complaining with PhonepayPlus, the regulator for phone-paid services in the UK
The Costs of Delivering Phone Bill Payments
On the surface, premium SMS and direct carrier billing keeps costs low and is incredibly profitable. It costs the network about a third of a pence (0.3p) to deliver a text message, and they often collect more than £5 from a single customer!
However, there are other costs involved too. Premium SMS shortcodes costs about £1000 to set up a shortcode and around £750 a month to maintain it. Each stakeholder also takes a cut for doing their part in providing this payment option. First, the network charges and revenue share (known as network payout or network outpayments) is deducted from the amount paid by the customer. Then, the aggregator takes their charge and revenue share (“aggregator payout”) from the mobile network operator. Of course, all billings also include VAT, so the government will take 17.5% from the mobile network provider.
Sadly, the payout figures for direct carrier billing and premium SMS services are terribly high. Most businesses only receive around 55% of amount that they have charged the customer. In comparison, credit and debit cards offer an 85% payout figure. The industry is working to increase the revenue share, in order to compete with the likes of Visa and Paypal.
Which technology is used at mobile casinos?
The nature of mobile casinos is such that players can entertain themselves on the go. The majority of mobile casino players also deposit in small amounts, well under the transaction limits set by Payforit. These circumstances make mobile casinos as an excellent candidate for providing direct carrier billing. This payment option is provided by more than 20 UK mobile casinos.
At the moment, Probability-powered casinos uses the (less advanced) Premium Rate Voice Calls to accept payment via BT Landline. The customer phones the premium rate number and is given a reference code to log-in to a website. Other casinos that accept payment via your mobile phone bill have already adopted direct carrier billing.
Phone bill solutions can reach more customers than other payment methods like credit cards and e-wallets. For comparison, there are roughly 6.8 billion mobile phones in the world and only 3.5 billion bank accounts and 2.15 billion credit cards.
However, of the two phone bill payment models, direct carrier billing definitely comes out on top. There are several advantages – the payment process is seamless and nearly frictionless. The more convenient it is to pay, the more likely that customers would make their purchases (and recurring purchases too.) It is secure, with its thorough regulatory processes and zero chance of internet fraud. It allows merchants to set flexible and dynamic price points. Best of all, it is accessible to everyone!