License to bill: making charge-to-bill services a reality in Europe
[Original post on blog.gemalto.com]
If you had a mobile phone around the time of the millennium, chances are that you bought a ringtone or wallpaper and paid for it on your phone bill. The development enabled a generation to start personalizing their phones for the first time, while also introducing the world to divisive characters such as the Crazy Frog. But it also posed an important question to financial regulators: if consumers could buy a digital product for their phone and pay for it on their next bill, why couldn’t they do the same with any product – whether newspaper, food or even a car?
If mobile operators were to behave like banks, effectively lending money to their customers to make purchases, then they would need to be regulated like banks. To avoid this, European telcos successfully lobbied for an exemption to the Payments Service Directive (PSD) which allowed phonesto be used to pay for ‘mobile consumables’, without operators needing a special license.
But over time, interpretation of the exemption started to vary and further extensions were made – for example, Italians can use their phone to pay for bus tickets and bike rentals, and in France and Germany car parking payment pilots have also taken place. But the situation varies across the EU, making it difficult to launch charge-to-bill services across multiple countries. A new version of PSD is now being worked on to improve clarity and prevent any abuses of the regulations. But what can telcos do in the meantime?
A telco could apply for its own financial license; however the time and cost of acquiring one is significant. So in order to support their payment strategies, companies like Netsize have acquired licenses instead. In this way we can design a new ecosystem expanding the reach of mobile operator billing beyond mobile goods in a secure and compliant manner with regards to financial regulation. Telcos work with us to process transactions via the phone bill or via credit card, safe in the knowledge that the framework is fully compliant. Providing the option for card payments helps to cover multiple geographies at once, while the operator billing model brings the convenience and accessibility needed for ‘unbanked’ customers.
So while we are not yet at the stage where we can buy a car with our phone, the barriers to more mobile purchases are steadily being broken down. For more on this, and other articles on the future of our connected world, check out the full Gemalto NetSize Guide