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The Future for Phone-Paid Digital Goods and Services. New report produced by Deloitte

26 November 2014

New report produced by Deloitte for PhonepayPlus shows mobile operator billing in digital goods market can grow beyond £500 million by 2019.

A new study, commissioned by PhonepayPlus shows potential for mobile operator billing transactions to grow to c. £500 million, and gain a 4% UK market share of micropayments for digital goods and services.

You can access the full report here.

With entertainment accounting for over 80% of digital products and services sold in the UK (excluding adult services), the study identifies mobile gaming as the biggest growth opportunity for mobile operator billing.

Whilst the major app stores and platforms have a strong influence over how digital content is consumed, the study sets out opportunities for mobile operators who wish to reap growth benefits.

A report based upon the study undertaken for PhonepayPlus by Deloitte, illustrates that mobile operator billing has the potential to access a total addressable market of over £500 million a year. To download a copy of the report please click here.

The rapid growth in consumption of digital content, largely via mobile-based devices, could provide mobile operators with an attractive and growing new revenue stream. However, the growth of mobile operator billing as a payment option for digital content within the next five years is likely to be dependent on:

- Competitive commission rates
- More platforms offering mobile operator billing
- Investment in the user experience
- Continued consumer protection

Launching the report, Joanne Prowse, Acting Chief Executive for PhonepayPlus, said:

“We commissioned this report because we wanted to understand better the trajectory of the market and, with UK consumers forecast to spend around £14 billion on digital content in 2019 to identify areas of potential growth, the scenarios for how that growth might evolve and what the enablers of and barriers to that growth might be”.

“It’s part of PhonepayPlus’ role as a regulator to support innovation and market growth and the analysis in the report sets out the scale of this potential opportunity for operator billing as well as some of the challenges.” The recent launch of Apple Pay in the US is just one example of the market’s scope and the speed of its development.”

With entertainment accounting for over 80% of digital products and services sold in the UK, the report predicts mobile gaming apps may offer the most significant opportunity for mobile operator billing. It also identifies potential opportunities in low-value physical and quasi-physical goods, such as ticketing, parking and transport charges.

Howard Davies, media and technology partner at Deloitte commented:

“The rapid adoption of smartphones and tablets is driving ever growing consumption of digital content and services, for which carrier billing can be a relevant payment option."

Joanne Prowse said:

“For mobile operator billing to grow bigger in the digital content payment landscape it needs to play to its strengths and be the easiest and simplest option for the consumer. Mobile operator billing payments are secure, convenient, and offer the option to make purchases offline."

The report also points to the need for consistent regulation to control the quality of consumer experience when purchasing digital products or services regardless of payment channel, and suggests that PhonepayPlus takes a lead in working with other regulators to develop a more coordinated approach to the digital goods and services market.

Joanne Prowse concluded:

“I am pleased that the report identifies that regulation can help support growth by building consumer trust and confidence. As regulators we need to be outcomes based in terms of our work to protect consumers and be flexible enough to ensure that regulation doesn’t stifle innovation.”