Focused on direct prepaid payments solutions for mobile
network operators, Vesta has an impressive customer base,
particularly in the US and China. Vesta is now turning its
attention to Europe where it sees a major opportunity to assist
network operators enhance both revenues and customer
retention.
For mobile network operators (MNO) two key performance
objectives are to increase both average revenue per user (ARPU) and
customer retention rates. However, in an industry moving towards an
advanced stage of its growth cycle characterised by intense
competition, many MNOs are finding these objectives progressively
more difficult to attain.
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Specifically, in the prepaid sector of the mobile industry US
payments technology developer and service provider Vesta
Corporation believes there is a solution to the challenge of upping
ARPUs and reducing customer churn. The solution, Joshua Rush,
Vesta’s director of marketing, told EPI, lies in MNOs taking
control of top-up payments which are now very much in the domain of
retailers and banks.
For Vesta, provision of top-up payment services by MNOs represents
a significant growth opportunity and one for which the company has
been developing and supplying technology solutions since its
founding in 1995.
“Vesta has its roots in the prepaid industry,” stressed Rush.
Vesta’s solutions enable consumers to top-up via a variety of
channels: live agent, internet, short message service (SMS),
handset application and interactive voice response.
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By GlobalDataIndicative of the potential financial benefits to be had by MNOs
adopting a direct top-up strategy, Vesta’s chief marketing officer
Chris Parsons noted that commissions earned by retailers on top-ups
range from 7 percent to 14 percent or even higher.
Also indicative of potential gains for MNOs going the direct top-up
route, a study conducted for Vesta revealed that a major European
MNO achieved a 20 percent reduction in customer churn and a 50
percent increase in ARPU among customers using direct top-up
compared with those buying airtime in the retail market.
Among the most significant gains to be had are those derived by
MNOs offering direct handset application top-ups. Based on data
collected by Vesta this solution can increase top-up frequency by
up to 80 percent and ARPU by almost a quarter.
Vesta’s first significant achievement in the mobile top-up market
was the successful deployment of a credit card-based account top-up
solution. Building on its success in the US, Vesta embarked on an
international expansion strategy in 2000 and in its first move
forged a development alliance with Chinese mobile payments
specialist ChinaDotMan which it went on to acquire in 2005.
With its vast mobile phone user base China has proved to be the
ideal environment to develop and test new payment technologies.
Among Vesta’s more recent achievements in this respect is in what
Rush termed the “emerging technology” of direct handset application
top-ups.
For its achievement in this area Vesta was in 2008 received the
Best New Product or Service, Telecommunications award in the
American Business Awards, an annual event that recognises
innovative achievements by US companies in a wide range of
industries.
The specific technology developed by Vesta was patented in 2007 as
the OneButton Recharge and enables mobile users to top-up their
prepaid accounts directly through their handset. The solution,
which functions as an internet or SMS-based application, provides
an interface with the customer, manages the transaction, screens
for fraud and adds funds in real time to the customer’s mobile
account.
For MNO customers a direct handset service such as OneButton is the
fastest and most intuitive to use, commented Rush.
Technological excellence has enabled Vesta to garner an impressive
lineup of mobile-network and fixed-line customers. In the US, major
customers include AT&T Mobile, AT&T Long Distance, Boost
Mobile, Cincinnati Bell, Sprint, SunCom, Qwest and Verizon.
Impressive customer base
In China, Vesta boasts as customers China Mobile, the world’s
biggest MNO in terms of users, China Unicom, the world’s
third-largest MNO, and China Telecom, China’s largest fixed-line
operator.
In 2005 Vesta turned its attention to Western Europe, where it
established a presence with the launch of Vesta Payment Solutions
in Ireland as a dedicated operations centre to support phone
account top-up for European MNOs. This move has enabled Vesta to
add a number of major European MNOs to its customer base including
O2, Tele2, T-Mobile and Vodafone.
However, Vesta is only scratching the surface of the potential in
Western Europe, a market comprising 23 countries and, according to
UK research firm Informa Telecoms & Media (ITM), 274 million
prepaid subscribers who spent $55.7 billion on prepaid airtime in
2007. In comparison, the North American mobile prepaid market
generated just under $10 billion in 2007.
In preparation for its expansion drive into Western Europe, Vesta
commissioned telecoms consulting firm Northstream to undertake an
in-depth study of market potential. As part of the study –
undertaken between March and June 2009 – Northstream interviewed
major MNOs across Europe.
Summing up Northstream’s findings Rush said: “Mobile network
operators in Western Europe are at the point of needing a direct
top-up solution. The potential for Vesta is significant.”
In its assessment, Northstream noted that it estimates that direct
top-ups could improve Western Europe’s mobile phone industry’s
prepaid profitability by “hundreds of millions of euro annually”
and would flow from lower channel cost, more frequent top-ups and
reduced churn. According to Northstream, direct operator top-up
channels cost about 5 percent to 6 percent of revenue earned to
operate.
MNOs aim of attracting customers to the direct top-up channel is
being assisted by an increasingly supportive payments environment
in Europe, noted Northstream. Among positive factors are a rise in
the popularity of cards and a more conducive regulatory environment
being created by European Union initiatives such as the Single Euro
Payments Area.
In addition, said Parsons, increasing use of the internet for
banking and payments purposes is increasing its attractiveness as a
means of undertaking tops-ups.
“Many consumers have no desire to interact with the retail
channel,” he stressed.
Mobile operator interest high
Indicative of the desire to enhance their top-up revenues, Rush
noted that that two-thirds of European MNOs are now working on
direct top-up solutions. Northstream’s interviews revealed that an
even higher 91 percent of MNOs believe there is a need to
strengthen the way top-up fits into their online or other
operator-controlled channels.
But at present there is still considerable work to be done by MNOs.
Northstream emphasised that prepaid business is still
retail-dominated in most countries, with over 60 percent of top-ups
undertaken in a retail environment.
However, there is a clear desire by many MNO prepaid customers to
alter this balance in favour of direct operators. This was evident
in a survey of British consumers conducted by Northstream.
In the survey Northstream found that 61 percent of respondents use
the retail channel for top-up, 31 percent use direct operator
top-up services and the 8 percent balance bank channels such as
ATMs. However, if provided with suitable direct operator top-up
alternatives 43 percent of respondents said they would use the
channel. Retail outlets would be the losers with 49 percent of
respondents likely to continue using this channel. Bank channel use
would remain unchanged at 8 percent of consumers.
For MNOs wanting to deploy a direct top-up solution there are two
choices: build their own or outsource the service.
MNOs choosing to build their own direct top-up solution face a
number of challenges, including the financial risk involved in
becoming the merchant of record, said Parsons. It is extremely
difficult for MNOs to seek redress in the case of payment default
and fraud, he added.
Adding to this risk is that mobile top-up customers expect prompt
service. Parsons said some MNOs that have attempted to go the
direct top-up route on their own implemented cumbersome security
measures such as phone interviews with customers seeking to use the
service.
“Customers are put off and inclined just to hang-up,” said
Parsons.
For direct top-up to be effective it is all about optimising
customer convenience, he stressed.
Towards this end MNOs choosing to outsource their direct top-up
services to specialists such as Vesta enjoy a number of advantages
compared with the go-it-alone route. “Vesta does the payment
processing and takes the fraud risk,” said Rush.
There is another factor strongly in favour of the outsource route:
the economic recession griping Europe.
“Operators are struggling to build-out direct top-up channels given
the reduction in their IT budgets,” said Parsons.
He continued that those MNOs that do grasp the opportunity to offer
an efficient direct top-up service will reap the benefits not only
in terms of ARPU enhancement and lower customer churn but also in
the form of potential new services.
Once a MNO has a top-up platform in place it can be used as the
foundation for additional services, said Parsons. Effectively, he
added, the MNO will have at its disposal all that is needed for a
mobile wallet of which top-ups are just the first service. The next
step includes using the platform to purchase mobile content and for
person-to-person payments.
Global ambitions
Western Europe forms part of what Rush noted is Vesta’s strategy to
expand globally in the pre-paid market. And undoubtedly it is a
market with considerable growth potential.
With the exception of North America the prepaid market overtook the
contract market several years ago and continues to outpace it by a
significant margin. Indicative of growth in the prepaid market, ITM
estimates that there were 2.33 billion prepaid mobile subscribers
at the end of 2007, a total that had grown to 2.52 billion by
mid-2008 and will, it forecasts, reach 3.93 billion by the end of
2013.
This growth will, estimates ITM, see the proportion of prepaid
subscriptions rise from 70.5 percent of total mobile subscriptions
in 2007 to 74 percent in 2013 while total prepaid revenue earned by
MNOs from prepaid services will increase from $242 billion in 2007
to $382 billion in 2013.
