Emerging Alternative Payment Methods
T-pay Offers a Solution to Online Payment Issues in the Region
An interview with Sahar Salama on the direct billing solution offered by T-pay
Payment issues are a major obstacle for the growth of the e-commerce sector in the Arab region. With a lack of trust in online transactions, consumers revert to cash on delivery as a safer option. For merchants, this translates into high rates of return and reduced profitability. But hope is not lost for alleviating the issues of online payments. More startups, such as T-PAYTM, are stepping up with alternative payment solutions.
“In a region where credit card penetration is low, mobile penetration is high, and the conversion rate for buying online digital goods through a credit card is low, we saw a gap in the market. Current online payment methods are not able to fulfill the demand for e-commerce and digital goods and services,” says Sahar Salama, General Manager at T-PAYTM.
What is the value that T-PAYTM brings to users? T-PAYTM helps businesses offering digital goods and services overcome the setbacks in their growth, mostly due to issues of payment methods or the lack of them.
With T-PAYTM, consumers will only have to enter their mobile number to purchase digital goods or services, and the transaction will be added to their monthly mobile telephone bill by their mobile carrier, if they have a post-paid number, or will be deducted from their existing account for those who have a pre-paid number.
T-PAYTM also allows merchants seeking to reach higher online payment conversion rates to reach all mobile users. With the ability offered for users to pay for their digital purchases from any desktop or mobile device through a single, click-to-buy action, using a Direct Carrier Billing system represents the ultimate convenience at zero cost.
What are the challenges that are slowing down the mass adoption of alternative online payments in the region? There are three main challenges: The first one is the limited reach that e-commerce and digital vendors have on the unbanked, and this can be overcome through the telecommunications operators (telcos) who have a wide reach in their markets.
This brings us to the second challenge, which is represented by the high cost structures of billing at telcos, due to inefficiencies in operation costs and tax structure. When online payment margins are low, the high cost of billing through a telco becomes a barrier to e-commerce and digital merchants. The challenge is to find models in mobile payments that are cost effective, with a larger reach, offering efficiency in operations and competitiveness in commission charged.
The last change is to educate consumers and offer them incentives to use mobile payments through telcos.
What are they key factors to achieve critical mass adoption? The convergence of services and partnerships is a critical factor. Building mutually beneficial relationships with all the parties involved to find the best solutions that offer value to all the players of the value chain is the way forward in the future.
The second key factor is offering added value for the various partners, from establishing relationships with customers, increasing user loyalty, enhancing brand value and expanding the reach.
The third key factor is creating a real ecosystem where all players work together to offer the best quality of services that will help achieve mass adoption of new and efficient payment methods.
How do you see online payments in the region growing this year? With the total value of mobile payments set to reach US$670 billion worldwide by 2015, the Arab region has a huge unaddressable market, primarily dominated by a young, unbanked population that has no means to conduct online payments. Currently only 22% of internet users in the Arab world use credit cards, which have a penetration rate from as low as 1.5% to 8% in most of the countries in the region.
The worldwide mobile payment transaction value has surpassed US$235 billion in 2013. The Middle East’s share of this market is minimal but is expected to grow at a compounded annual growth rate of 80 per cent until 2017, when it will be worth US$27.6 billion.
This growth will change with the creation of an ecosystem, value propositions from all fragmented players and optimized commission charges that are competitive in the market. I see that the only payment method that will grow in the region this year is the Direct Mobile Billing method.
What is the biggest opportunity in online payments this year? The answer in my opinion is direct billing. It is expected to offer a US$13 billion revenue opportunity by 2017. It will unlock the potential of online transactions by unleashing the power of mobile monetization.
Sahar Salama, General Manager at T-PAYTM