Now with added video!
Some new research commissioned by mobile financial services company Juvo has concluded operators are wasting loads of cash through prepaid churn.
The research was conducted by Strategy Analytics, which is having a busy day. It took a look at eight prepaid-dominant markets: Argentina, Brazil, India, Malaysia, Mexico, the Philippines, South Africa and Thailand; and concluded that in these markets alone, operators wasted $670 million last year replacing lost prepaid subscribers.
Otherwise known as PAYG or contract-free, the prepaid market probably gets a bit overlooked in developed markets as there’s nothing operators like more than signing someone up to a nice, fat two year contract. But as well as being a big piece of the action in developed markets, it tends to dominate developing ones.
Now, on one level remarking that churn is an issue in a market with no contractual obligation involved seems like a bit of a redundant statement. Of course punters are going to shop around and exhibit minimal loyalty. But the apparent point of Juvo commissioning this study is to show there are still plenty of things that could be done to efficiently reduce this churn.
It should also be noted that Juvo, in common with all other companies, doesn’t tend to just commission surveys for a laugh. It contends that what it has to offer can help operators with this prepaid lack of stickiness and has consistently messaged on the matter of prepaid churn. But that said, the findings of this study still have independent merit.
Prepaid accounted for 71% (5.7 billion) of global mobile connections and 32% ($265 billion) in service revenues in 2018. In developing economies those numbers move strongly in the direction of prepaid, for example is accounts for 94% of connections and 80% of revenue in Africa. SA also says it’s more profitable than you might think, with EBITDA margins of 40-55% in developing markets (apart from India, where Jio has thrown a spanner in the works).
This background is designed to set up the punchline which is, of course, churn. The second chart below shows monthly prepaid churn of 3.1-6.5% across the countries studied. This equates to 37-80% annually meaning that, on average, operators have to totally replace their prepaid subscriber base every couple of years.
“Until now, the industry has been in the dark on the scale of the costs associated with prepaid mobile churn, and the portion of prepaid OPEX spent on reacquiring the same customers,” said Phil Kendall of SA, the author of the report. “What this research allows us to do is to confidently calculate the profit that can be unlocked when prepaid churn is reduced. Success in the highly volatile, promotion-fueled prepaid market will go to those operators who can improve customer loyalty, allowing them to make strategic choices between OPEX reduction, accelerated growth or investment in service differentiation.”
“The market opportunity here is 5.7 billion customers and over $265 billion in annual revenue,” said said Steve Polsky, CEO of Juvo. “However it is hampered by huge churn and missed opportunities. As an industry, we need to talk about prepaid, we need to change our approach and we need to put identity at its heart. Prepaid customers in emerging markets consistently churn because they are constantly told ‘no’. No you’re out of airtime. No you don’t have enough money. We have to start with ‘yes’.”
The report, called ‘Death by a thousand nos’, offers a deeper dive into the prepaid churn issue, as well as some top tips on what to do about it, and can be downloaded from the Juvo website. With a major driver of the postpaid demand – the smartphone market – in significant decline, it seems likely that prepaid will become a bigger deal for all operators. So it’s probably a good idea to start thinking about how to make the most of it.
US mobile payment processing outfit Square reckons its new stand will empower small businesses in a way that traditional financial services have failed to do.
Square was launched to much fanfare, thanks to being founded by the bloke who also founded Twitter – Jack Dorsey, in the US in 2009. The first product was a little dongle that you plug into the headphone jack of your phone that allows you to take card payments on it by swiping the magnetic strip.
None of that made it over here for a while though, with Square making its first appearance in the UK via a contactless card reader last year. We met Jesse Dorogusker, Hardware Lead for Square, and he explained that’s because they didn’t support Chip and PIN until then, with the US still reliant on the magnetic strip or even (shudder) those anachronistic carbon paper counterfoil things.
Now Square is adding a stand to its UK offerings, which is designed to support a tablet and turn it into an instant point-of-sale terminal. Before Square Dorogusker spent years heading up the accessories division at Apple and that influence is clear in the design of the stand and the card reader, both of which go hard on the smooth white plastic theme.
The whole bright idea from day one was to utilise all the powerful technology that was being put in people’s hands thanks to Apple and Android, to help smaller businesses get access to the latest, mobile-powered, financial services.
The barriers to entry for SMEs to get into modern financial services are too high and I would say that’s on purpose,” Dorogusker (pictured) told Telecoms.com. “The mainstream industry sees too much risk in serving small business owners and as a result they’re very underserved, especially in technology transitions where the introduction of additional ways to pay like contactless.
“The smartphone industry has done an amazing job of making incredibly powerful devices widely available at shockingly low prices for how technologically packed they are. We’ve built complementary pieces of technology that connect to these amazing devices and give consumer-grade experiences to small businesses.”
It’s hard to argue with the premise. Imagine the amount of sales lost by, say, stallholders at a music festival because potential customers have run out of cash. The Stand product also comes with point-of-sale software to use on the tablet and even a swivel base so the retailer can present the sale to the customer for approval. As advertised it give small businesses the point-of-sale power of much larger setups and that seems pretty compelling.
Dorogusker also thinks this is something the telecoms industry needs to be aware of. People have challenges with connectivity and we’re now in a world that requires an online connection to make a payment, verify it and issue a digital receipt,” he said. “A lot of networks are focused on peak speeds and not as focused on coverage. 75% of Square’s customers in the UK are outside of London, maybe not near a bunch of cell towers, and they need coverage – not ten bars, one bar will do.
The Stand product launched in the UK today and is on a half price promotion for a month. We’re now off to the street market on Tottenham Court Road where you can buy a delicious Thai green curry and rice with just a tap of a phone. Now that’s progress.