3 reasons why charging users with phone credits is a good idea

Credit: imtfi

Coda Payments is a payment solution based in Indonesia backed by Toivo Annus, Digital Media Partners, GMO Venture Partners, and Golden Gate Ventures. Launched in March this year, the startup lets Indonesians use their phone credits to purchase digital content like online services, game credits, and digital media.

Co-founder Paul Leishman explains three reasons why startups should seriously consider monetizing their products via phone credits:

1. You reach more customers

80 percent of Indonesians own mobile phones, which is much higher than the percentage who have bank accounts, just (20 percent). Even those who own bank accounts might not have the ability to make online purchases because they don’t have debit or credit cards. Merchants can reach a lot more potential customers if you allow them to make purchases using something that they already have: phone credits.

And although there’s a future for e-money in Indonesia, usage remains very low.

2. Easier to capture impulse purchases

One thing you can expect most people to already have in their possession is phone credits. Besides the fact that people use them up almost every day, it is also very easy to buy these credits from stores or individual sellers located all over Indonesia.

It is also less of a hassle when customers can purchase digital content using phone credits. Users just choose which payment method they prefer, specify the amount, put in their phone number, and confirm the purchase by replying the SMS sent to the phone.

They don’t need to register or do any sign-ups first. No need to walk to a nearby ATM to wire money. No need to buy physical vouchers and type in 12 to 16 digits. Customers can directly purchase without leaving their seat. This much faster purchasing method can make the difference for converting more impulse buyers.

3. Less risk

Leishman explains, in comparison to credit cards, customers consider making purchases using phone credits as being less risky. Over 90 percent of Indonesians use prepaid SIM cards and they usually have around IDR 20,000 ($2) to IDR 100,000 ($10) for monthly usage. If you lose your phone, then your biggest concern is the safety of your phone rather than its credits. He adds, while IDR 20,000 ($2) in phone credits isn’t much, it is still enough to buy digital content in Indonesia¹.

Coda advantages

There are two ways to charge directly using phone credits to users without the hassle of signing up. One is to work together with a premium rate SMS aggregator. A premium-rate SMS aggregator is a company that works with traditional content providers in many different countries and enables merchants to charge customers of the telcos to which they are connected. These aggregators include Fortumo and Mopay. The other is by working with Coda Payments.

There are three major disadvantages when working with premium-rate SMS aggregator: low revenue share, limited and low value price points, and slow payouts.

• Coda Payments offers a much higher revenue share than premium SMS aggregators, though he was not able to disclose how much.

• Merchants have to comply with the premium-rate SMS aggregators’ fixed price points. Some telcos might not allow merchants sell a digital good for 125 cents, for example. Coda lets merchants decide the exact amount they want to charge users.

Expansion plans