How spend limits drive DCB spend
In the perfect payment scenario, customers can make as many payments as they wish, buying any number of products, at a range of prices. All payments are collected as intended and the products are delivered and work as expected. There are no blockages or surprises for the customer and therefore no refunds or reasons to contact the operator or store customer care team.
In practice, some payments will be disputed, or refunds will be necessary. This can be for several reasons:
- The purchased product does not meet expectations. In most cases this happens within the first few minutes of purchase and the customer simply cancels the purchase or requests a refund directly through the store.
- The customer doesn’t have sufficient credit on their pre-pay account, causing the payment to fail. Many customers will simply top up their pre-pay account and try again, confirming a strong desire to buy.
- Some customers will fail to meet the payment obligations for their monthly post-pay mobile charges. The operator needs to plan for these risks in their financial models and revenue shares.
- In a few cases a customer may claim to be unaware of payments made to their mobile account. They get “bill shock,” resulting in customer care calls and refunds.
Operators and app stores often look to implement spend limits or spending rates as a mechanism to minimize liability and control exposure to risk. Understanding basic customer behavior and spending patterns is crucial to delivering the optimal purchase experience and maximizing revenues while controlling risk.
Setting a spend limit or rate too high does very little to control risk or protect revenue as intended. It fails to capture out-of-control spenders that are most likely to complain of bill shock, fail to pay their bill, cancel their operator contracts, or become uncollectable bad debts.
On the other hand, introducing spend limits that are too low will inconvenience the 20% of the subscriber segment that are considered “primary spenders” and generate the majority of earnings. The lower the spend limit, the greater the impact on these valuable users. Preventing these customers from buying products does three things:
- It reduces the monthly spend by those users and therefore the operator revenue share.
- It causes customer dissatisfaction and increases complaints, leading to increased customer care costs as top spenders call to complain or request their spend limits are increased. This in turn increases frustration and dissatisfaction.
- It drives customers to switch to using credit cards or gift cards for their payment method. As customers encounter spend limits, many will register a credit card to pay and buy what they want.
Bango Boost technology analyzes the purchasing behavior of operator customers. Operators can use this analysis to determine the best spend limits or spending rates to configure for subscribers.
To perform this analysis the Bango Boost technology considers multiple measurement points:
- General changes in payment trends including the number of new DCB customers, the type of customers, and new products coming into the market that may drive payments.
- Payment behavior of customers that hit spend limits.
- Customer loyalty, spend frequency, and their contribution to the overall End User Spend.
- The type of content and value that is rejected because of the spend limits and analysis on price point popularity.
This analysis is shared with the operator through Bango Boost Reports. The operator can then use this information to implement the spend limit in their subscriber management platform.
How Bango can help implement spend limits and spending rates
If the operator system does not allow for the implementation of spend limits, there is functionality within the Bango Platform that operators can use to implement some types of limit on spending.
Bango can enable the configuration of spend limits and rates on the Bango Platform on behalf of the operator.
The following limits can be configured:
- Monthly spend limit – for example, limit spending to $250 USD per calendar month.
- Daily spend limit – for example, limit spending to $100 USD per day (24hr period).
- Individual transaction limit – for example, a maximum of $50 USD per individual transaction.
The spend limits can be different for pre-paid and post-paid customers.
A monthly spend limit is the best approach to managing monthly contract customers. If additional protection is required, especially when monthly limits are high, a daily spend limit can be applied. Per-transaction spend limits are generally not useful if daily spend limits are used.
To enable spend limits on the Bango Platform, the operator can send a request to Bango Support indicating the type of spend limit and the value to be configured.
Although this functionality is available in the Bango Platform, designed to support operators in balancing user satisfaction against risk, it is strongly preferable that limits are implemented in the operator’s own subscriber management system. This is the most efficient and effective way of managing spend limits, for these reasons:
- Operators are regulated by local authorities. By managing their own spend limits, operators can ensure that any changes in local regulations are reflected in the spend limit configuration. Bango may not be aware of local regulations, and does not aim to stay fully informed of all requirements.
- Operators may want to limit the spend across multiple VAS services, yet Bango can only limit behavior across the services it provides through the Bango Platform.
- Operators can include credit profile in the spend limit configuration to complement recommendations from Bango. The credit profile can be based on the ability of a customer to pay, rather than a generic spend based model.
- Operators can implement dynamic spend limits where customers can automatically move to higher spend limit tiers as soon as they meet certain criteria.
- Operators monitor the customer care calls and have first-hand information on any concerns that customers may have about spend limits, or if limits are not functioning as intended.
If an operator chooses to use the Bango spend limit functionality, the following conditions apply:
- The operator determines spend limit policy for each subscriber. Bango is not responsible.
- A “safety net” spend limit cap for all subscribers must be implemented in the operator, in addition to the Bango limits. Since Bango cannot see all spending it is vital there is a general limit provided by the operator.
- The operator is responsible for ensuring spending caps comply with local market regulations.
- Because Bango is unable to detect any problems or anomalies in the operation of the spend limits due to human or system error, liability for any overspend by consumers or its consequences remains with the operator.