Call completion in a pre-paid world, is micro-credit the answer?
Missed call attempts, when person A tries to call person B but cannot get through occur for all sorts of reasons. People may have their phones turned off, they may be out of network coverage, busy on another call, or simply decide not to pick up.
As a rule of thumb, for every successfully connected call, there is another unsuccessful missed call. Mobile operators know this. Unsurprisingly then, they spend a lot of time and effort implementing ways to reduce their level of missed calls, because simply put - Missed calls equals missed revenue, and lots of it.
Collectively, these efforts to get people connected constitute an operator's call completion strategy. Voicemail is essentially a call completion system, with calls that would otherwise not get through being connected, and thus generating revenue.
The good news for operators is that in many cases a successful call completion strategy generates revenue more than once, such as when the end result is a returned or follow-on call. Revenue generating strategies can be as simple as charging customers to retrieve voicemail messages, as well as the returned calls that result from listening to them.
Other examples of call completion and call continuity strategies that are becoming commonplace include the 'call waiting' beep, 'missed call' alerts, and 'message waiting' alerts.
Recently however, call completion strategies have begun to expand to include a new category of missed call: The pre-paid user who wants to make a call, but has no available balance or credit to do so.
(Please click on the image to view an enlarged version)
Strategies here include traditional 'reverse charge' systems where A calls B but B pays, or a modern variation to this, the 'call-me-back' system, where party A is allowed to send a pre-formatted SMS to party B requesting that they call them. Alternatively the pre-formatted SMS might ask party B to top up A's balance for them (for example from a child to a parent)
In all of these examples the distinction between pre-paid and post paid customers remains clear; in the pre-paid world, when the caller has insufficient balance, the call completion strategy is designed to find an alternative method of payment before the call is connected. There are however, a few fledgling examples around the world that turn this relationship on its head, and these are generating some interesting results.
The question is this: What would happen if, faced with an anonymous pre-paid customer with zero credit, the operator decided to let them make a call anyway, and in so doing, allowed that pre-paid customer to run up a line of credit? This could be as an act of good faith, based on the understanding that the credit will be recovered next time the customer tops up their balance.
On an individual level of course the answer is binary; either the operator will get their money back next time the customer tops up their credit (plus a bit of interest, or a handling fee), or they will never see the money again, because the anonymous customer dumps the SIM and moves on to another operator.
There have been some interesting small trials in this area of extending 'micro credit' to pre-paid customers, and where the trial base of customers is carefully screened and controlled, the results are promising. Most people it seems, value the service (after all, the operator is doing them a favour when they need it most) and are good for the credit.
However, on a macro level across an entire customer base the proposition seems preposterously risky: Faced with 10 million anonymous pre-paid customers running up lines of credit, how can an operator distinguish between those likely to pay the money back, and those likely to disappear?
The answer lies in scoring, combining a form of credit scoring with behavioural scoring. In some markets pre-paid users are required to identify themselves, and in others they choose to do so, and in these cases traditional credit scoring can assist in determining risk for micro credit, and even where customers remain anonymous a 'micro credit history' can be built up over time through analysis of how the service is used and this can form the basis for a scoring model.
Additionally by analysing the historical behaviour of its customer base across a range of relevant factors, it is both possible and practical for mobile operators to build a behavioural scorecard to effectively manage their risk, by segmenting their pre-paid customer base according to their propensity to honour a micro-credit service.
If done properly micro credit for pre-paid mobile users presents some interesting opportunities; as a call completion strategy the positive impact on revenue is obvious, however what is perhaps more interesting for long term growth potential is the powerful impact that this service can have on customer loyalty. A valuable service, delivered at a time of need, is always appreciated, and worth keeping hold of.
Tim Barber
Director
Telecoms Market, EMEA
Experian
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