Why do publishers ignore a crucial component of their paywall?

Online news and magazine publishers have seen shifts in the industry accelerate this year due to the global health crisis. During May, FIPP held a webinar which summarized the trends:

• Print circulation declining
• Advertising revenue declining
• Online subscriptions revenue growing

Reader revenue growth from online channels is a positive for publishers, but paying for news remains far less popular than paying for other types of digital content:

Despite the one-off spike in subscriptions during the spring, the gap between news publishers and other digital content segments remains huge. Making only incremental changes in tailoring content, adjusting paywall pricing and user acquisition strategies leads to incremental growth, but not a 15x leap in subscribers. What’s missing to close the gap?

One key aspect that other digital content segments are focusing on but publishers largely ignore are which payment methods get used in the paywall. A recent paper by the Reuters Institute states: “Newspapers should take a page from technology start-ups and adopt frictionless payment systems. Anyone should be able to subscribe in a few seconds”.

The default payment option provided to readers is credit card payments. Credit cards payments are added to the paywall in the very beginning and with that, the work is done. The assumption publishers make is that this is already the “frictionless payment system” with which “anyone should be able to subscribe in a few seconds”.

And they work, at least for those readers in the audience who end up with a subscription. But the people consuming video, music, online games and news are exactly the same. So why are so many more of them paying for other content, but not for news?

Looking at gaming payments data from SuperData, only 25% of global gaming transactions are done through credit cards. Another 13% is done through direct debit and bank transfers. So where is the rest coming from?

The answer is alternative payment methods: carrier billing, mobile wallets and prepaid cards. Credit card, direct debit and bank transfers duplicate each other as they all assume readers have access to and are willing to pay with their bank card or account. Alternative payment methods remove banks from the equation, significantly expanding the amount of people who are able to make payments.

Readers want to use an alternative payment method because paying with a bank card is inconvenient. Today, more than 50% of online content consumption takes place on mobile devices but the experience of paying with a credit card is exactly the same as on desktop: 

Finding your credit card from another room and filling out multiple form fields on a small smartphone doesn’t describe Reuter’s suggestion to “have anyone be able to subscribe in a few seconds” too well.

A payment system that is frictionless requires the user to make as few steps as possible to start paying for news. In case of digital wallets, the detailed data required for a credit card transaction is replaced by logging in to the wallet. In case of prepaid cards, it’s replaced by entering the code on the pre-purchased card. And in case of carrier billing, it’s replaced by processing the payment through the user’s mobile identity.

This is where mobile operators come into play as payment partners for publishers. Everyone has a mobile device in their pocket and every mobile device has a SIM card. Mobile operators collect payments from users through those SIM cards, either for their own or 3rd party services. This doesn’t require involving banks, and the payment process becomes frictionless:

Carrier billing has seen widespread adoption across virtually all other segments of digital content, and is used by some of the biggest companies in the world. This holds true for both emerging Asian markets, where people use alternative payments as they don’t have access to credit cards…

… but also in Europe, where the frictionless user experience results in better payment performance compared to card-based transactions:

The companies profiled above and news publishers both focus on providing value and entertainment to their user base. The effort put into perfect user acquisition and pricing strategies are equal. But while others also focus on optimizing their payment methods, publishers fall flat on the checkout page. 

Dealing with this critical aspect of the user journey has been natural for SVOD, music and gaming because they are digital first. The historical background of print for publishers means the choice in payment methods was not an issue in the past. But in online channels, publishers need to adopt the same strategies as digital first companies – and that includes more payment options for readers.

If you're interested in learning more about mobile operator partnerships for publishers, carrier billing and a case study on Sweden’s leading newspaper Aftonbladet, check out our white paper below: