Direct carrier billing (DCB) and phone-paid services have transcended their niche appeal and are now in use by a significant proportion of consumers off all ages in the UK.
So suggests the latest market analysis by the Phone-paid Services Authority (PSA), which finds that an average of 62% of the population aged between 16 and 60 use phone-paid services, with the majority (56%) using them because they are convenient.
Affordability was once again the second-most popular answer (48% in 2022–2023, compared to 47% in 2021–2022) and impulse purchasing the third-most common (46% in 2022–2023, compared to 47% in 2021–2022). The trends from the past 5 years have remained consistent, with convenience and habit continuing to have an increasing influence on customers’ phone-paid service use.
More excitingly for the telemedia sector, consumer confidence in phone-paid services is high, which also acts as a driver of phone-paid service use. In 2022–2023, fewer phone-paid service users reported encountering service issues, with 24% reporting issues with at least one service this year compared to 26% in 2021–2022. Despite the positive change, this number remains roughly consistent with overall complaint level since 2018 (which is around 25%). It is unclear whether this indicates the start of a decline in complaint rates.
The most common problem encountered by phone-paid service users was the difficulty in accessing or using services. This is consistent with previous years, however the percentage of respondents that encountered such problems declined this year (42%, down from 44% in 2021–2022), which is also a continuing trend from last year.
Sexual entertainment, connection services and personal and relationship services resulted in complaints from the largest proportion of respondents. This reflects the same pattern as last year. The percentage of respondents who encountered a problem with sexual entertainment services remained static year- on-year (30% in 2022–2023 and 30% in 2021–2022), but the number of those respondents who had issues with connection services (30% in 2022–2023 and 28% in 2021–2022) and personal and relationship services (29% in 2022–2023 and 28% in 2021–2022) increased compared with the previous year.
The second-most commonly reported issue was the perceived differences between the service advertised and the service received (40%, down from 42% in 2021–2022). The third most-commonly reported problem related to price misconceptions, where the service was more expensive than users had expected (34% down from 37% in 2021–2022).
The percentage of respondents reporting issues within all other service categories has, for the most part, either decreased or remained static since 2021–2022. One explanation for this is likely to be the removal of bad actors from the phone-paid service industry thanks to regulations such as Code 15.
In general, those working in the industry report very few complaints regarding phone-paid services usage and have mentioned that the clear parameters introduced through Code 15 have helped to alleviate previous issues around consumer confidence in this area, which mostly centred on the adult and ICSS segments. Another beneficial consequence of Code 15 is the departure of problematic service providers (for example, scammers or those providing poor-quality services) from the market, which has also helped to improve consumer confidence.
Where is it heading?
The report suggests that consumer spending via operator billing will grow at a CAGR of 6.5% between 2025and 2026 to £355 million. This growth will be driven the increasing popularity of games, which will lead to a higher number of games downloaded from app stores and to higher consumer spending on gaming console platforms. Entertainment subscriptions and subscription-based payments for higher-quality lifestyle services are also expected to drive growth.
In particular, industry stakeholders reported in interviews that there are plans to add more streaming services to the phone-paid services market in the next 12 to 18 months, which suggests a positive outlook for the future of operator billing. Several industry stakeholders also mentioned in interviews that they are exploring the possibility of bringing new services to operator billing (for example, e-ticketing and carparking).
However, most providers are at an early stage of exploration and, in some cases, the addition of these new services largely depends on a potential revision of the PSD2 spending limits. Any change to these limits would likely promote growth in the operator billing market and we would need to revise our forecast accordingly. However, a PSD2 consultation only began recently, and we do not anticipate any major regulatory changes or any significant market response to occur within the time of our forecast.
Spending via premium SMS will, however, decrease at a CAGR of 0.7% between 2022–2023 and 2025–2026 to £184.6 million. After an increase in spending in 2023-2024 due to the return of uninterrupted, year-round competitions, spending on TV and radio broadcast competitions will decline due the continuing shift to digital payment methods, as more service providers move to online platforms in an attempt to offset increasing competition by digital service providers. The report authors expect that consumer spending via premium SMS will decline across other service categories for similar reasons and do not anticipate any large-scale adoption of new services, so spending via this payment channel will continue to decline.
Premium SMS could be a good payment option for parking and other new service types in the long term, but few operators and service providers shared news with PSA of any plans to roll out these services on premium SMS. One interviewee reported that merchants that are looking to enter the phone-paid service market are turning to operator billing over premium SMS because the former channel is more conducive to repeat payments and subscriptions, whereas the latter is better suited to one-off payments.
End-user spending on games will continue to grow significantly, increasing at a CAGR of 9.2% between 2022 and 2026. By the end of our forecast period, the report expects this category to overtake TV and radio engagement to make up the largest part of the phone-paid services market, accounting for 28.8% of total user spending (up from 24.0% in 2022–2023).
Spending on TV and radio engagement will be slightly higher in 2025-2026 (£173.9 million) than in 2022-2023 (£173.2 million), although this represents growth to £175.0 million in 2023-2024 before decline from that point onwards (overall CAGR of +0.1%). It will account for 27.0% of total user spending by 2025–2026 (down from 29.2% in 2022–2023). Entertainment is expected to remain the third-largest service category and spending will grow at a CAGR of 3.3% between 2022–2023 and 2025–2026.
Charity donations and lifestyle services will also grow between now and 2025–2026. Spending on other service categories including betting, gambling and lotteries, assistance services and competitions and quizzes will continue to decline over the forecast period.
