Prepaid Rules the World, but ...

Ismo Antikainen
February 29, 2024


Globally, there are 8.5 billion mobile connections, surpassing the world population with a coverage of 105%. As of 2022, 5.4 billion people, or 68% of the global population, have subscribed to mobile services (GSMA). Contrary to the expectations shaped by the EU and US markets, the majority of these subscriptions are prepaid, not postpaid. In regions like Africa, prepaid subscriptions exceed 90%, while global average for prepaid is as high as 71%. This underscores the vast prevalence and business significance of prepaid services.

Four types of prepaid offers

We at NXT:FWD have discussed with tens of mobile operators worldwide on their prepaid offerings. Based on these discussions we have identified four primary types of prepaid, each with its unique consumer challenges:

  1. Pay-as-you-go Prepaid
  2. Pay-as-you-go with Bundles
  3. Recurring Prepaid
  4. No-Balance Prepaid

Pay-as-you-go (PAYG) Prepaid

The original prepaid model, PAYG allows users to top up their balance and consume services—calls, SMS, and internet access—paying per unit used.

This model's primary advantage is expenditure control; users cannot spend beyond their balance. However, unforeseen data consumption can rapidly deplete this balance, leading to potential bill shocks as the data tariffs for data are typically very high.

Early days of the prepaid one could observe a pattern in consumer behaviour following a voice call; check the balance, make a call, check balance again and try to calculate whether balance deduction matched what expected. It showed clear lack of trust to the service provider. Today, continuous balance monitoring has become impractical due to background data usage, complicating the PAYG model further.

Pay-as-you-go with Bundles

Nowadays operators offer consumers to buy packets or bundles, e.g. 1GB of data with  balance. And when out of bundle, continue based on pay-as-you-go. Despite improvements, significant issues remain:

First, some operators automatically switch to PAYG rates after bundle exhaustion without explicit user consent. This is like highway robbery as out-of-bundle data fees are unexpectedly high.

Second, In some countries regulators have recognised this and started to require consumers to opt-in in or continued PAYG post-bundle.

Last but not least, understanding data consumption with MB and GB bundles is challenging.  To understand GB consumption necessitates continuously monitoring it. Impractical, as leads to need to monitor constantly both main and data balances.

Recurring prepaid

Recurring prepaid plans represent the closest migration towards postpaid, offering users a monthly bundle of Data, SMS and Voice - to cover all basic communication needs, with single fee charged from prepaid balance every month. A normal postpaid subscription, except  payment made in advance. This model simplifies payments but limits spend control. Possibly beneficial for users that can spend 20-50USD every month for their mobile service, but most of the world of prepaid customers don’t want to or can’t afford to.

Operators attempt to make user life “easier” by providing automatic recurring payment features to top-up user’s account or by providing grace periods during which the service continues with small fee - even if user has no balance on the account to renew the subscription. This mimics basic postpaid with upfront payment.

In some markets operators offer also daily recurring prepaid where the first use of the day triggers a daily charge of service - automatically detected from balance. User is thereafter able to use the service up to fair-usage-policy without additional fee on that day. Experience is good only for subscribers using heavily mobile services only few days of the month and remember to close of their mobile data or remove the SIM for the rest of days. Users snacking calls, texts, or data across multiple days see their balance evaporate into thin air.

No-balance prepaid

Latest addition to family of prepaid is what we call “no-balance prepaid”. With this consumer does not top-up, but directly buys a bundle from a physical POS or on-line. e.g. a 2-week bundle of unlimited national voice and SMS with 3GB of data.

Operator still technically supports a prepaid balance that can be used additional services like international calls or premium services, but most of the users are never doing top-ups and might not be even aware that there could be a balance that needs to be topped up.

With this approach consumer controls very well against bill shock, but is limited for the decision whether I buy the service for 1 week or 2 weeks - with related guesswork for data consumption the time period.  In other words, no-balance prepaid is a very inflexible way of letting user to customise, or scale up and down, her spend and usage.

Models Fall Short on Meeting User Needs

Prepaid won over postpaid, because it gave consumer more control. It is easier to understand and provides tools for avoiding bill shocks. And it used to provide needed flexibility.

However, all the models except the pure PAYG require an up front commitment for a rigid product. Selection without try and buy, or opportunity to scale up or down - flexibility that was the power of prepaid. In addition, users with limited financial means will always select the lowest end offer - even if it was not right for them. And everyone needs to select bundle through pure guesswork. For PAYG, on the other hand the high rates for basic data do not protect against rapid balance depletion.

In short, we argue that all four prepaid models discussed are about managing CSP cashflow and not about providing consumers transparent and easy-to-understand services.

NXT:FWD Solution to Prepaid

With NXT:FWD CSPs can offer consumers a simple mobile data from minutes, an hour, a day, and beyond. A simple connection quick to understand, quick to buy, and transparent to use. Activate immediately, know how much time is left, and be in the know when they expire.  These simple connections are sold in an app spiced up always with the best prices, offers, and rewards.

Our model gives enhanced consumer flexibility of pay-as-you-go with better control and transparency of spend. Better than any other prepaid types have achieved.

NXT:FWD is flexible to be offered for any of the above mentioned prepaid types. CSPs can offer future prepaid flexibly - complementing and improving the above prepaid types. In addition, the solution is tuned to learn from consumers, to decide the optimal evolution for the future prepaid. Want to learn how? Reach out!

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