Over the last three decades, prepaid airtime and data have become an integral part of value-added service (VAS) offerings in South Africa. According to the 2022 Digital Goods and Services Report, consumers recognise airtime and data as essential goods, and expect to have easy access to them across all channels. In this blog, we explore how banks and retailers who sell prepaid airtime and data can get the most out of it.
According to the Report, prepaid airtime and data is a trusted staple of South Africa’s VAS market, making up 28% of sales volumes in the digital goods and services market.
“42% of all digital goods and services sales are prepaid airtime and data … the demand for prepaid airtime and data is strong and shows no sign of slowing down.” - 2022 Digital Goods and Services Report
Irrespective of the channel they’re sold through - including till points, mobile apps, and USSD codes - prepaid airtime and data vouchers are a high-volume and low-margin product. This makes it important for you to find the best approach to cutting costs and maximising revenue margins for your business. If you don’t build a strong VAS strategy, you stand to lose prepaid airtime and data sales volumes and revenue.
High volumes, but low margins
Since prepaid airtime and data are face-value digital goods and services, customers expect to receive the exact value they purchased when they load the voucher onto their phone.
This creates a challenge for banks and retailers, as there are other stakeholders involved in the process - from providers and aggregators to tech partners - all of which carry a cost. Although these additional stakeholders can lower margins and affect potential revenue, you can mitigate this risk by leveraging your partnerships. A strategy focused on acquiring access to reliable infrastructure and resources can help you to minimise this potentially lost revenue.
How to get the most out of prepaid airtime and data
1. Use a multi-provider model for more options
When integrated to a single aggregator or prepaid airtime and data service provider, your service is limited to what that specific provider is able to supply. Making use of the right technology partner to connect to multiple providers and aggregators will allow you to offer a wider range of product options. This will also give you the opportunity to negotiate more lucrative commercial deals, ensuring that you can improve on the low margins that come with selling prepaid airtime and data.
Selling a high-volume, low-value, and low-margin product means every transaction counts. Having your prepaid airtime and data service go offline, without a failover solution can result in a significant number of lost transactions. And, with the reduced earning potential that comes with low margins, losing transactions translates to losing money.
Features such as preferential routing can mitigate against the risk of offline providers and the associated losses. For example, if a client purchases an airtime voucher, but the transaction fails because your first-choice provider’s systems are down, the request gets rerouted to another provider in real-time. This enables you to continue selling prepaid airtime and data, without your customers experiencing failed transactions and leaving empty-handed (to seek the same product elsewhere). By ensuring all transactions are successful, you can generate more income - making the most of your revenue margins. Electrum’s Digital Goods and Services Platform includes preferential routing in order to redirect traffic to another provider if one of your providers’ systems go down - helping your business to keep transactions flowing.
3. Let software, rather than hardware, do the heavy lifting
Connecting to a cloud-hosted platform for your prepaid airtime and data product means you won’t have to buy and manage labour-intensive infrastructure, resulting in saving on maintenance and running costs.
Cloud technology also has the ability to scale, allowing you to continuously develop your offering’s technology to meet demands and business growth. A cloud-hosted platform is able to increase supply to match demand, whether your VAS business grows over an extended time period, or sees occasional spikes in the sale of prepaid airtime and data vouchers.
4. Monitor transaction volumes and automate your financial reconciliation process
Keeping track of high volumes of daily transactions is no easy feat, which is why it’s essential to have automated alerts for system failures. For example, you can ensure that reversals happen when they need to by using Electrum’s monitoring tool dashboards, which flag failed transactions. This alert system helps to ensure up-time, because it enables you to quickly find and solve problems as they show up.
It’s imperative to have automated transaction matching to detect any transaction discrepancies between your business and your service providers. This level of automation allows you to reconcile and settle high volumes of transactions and easily identify error cases with limited human intervention. Financial reconciliation tools, such as Electrum’s Back Office tool will help you achieve optimal margins by ensuring the accurate settlement of day-to-day fees.
Win at prepaid airtime and data - partner with experts
With the low margins associated with prepaid airtime and data, your strategy is key. The right technology partner will help you to maximise what you can offer your customers; ensure your service is available when your customers want it; help you to easily scale your service when you need to; and simplify your financial processes.
If you’re looking for a team of experts to help you build and execute prepaid airtime and data solutions that work, with around-the-clock implementation support, contact Electrum today.
