The Struggle of Digital Prepaid Services to Become Consumers' Choice

Over the past decade, telecommunication operators have been experimenting to find the right formula to improve their business performance. Since the emergence of service over-the-top (OTT) in Indonesia, operators develop various service models to bring in new customers and increase ARPU.

A number of operators have tried e-commerce and digital money businesses. They failed to develop a business that sustainable. Since two years ago, the operator is back with a new strategy. This time it's not creating digital services. They actually provide services that are still in the corridor core business, but with a different approach.

Operators introduce digital-based prepaid services. It is said so because various user transaction activities are carried out entirely through the application. Here, the operator offers a unique value proposition to accommodate the needs of a market that likes to try new ways.

For example, consumers can customize their SIM card, or in other words choose a 'beautiful number' via the application. Likewise purchasing and registering cards. This method is definitely different from what we usually do; buy starter pack and credit at the counters.

Currently, consumers have three choices brand digital prepaid, namely by.U, Live.On, and MPWR. Originally there were four, but Switch Mobile decided to stop the service in early 2021.

The question is, are digital prepaid services able to survive the hustle and bustle of an increasingly saturated telecommunications industry? In this report, DailySocial collects various perspectives regarding the digital prepaid phenomenon and its future projections.

Change Branding operator

As said above, telecommunications services are identical to conventional methods. In fact, the ideas of digitizing this process have been achieved considering that operators have their own applications which function to provide purchases of data packages or credit. However, this is not the goal.

According to the former Managing Director Telkomsel Emma Sri Hartini at that time, by.U could bring "refreshment" to the telecommunications industry which was more familiar with the presence of old card brands. He believes that by.U can embrace the younger generation without needing to be closely associated with it Telkomsel which is often associated with expensive cellular cards.

Another reason is that the current generation of young people tend not to want their service needs to be dictated to, aka product-driven. Digital prepaid cards offer customization of services that are considered to meet the needs of users in this segment.

Smartfren President Director Merza Fachys previously said the same thing. This digital mobile brand can be positioned as a completely new product without needing to be associated with the brand Existing its parent.

Big PR boost awareness

If traced based on the time stamp, by.U is the first digital prepaid product launched in Indonesia (October 2019). Then followed by Switch Mobile (March 2020), Live.On (October 2020), and MPWR (December 2020). Almost two years later, are these products able to disrupt the existence of cards that have been on the market for a long time? is Branding and new approaches can steal consumers' attention?

The hypothesis above can actually be easily disproved considering that the Switch Mobile service was suddenly discontinued after less than a year. Switch did not specify the reasons behind this closure. We can assume this service failed in the market. This may also be due to consumers not being used to enjoying cellular services in new ways. Or maybe there's a lack of it awareness due to the Covid-19 pandemic situation which makes it difficult for service providers to market products offline.

Another assumption is that the cellular market is already saturated so it is difficult to obtain traction significantly. Plus, just the target market segmented, no mass market.

Quoting Dataword, the Central Statistics Agency (BPS) recorded that cellular card users reached 341,28 million in 2019, down from 435,1 million in 2017. Penetration exceeded the population with 269,6 million people in 2019.

We tried to validate this with every digital prepaid service provider, but most were reluctant to share their data. Only Telkomsel who wants to reveal a little information. Presented by.U Principal Growth Lead Riko Ringgoanto, user by.U reaches 2,5 million after two years of launch. This means that by.U only contributed 1,4% of the total 169,2 million customers Telkomsel in semester I 2021.

According to Riko, this achievement has exceeded initial expectations. This target even takes into account the Covid-19 factor where consumers tend to reduce their spending. With the achievement of the number and engagement current user, he calls by.U already product-market fit.

"Awareness is still our big PR for the past two years. Due to Covid-19, it is difficult for us to market offline advertisements and events. However, we continue to do it intensively digital placement, enter local youth communities, and hold webinars. Because by.U digital only, it seems less colorful. Of course promo ting via offline channels remains irreplaceable in Indonesia. If the situation improves, we are ready promo ting at offline locations, such as the MRT and KRL," he explained.

Meanwhile, Head of External Communications XL Axiata Henry Wijayanto admitted the same thing. Even though marketing activities are limited, the party sees a positive impact where people are now getting used to doing digital activities.

"Everyone faces similar challenges digital telco brands, namely how to improve awareness and credibility. Especially as a new brand, these things will often appear. "We will continue to enhance sustainable partnerships to encourage consumer needs for digital activities," Henry said DailySocial.

Can it disrupt?

Secretary General of the ITB Center for Telecommunication Policy and Regulatory Studies, Muhammad Ridwan Effendi, believes that the emergence of digital prepaid will be difficult to disrupt prepaid brands that have been around for a long time. Apart from the current abundance of prepaid products, the majority of Indonesians seem to prefer products that are simpler and easier to remember. Therefore, the emergence of new products is considered to be difficult to survive.

"In several countries, digital operators such as the MVNO model enter with a community approach. But here it is still less successful. There are [prepaid] products that enter the youth community segment, but eventually disband. Maybe it is necessary to try to enter a wider community, such as religious, motorcycling, or music. This concept has been successful in several countries," he explained.

Currently, Indonesia has at least ten brands of cellular cards, both prepaid and postpaid cards. In order to encourage efficiency with the current competitive cellular market, several operators have begun to streamline their service brands.

Quoting Liputan6.com, Telkomsel finally merged the prepaid brands of SimPATI, Loop, and Kartu AS into Telkomsel Prepaid. According to internal research conducted over the past year, Telkomsel sees customer segmentation becoming less relevant in the digital era. They are now more focused on presenting packages according to customer needs and interests.

Meanwhile, Telecommunication Observer from ITB Ian Josef Matheus actually provided a different perspective. Instead of coming up with a new brand and approach, operators should provide more understanding to consumers that postpaid and prepaid costs will be the same.

"Prepaid does make the biggest contribution to cellular operators' income. However, prepaid cards should be made in one brand only and what society really needs. "This is so as not to cause confusion for customers or potential customers with the combined advantages," he said DailySocial.

Apart from that, operators can actually develop more innovation for postpaid because ARPU is considered to guarantee operator income more. For example, providing payment on-demand well volume-based or time-based for digital applications developed by mobile operators.

"Unfortunately, the operator doesn't have one yet killer a product whose popularity can match WhatsApp, Zoom, or Telegram. In fact, your own application can reduce outbound traffic and streamline expenditure costs. "Even if you can't develop it yourself, operators can actually collaborate with the digital ecosystem to encourage increased ARPU," he added.

Respondent perspective

DailySocial have the opportunity to do it again mini survey from the user's point of view. As disclaimer, this survey does not fully reflect the facts and problems that exist in the field. This survey was conducted to display user perspectives regarding the use of digital prepaid services, as well as our efforts to validate them with related service providers.

Surveys show that most respondents use digital prepaid as a secondary number for mobile data or internet needs. Respondents also admitted that they did not plan to make it the main number.

Some respondents admitted that they did not want to use it for a number of reasons, including: lazy to install applications, not interested, complicated, and too many numbers. As many as 40% of respondents said they were not interested in trying digital prepaid in the future, 40% said they were interested, and 20% said maybe.

"Before it was launched, we were aware that by.U would be used as a secondary number, and from the start we did not try to make by.U the main number. According to our internal research, spending most of them are in secondary numbers. That's why we try to present it reward, free quota, and additional features (music, podcast, etc.) to upgrade engagement user. "So, they don't just make transactions," explained Riko.

Various user perspectives regarding digital prepaid services / DailySocial Mini Survey

We also spoke with two anonymous sources regarding the use of Live.On and MPWR. Each has concern the same as user experience even though the issues they experienced were different.

According to Live.On users, the internet speed is considered good because the signal and capacity in the area is strong. According to him, the package price is relatively affordable, not more expensive than Telkomsel, but not much cheaper than its parent operator XL. However, user experience Live On from the payment side is considered less than optimal.

"I use Live.On for secondary numbers on different devices. When making payments, it becomes complicated because all e-wallet applications are already installed on the main device. Like it or not, it has to be done on the same device because there is synchronization. Supposedly, the payment just needs to be entered number e-wallet just so it can be set straight away," said one user.

Meanwhile, MPWR users also admitted that they had no problems with signal and internet. However, he considered the MPWR application to be less responsive and seamless pattern. The appearance is also considered to be somewhat different from most applications which usually come with modes scroll up and down.

"The appearance of MPWR is actually sideways so it doesn't feel good. In my opinion, the myIM3 application is actually better than MPWR. How come it's inferior to its parent application, even though tagline [MPWR] is digital," he said.