Understanding how the various stakeholders can support your business model is important when building out your VAS strategy. Providers, aggregators and technology partners offer different benefits, so having a clear idea of what they do and how they work is useful to help you make the right decisions.
Who are they?
Businesses can procure digital goods and services through providers, aggregators and technology partners. Even if you’ve offered VAS for some time, it’s useful to take a step back and remember the difference between these entities:
Providers are the originators of goods and services:
Some examples include municipalities, bill payment aggregators and mobile network operators.
Aggregators are wholesalers:
They buy a fixed-range of VAS product offerings from providers and resell them to retailers, such as supermarkets and banks. They have direct relationships with providers and can negotiate favourable commercial terms because of their bulk buying power and lack of dedicated infrastructure.
Technology partners bring together the service offerings from providers and aggregators:
Unlike aggregators, technology partners are not resellers of VAS products and don’t hold commercial agreements with the providers. Rather, they give retailers access to multiple aggregators and providers through a single streamlined system, fronted by a user-friendly platform. They also manage all of the transactions that flow through the system to cut down on administration for customers.
How do they fit into the transaction landscape?
Each stakeholder plays an important role in the transaction landscape. While access to VAS has become more streamlined over time, there is still a ‘waterfall’ system, where each stakeholder’s service offering flows into the next.
When VAS first became available, businesses went directly to VAS providers and used in-house development to set up their offering. A big part of this often included customising their payment rails to manage the transaction flow. As more providers joined the market, scalability became an issue as managing a growing number of individual integrations became difficult.
To counter this, aggregators emerged as a solution to bundle different services from individual providers. For example, a bank or retailer could use an aggregator to get both airtime and data from an MNO through one aggregator channel.
As VAS became more prolific, and customers came to expect it across more channels, relying on a single aggregator became risky. Aggregators have massive transaction volumes, so if they suffered an outage, all of the businesses dependent on their system would go offline, leading to loss of revenue and unhappy customers. Using a single aggregator also made it potentially difficult for businesses to scale VAS offerings as not many aggregators offered all available products and services.
Technology partners saw the opportunity to use built-for-purpose technology to connect businesses to multiple aggregators – as well as directly to providers – through their own single point of access.
If you’re looking to grow your VAS offering, this solution offers multiple benefits:
- Risk avoidance
With the option to connect to multiple aggregators, outages are avoided. Should one aggregator be down, technology partners dynamically route the transaction to your second-, third-, fourth-prefered provider, securing revenue and retaining consumers. In addition, working with a technology partner protects you from product or service discontinuation. For example, municipal contracts go out to tender regularly, and sometimes relationships end.
- Maximise revenue
By connecting to multiple aggregators and providers, you can negotiate the best pricing for each service you want to offer, in line with your business plan and budget. Looking at the example of airtime, Provider A might offer the best rate for airtime but Provider B offers a better price for data. A technology provider provides a seamless connection to both providers, which means you can offer your customer better rates, while also protecting your margins.
- Increased flexibility
Having access to multiple providers allows you to keep up-to-date with new products and services, like lotto, gaming and betting. This helps you grow your VAS portfolio and increase customer loyalty.
- Easier management of transaction flows
Best-in-class technology partners offer back-office and analytic tooling for automated reconciliation and a real-time view of operations. The tech that they provide abstracts the complexities of transaction processing, such as multi-leg orchestration, protocol translation, store-and-forward and load balancing making it easier for you to easily manage your entire transaction flow.
What’s best for you?
Whether it’s best to work with an aggregator or a technology partner depends on your VAS strategy and other business needs.
If your digital goods and services portfolio is relatively new and you’re not looking to expand your range of offerings, an aggregator makes the most sense.
If revenue, uptime, flexibility and growth potential are essential to your strategy, technology partners are a great solution.
If you’d like to hear more about how Electrum can help your business make the most of the VAS market, please get in touch!