A survey released today reveals there is widespread confusion among consumers in the UK around whether or not they have taken out financing on their mobile phones. In the survey, only 27% of respondents stated they had taken device financing as part of an operator package. In contrast, when asked what kind of mobile plan they were on, 36% of respondents indicated that they were on a contract for their device and tariff suggesting many are unaware that a contract is in fact a finance agreement. 32% indicated that they owned their device outright and had a sim-only tariff.
The survey results also show a third (33%) would purchase a more expensive device with a higher specification if financing was available. Affordability is still a huge barrier to worldwide smartphone access, as highlighted in a recent GSMA report. Access to the internet and digital services enabled by smartphones is a critical element in providing ubiquitous internet access and tackling the digital divide. As the price of smartphones with higher specifications and features including 5G continues to rise, financing options have never been more important.
“Operators are missing an opportunity. There is clearly appetite amongst consumers to have the highest spec mobile devices and they are willing to take financing deals to obtain them. The fact is, increasingly customers are turning away from traditional mobile contracts as new competitors offer more attractive financing deals,” said Dion Price, CEO, Trustonic.
“Operators need to be able to offer competitive financing deals without increasing their commercial risks if they are to remain relevant. In this context, device financing technology solutions benefit operators by helping them to secure new customers and increase revenues by lowering the risk threshold associated with offering credit to consumers.”
In addition, the survey2 found that nearly 2 in 5 (37%) of UK consumers would consider spreading the cost of purchasing a mobile phone if this option was available at the point of purchase. While spreading the costs of a smartphone purchase over time is not a new concept, consumers are looking at alternative options to taking finance with a mobile operator.
“The mobile phone industry has been built on financing expensive phones and making the cost more affordable and manageable for consumers. Success depends on having a robust platform to manage the process in a customer friendly way,” Ben Woods, Chief Analyst & CMO, CCS Insights
The study1 also offers insights into the differences in consumer attitudes around the world. While only 21% of UK respondents said that they would be happy to take a loan or finance option at point of purchase to get a higher spec phone or to replace their current phone with a smartphone, the figure more than doubled in the other countries to 53% in South Africa and 58% in Mexico. This further highlights the hesitancy of UK consumers to agree to financing options.
Further findings from the study1 across all three countries include:
– When asked if they would choose a finance or loan option to purchase a smartphone:
– 44% said ‘yes’ compared to 38% who said ‘no’
– Younger people were more likely to consider finance for all age groups under 45 at 50% or over compared with 33% of 45-54 year-olds and only 12% of those aged 55 and over
– The biggest drivers for changing mobile device:
– 44% said durability (a cracked screen, general wear and tear or it the device breaks)
– 35% said after losing their device or having it stolen
– 33% said they changed because they wanted the latest design, functions and features
– When asked if they planned to purchase a 5G device in the next 12 months:
– 42% of all respondents said ‘yes’ across all three geographies
– This figure drops to 21% in the UK and is highest in South Africa where 56% of respondents said they plan on purchasing a 5G device within a year
– Men were more likely to say they planned on purchasing a 5G device at 48% compared to 35% of women
– 54 % of 23-34 year-olds said they were likely to purchase a 5G smartphone.
– The biggest drivers for changing mobile operator:
– Better connectivity or coverage was the biggest driver at 25%
– Followed by getting a better device (24%) and then cost (17%)
– However, in the UK cost was the most cited reason to change operator (35%)
– Younger people in the UK are more likely to change mobile operators3:
– 58% of 16-24 year olds in the UK switching in the last three years
– Compared to 38% of 45-54 year olds and 34% of those in the 55+ age bracket
“There is a clear opportunity for operators to remove the confusion surrounding device financing and offer more options to their customers. Especially with the younger generations being so willing to switch operators for a good deal, operators need to offer a finance model that works for them. Only when everyone has access to device financing can we start to bridge the digital divide across the UK, and worldwide,” concludes Price.