Survey: Financing confusion affects phone purchasing
June 17, 2021
According to findings from revenue and device security specialist Trustonic, 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 per cent 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 per cent 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. Thirty-two per cent indicated that they owned their device outright and had a sim-only tariff.
The survey results also show a third (33 per cent) 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,” asserts Dion Price, CEO, Trustonic. “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.”
“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,” he suggests.
In addition, the survey found that nearly two in five (37 per cent) of UK consumers would consider spreading the cost of purchasing a mobile phone if this option was available at the point of purchase. Twenty—one per cent would use the option to upgrade to a higher spec smartphone or to move from a featurephone to a smartphone.
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,” notes Ben Woods, Chief Analyst & CMO, CCS Insights. “Success depends on having a robust platform to manage the process in a customer friendly way.”
Further findings from the study across the UK, Mexico and South Africa, where similar surveys were undertaken, include:
- When asked if they would choose a finance or loan option to purchase a smartphone:
- 44 per cent said ‘yes’ compared to 38 per cent who said ‘no’
- Younger people were more likely to consider finance for all age groups under 45 at 50 per cent or over compared with 33 per cent of 45-54 year-olds and only 12 per cent of those aged 55 and over
- The biggest drivers for changing mobile device:
- 44 per cent said durability (a cracked screen, general wear and tear or it the device breaks)
- 35 per cent said after losing their device or having it stolen
- 33 per cent 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 per cent of all respondents said ‘yes’ across all three geographies
- This figure drops to 21 per cent in the UK and is highest in South Africa where 56 per cent 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 per cent compared to 35 per cent of women
- 54 per cent 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 per cent
- Followed by getting a better device (24 per cent) and then cost (17 per cent)
- However, in the UK cost was the most cited reason to change operator (35 per cent)
- Younger people in the UK are more likely to change mobile operators:
- 58 per cent of 16-24 year olds in the UK switching in the last three years
- Compared to 38 per cent of 45-54 year olds and 34 per cent 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,” concludes Price. 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.”