The dawn of the new telco digital banking era

March 22, 2022

african store attendant smiling while a customer does a mobile transfer as payment

Jonathan Kriegel


The telecommunications industry has already orchestrated a new era of smartphone-enabled digital payment services, bringing in people who previously had no access to banks or other institutions. But the last five years could be just the beginning of a world that sees operators play a much more significant role in fintech as they develop more innovative services for consumers everywhere.

Tamzin Booth, a partner at advisory firm Brunswick Group, outlined how far mobile money services have come at the recently concluded Mobile World Congress.

“Seven years ago, the New York Times said that cellphones, not banks have the potential to change and shape finance in the developing world in the future and how right that prediction was,” she said. “When you look at the resounding success of services like Safaricom’s M-Pesa, Telefónica’s Movistar Money, Orange Money, and Orange Bank, Turkcell’s Paycell, and others, you see that entering financial services for telecoms firms is in full swing and if anything is accelerating.”

The statistics are impressive. In 2020 the transaction value of mobile payments rose by 22% year on year to US$767bn, and there are currently 1.2bn mobile money accounts in the world, which represents around 15% of the world’s population, according to the GSMA. This has had an extraordinary impact on financial inclusion in a world where almost a third of the global population is unbanked. Thanks to telcos and MNOs, suppliers like Ericsson, the GSMA, and the work done by the Bill and Melinda Gates Foundation that is changing, added Booth. At the same time, their success in financial services prompts more traditional institutions to cast their net more widely.

Orange Bank expansion on the cards

Narciso Perales, CEO at Orange Bank in Spain, also feels that the telecommunications industry has played a critical role in improving financial inclusion. Mobile wallets have breached the divide for hundreds of millions of people across different geographies.

“Only ten years ago, 50% of the world’s population were unbanked. Now 70% of people have access to financial services,” he said. “Truly, mobile has radically changed the financial services industry for the better.”

Orange Money in Africa now has over 45m users. Perales believes that there are further opportunities for telcos and mobile network operators (MNOs) to play an even more active role in the financial services industry.

“This is because we [telcos] can do anything that a traditional bank may offer but within a mobile phone,” he explained. “And we can do it better because we have a deeper knowledge of this technology and a closer relationship with customers than other digital companies.”

Orange has already moved to build its first fully-fledged regulated bank in France in 2017 and later in Spain (2019) and Africa (2020). It has plans to extend that proposition to other countries shortly. In 2021, it handled more than €1bn of financing and personal loans, a figure that very few digital banks could match. Having the scale and reach to serve many customers depends on having a robust digital banking platform that can be universally applied in multiple geographies and running comprehensive customer evaluation programs to ensure that ease of use is a top priority.

“The customer has well evaluated the experience we are building,” said Perales, referencing that the Spanish versions of the app are now in their fourth and fifth generation after the telco partnered with cloud banking platform provider Mambu to build the back-end infrastructure.

“All traditional banks are trying to digitalize, and multiple neobanks are entering the market. That gives customers much choice, and they are likely to opt for the platform which is easiest and most convenient to access and use.”

Trust and customer acquisition will help telcos win

Operators are in a unique position to make the best use of other assets – including a strong brand, established distribution channels, and finance facilities – to deliver digital banking that other fintechs cannot. The financial services industry has traditionally struggled to build trusted relationships with customers, particularly in emerging markets.

Customer acquisition and brand evolution are also expensive for them, which can account for as much as 20-25% of their revenue in the insurance business. By contrast, MNOs already have trusted brands that provide a firm foundation for customer acquisition, explained Marriam Cassim, Financial Services CEO at Vodacom Group.

“They have access to millions of customers where they have a direct relationship to the market and phenomenal distribution,” she said. “They can also access immense amounts of data to put together personalized customer propositions rather than blanket pricing.”

Data insights enable new business models

Data is undoubtedly a significant asset for operators, which offers considerable potential to develop and implement new financial services. Vodacom, for example, has built a successful device insurance business out of its ability to draw correlations between the number of base stations a consumer travels through and their propensity to claim on their mobile phone. It has also used historical data drawn from its customers’ telecommunications service consumption behavior to build a credit scoring business.

“We can credit score a customer by just knowing their mobile phone number – not having to plug into a bureau or other source of information but just the mobile phone number to provide nano credit which could be anything between €1-2,” explained Cassim. “In our opinion, that starts to drive real financial inclusion.”

“When we start looking at data we have in the network – in pre-paid accounts, in mobile wallets – and respectfully combine that data, that is how we are going to be able to build a lot of new types of service which will be relevant to the user when they need it,” added Eva Hedfors, vice president, head of marketing and communications at Ericsson Digital Services.

Irfan Khan is CEO at Telenor Pakistan, a regional operator that has developed a mobile wallet – EasyPaisa – that serves over 20m and in 2021 transacted over 1.4bn rupees, around 5% of the entire country’s gross domestic product (GDP). He points out that insights based on the data telcos can collect from their customers have already helped open new avenues to consumers that previously had no access to traditional lending methods.

“When you look at the mobile phone, now people with no access to anything else can earn money, buy meals for their family, send their kids for education,” he said. “We need to think about how we build on this platform and go beyond traditional use cases like top-ups and bill payments.”

The consensus at the 2022 Mobile World Congress was that a new generation of telco financial services that combine technology and platforms such as mobile payments, blockchain, artificial intelligence, and the Metaverse is just around the corner.

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