Telecommunications have long had an association with payments, particularly in emerging markets with underserved populations.
In fact, a report by Spearline in 2021 revealed that telecom companies play a vital role across all areas of emerging market economies (EMEs), providing access to information, services and additional markets – driving economic growth in these regions.
As we enter the digital age, what role are fintechs playing in the financial services telecoms companies offer in EMEs?
Fintech driving payments growth for telecom companies
Many Western markets may not be too familiar with the likes of VodaPay or T-Mobile MONEY, but these newly launched telecoms payments options play a significant role in emerging regions by providing payment options.
It is, therefore, no wonder OpenPayd’s Head of Product Strategy, Daniel Belda, says digital payment technologies are enabling telecom companies “to take this one step further and improve the engagement with and retention of their expansive customer bases”.
The success of VodaPay and T-Mobile MONEY, as just two examples, proves that providing embedded payment options for telecom companies has led to “increased customer engagement and loyalty compared to other companies looking to deploy a digital wallet or super-app,” adds Belda.
He notes: “Digital payments help telecom companies meet customers where they are – through their mobile phones – giving them the power to make payments, local transfers, international transfers, give gifts, and more – all while removing the need for a physical card that can be easily lost, or involve a tedious in-person trip.”
It is not just convenience, either, helping telecom companies expand their customer bases through payments. “Financial inclusion is another critical element of digital payments that keeps customers sticky,” adds Persson.
“Approximately 1.4bn people worldwide are unbanked, many of which live in developing countries. However, many of these people do have access to a mobile phone, which is all they need to harness digital payments and gain access to critical, everyday financial services.
“These elements – convenience and inclusion – are what have made the difference for mobile financial services and allowed their popularity to grow so meteorically across the globe.
“And as telecom companies continue to invest in more layers to the mobile money service mix, like personalisation, it’s clear that customer engagement will continue to increase as well.”
What is also true is that customer engagement is heightened by a stronger customer journey, and digital payments provide this type of journey for telecom companies.
In fact, even in EMEs, “consumers have come to expect end-to-end experiences, which is drawing telecom companies towards offering embedded financial services like digital wallets”, says Belda.
Persson gives e-shopping as an example, where customers “can easily check out using a variety of payment options from credit cards to digital wallets.
“They can even opt for buy now, pay later services, apply coupons and discounts, and receive cashback or loyalty points all in a single transaction journey.”
Digital payments: Reducing costs
It is not just greater customer journeys, engagement and retention that digitalisation offers the payments divisions of telecom companies – it can also help to significantly reduce costs.
By helping telecom companies reach higher operational efficiencies, the cost of payments infrastructure can be significantly reduced.
For Persson, there are two key areas where digitalisation has helped telecom companies reduce their expenditure: voucher generation and distribution costs.
He notes: “In the ‘old days’, and particularly in developing countries, any customer who needed to top up their phone prepaid subscription had to run to the local store and grab, for example, a US$20 paper voucher.
“Digital payments allow customers to self-top-up through their digital wallets, circumventing the need for these paper vouchers and thus removing the untold costs associated with first printing and then distributing millions upon millions of vouchers.
“For example, MTN, a leading telecom operator in Africa, has more than 24% of its airtime sales processed by MTN Mobile Money.
“Digital payment offerings also enable telecom companies to streamline their payment processes, reduce cash handling expenses, minimise late payments and bad debts, enhance customer service, and gain valuable data insights.
“Naturally, these benefits contribute to significant cost savings and operational efficiencies for telecom companies, enabling them to focus resources on improving their core services and driving business growth.”
Telecom payments: What are telecom companies missing?
It is clear modern digitisation of financial services paints a rosy picture for telecom operators offering payments. But what are the downsides? What can a payments or financial services provider offer consumers that a telecom company cannot?
For Belda, while telecom companies are becoming increasingly capable, offering more services in different sectors like payments, smart agriculture, and health tech, “to continue to do so efficiently and effectively [they] need to have the right partners on board”.
He adds: “Most telecom companies don't yet have a clearly defined financial services proposition.
“By partnering with a payments service provider, telecom companies can focus on their core operations and business growth, diversify offerings and increase customer engagement, all while maintaining a competitive edge in the market.”
Meanwhile, as far as Persson is concerned, the main struggle for telecom companies is keeping up with different regulations. “Adhering to various countries’ sanctions, anti-money laundry rules, and regulations can be a very complex undertaking,” says Persson.
“Ideal digital payments providers will be able to help telecom companies navigate an increasingly complex digital age.
“As digital payments increase, so does the potential for fraud. Most enterprises currently rely on ageing IT infrastructure, but advanced security and fraud management systems are needed.
“Such systems should be able to utilise AI, data analytics, and sophisticated rule engines to identify anomalies in transaction trends and curb fraud attempts in real-time.
“They should also be able to perform transaction velocity checks and map, analyse, and block the connections of fraudulent users. To succeed, this level of security and trust is paramount.
“Finally, companies are currently late on the potential of cloud to improve scalability. Through the next decade, expect to see telecom companies seek out a partner that can integrate their digital financial systems onto cloud, unlocking a new realm of increased scale, efficiency, and seamlessness.”
The future of payments and telecoms
But is scaling cloud capabilities the only thing in the future relationship between payments and telecom companies?
While cloud migration is an important step, this is just one area where Belda feels telecom companies will move from solely being a telco to a ‘techco’ (a telecoms operator to a technology company).
He adds: “This has been widely discussed across the telecoms industry over the last few years, with the aim of enabling telecom companies to win new business in wider technology sectors including AI, IoT and cloud.
“We’ll likely see something similar happen with telecom and payments companies. Many operators already offer some form of financial service, like paying for a phone in 12 instalments alongside a new subscription – the precursor of BNPL in Europe.
“In the future, we’ll see increased partnerships and collaboration to offer a breadth of services to customers.”
This is echoed by Persson, who calls digital the next frontier.
“More than 160 telecom operators offer mobile financial services today across geographies including the Middle East, Asia Pacific, the Americas, and Africa,” he adds.
“Telecom operator MTN Uganda, for example, sees approximately 29% of its revenue come from fintech services. That is incredibly significant.
“With existing services like data and voice stagnating, there’s no doubt more operators will continue to jump on board as digital payments become a key avenue for companies to diversify their revenue.”
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