So is turning ubiquity into a competitive advantage a bad thing when in doing that businesses can create greater financial access for millions of people?
The partnership between telecom companies and banks won’t help with space exploration or invigorate plants to grow underwater, but in many cases it has the potential to solve real-world problems.
Whereas banks were previously the sole custodians of most financial transactions, a wide range of non-traditional players – including fintechs and neobanks – have diversified the sector. And partnerships between telcos and banks, or even telcos launching their own solo banking ventures, are becoming a frequent occurrence.
Banks and telcos also have a few operational similarities: both have customers identified with unique numbers and have cards, operate within networks, have millions of customers and act within a strictly regulated industry.
However, with the emergence of Amazon, Uber and Deliveroo mobile phones stopped being a purely communication tool years ago - we use them to shop, move around, get dinner on the table. And customer expectations for a convenient way to pay has become a fundamental part of the customer experience.
Financial services needed to develop and launch new payments experiences to stay relevant and gain an advantage over rivals. As such, telcos - being intrinsically linked to the consumer-preferred smartphone market - offer an ideal method of integrating and adapting to current economic conditions. They can easily provide services in even the most remote locations and that’s the reason why telcos have been heralded as a vehicle for financial inclusion.
In Europe, Orange Bank had 1.2 million customers across its operations at the end of 2020. Of these, 650,000 were using banking products (a bank account or consumer loan) and 530,000 had a mobile insurance product. Orange Bank France is pursuing what it calls a value-oriented strategy, offering customers a range of premium card benefits such as travel and purchase protection insurance, cash back on purchases and other benefits for a monthly fee between €5-€8 per month. More than 90% of its new customers in the fourth quarter of 2020 chose a premium offer, compared to 30% during the same period of 2019. Orange views financial services as one of three growth engines.
Since 2015, Mynt is leveraging its mobile and physical networks of its partners and parent company Globe Telecom, to increase access to financial services through mobile money, lending and newest technology. Mynt's potential, as a subsidiary of leading Filipino telco Globe Telecom with a customer base of over 60 million, has been considerable from the start. To seize the opportunity, Mynt looked to disrupt a market with a staggering 113% mobile yet only 31% banking penetration. The company recently transformed its existing operations and launched new products, in order to potentially reach Globe's 60 million customers.
In April 2019, Telefónica in Spain launched Movistar Money, a consumer loan service giving its Spanish contract customers the ability to obtain credit of up to €3,000 in less than 48 hours without documentation or initial fees. Telefónica is rolling out similar financial services across its footprint such as Vivo Money in Brazil and Movistar Money in Colombia.
In South Africa, TymeBank lets its customers send money to anyone with a valid SA cellphone number (no bank account needed).
The future evolution of this symbiotic relationship betweens telcos and banks seems inevitable as the rise of cashless societies and mobile payments continues to unfold.