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By FintechOS · March 26, 2020
8 minute read

Telcos’ Magic Formula for Growth: It’s Fintech Time

afbeelding 108 FintechOS

More than 90% of the world’s population lives within reach of a 3G or higher network. The spread of mobile connectivity provides the foundation for launching mobile banking services. If telcos learn how to behave more like banks, their profit formula is likely to change dramatically.


Watch webinar on-demand – How do businesses provide financial services to build new revenue streams, decrease costs and increase customer loyalty without breaking the bank?

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  • Today, connectivity is a commodity. 97​% of the world’s population lives within reach of a mobile cellular signal and 93% within reach of a 3G (or higher) network.
  • With the help of big data analysis and automation, telcos can provide tailored financial services (FS) to the end consumer – quickly and easily.
  • Telcos who want to generate new revenues from the FS market, to innovate at speed, reduce churn, increase loyalty, and get the best time value of money are already embracing financial technology.


In the early 2000s, when today’s multi trillion-dollar tech industry was only emerging – and not disrupting entire economies, societies and politics, like today – do you remember what the hottest industry was? Right. It was telecoms, also known as telco.

Back then, the telecom companies’ infrastructure was a powerful force for transformation, just as new technologies like Artificial Intelligence, Banking APIs and the Internet of Things are now.

But nowadays, for the average consumer, infrastructure is no longer an attractive marketing proposition. Connectivity has become a commodity. Nearly half of the world, or more than 4 billion people, are already connected to the Internet. Data provided by The International Telecommunications Union (ITU) shows that 97​% of the world population now lives within reach of a mobile cellular signal and 93% within reach of a 3G (or higher) network.

It appears that the highest phone ownership rates are in Europe, and the lowest are in Africa and South Asia.

Overall, the number of active mobile-broadband subscriptions per 100 inhabitants continues its double-digit growth.

FintechOS telco graph

Evolution of mobile and fixed subscriptions *** Source: The International Telecommunications Union’s (ITU)

Telco, reinvented

Developed markets are highly digitized, subscriptions are on the rise, and the communication intensity in terms of time spent will grow by 63% over the next ten years, according to Informa Tech, a research and consulting company.

Despite all that, the pressure on profits and growth rate for telcos is mounting. Worldwide, for traditional telcos, CAGR, the Compound Annual Growth Rate, was estimated by McKinsey & Company at only 0.7 percent through 2020 (Please note that these estimates were made before the Covid-19 outbreak).

Why is that? “Developments in digital technology threaten their current investments and put their cost baseline under significant pressure”, noted McKinsey in a 2017 report dedicated to telcos’ growth strategy in a digital world. “In addition, telcos will continue to be forced to make major investments in future network technology. But the cost of just doing this alone is expected to result in a drop in revenue in the order of 15 to 30 percent”.

Last year, Gartner forecast that worldwide 5G wireless network infrastructure revenues will reach $4.2 billion in 2020. That’s almost double 2019’s figure. 5G services have already been launched in the U.S., South Korea and some European countries, including the U.K, Switzerland and Finland.

To sum up, telcos have focused on 5G as a result of increasing competition from OTT (over-the-top services providers of messaging, voice, video calls, content and other services), as well as from technology players. They have been forced to loosen their traditional business model and to search for customers and new revenue streams elsewhere.

A new focus on leveraging data and digital technology

Some telco giants have moved into media territory, eager to grab business from content rights and distribution, as well as advertising, which used to be valuable assets for traditional media holdings before the Internet era.

Financial services (FS) is another territory that they have looked at entering.

Daniela Budurea
Daniela Budurea, with 17 years of experience in cross border money remittance, thinks that telcos can provide better-tailored financial services to the end consumer with the help of big data analysis.

Here is why. “The biggest opportunity comes from the fact that telco players might increase financial inclusion. Today, the number of people with a mobile phone exceeds the number of people with a bank account”, says Daniela Budurea, an independent fintech consultant, with 17 years of experience in cross border money remittance, in a short interview for FintechOS’ blog.

Two billion adults worldwide don’t have a bank account, according to The World Bank, but 1.6 billion among them have a mobile phone, notes The International Telecommunications Union (ITU).  This large number of “unbanked” people represents a huge potential for telcos, as Budurea points out.

But the debate goes beyond opportunities. The World Bank thinks that “a new focus on leveraging data and digital technology is transforming the business model for providing financial services for low-income individuals – the poor, for women, and for people in rural areas – and for small enterprises”.

Orange, one of the largest operators of mobile and internet services in Europe and Africa, seized the opportunity quickly and launched its first FS offering, back in 2008. Later on, in 2013, Orange launched an international mobile-to-mobile money transfer service between Mali, Senegal and Cote d’Ivoire in underserved Africa. The service allowed money to be sent and received just by dialling #144#, entering the Orange telephone number of the recipient and the amount to be sent.

Orange claims that the company’s mobile money solution today allows millions of people excluded from the banking system to be able to deposit, withdraw, transfer and make payments from their mobile phone.

Telco-branded FS – and more

But the operator has also made significant moves in markets with high mobile connectivity, like those in Europe. In 2014, Orange Polska and mBank, the 4th largest bank in Poland in terms of total assets, signed an agreement to create a mobile retail bank for users of smartphones and tablets. It may have seemed crazy at the time, but financial services started to be provided not under the bank’s brand, but under the Orange brand.

It was hailed as “a unique 100% mobile experience which goes beyond traditional banking services: a real inspiration in terms of user experience”, reads a 2015 company report.

Let’s move to Asia now and take a look at a recent move from Axiata Group, Malaysia’s largest telecommunications company. The news is still hot: on February 26th, amid the  Covid-19 outbreak in the region, Axiata revealed its plans to bid for a digital banking license. The telco group owns a digital financial services arm called Axiata Digital, “which operates e-wallet Boost and micro-lending platform Aspirasi – said to have issued $11.83 million in microloans to 9,000 merchants across the country”, according to Fintechfutures.

So, “Telcos can act like banks and help provide low-cost short-term financing; savings tools; basic investment tools, for both individuals and small companies”, continues Daniela Budurea, formerly Regional Director for Central and Eastern Europe with Western Union, a leader in cross-border, cross-currency money movement and payments.

“The second biggest opportunity for Telco providers derives from the fact that they have access to location data. With the help of big data analysis, they can provide better-tailored financial services to the end consumer, adjusted to their habits and needs”, she said.

It’s fintech time

“A fintech-driven approach is absolutely necessary”, says Lee McCready, Emerging FSI Lead at FintechOS, a fintech enabler who recently helped a telco client in the CEE build data-driven banking services tailored to their customers. “Telcos who want to better service their customers and generate new revenues from the FS market are already embracing financial technology. The knock-on effect of this is that they also reduce churn and operational cost while maintaining the ability to innovate rapidly”, McCready noticed.

FintechOS solution for telcos

There are a number of reasons why telcos and fintech enablers should work with one another. For fintech companies, most of them startups, such partnerships allow them to scale their technology and access the capital they need for growth. For telcos, collaborating with fintech enablers allows them to improve product offerings, reduce churn, retain digitally-savvy customers and diversify revenues, all without making significant investments themselves: according to some estimates, it would take a telco three to four times the resources to build the same technology in-house.

FintechOS shared benefits

Should this be the magic formula for telcos who want to act like banks? Time will show. For now, “telcos’ profit formula, as we know it today, will change dramatically and diversify”, thinks Daniela Budurea, the fintech consultant interviewed for this article. “Telcos will generate bits of profits from various industries. The introduction of 5G at large scale will exponentially accelerate the use of telcos in other industries”.

In short, it’s fintech time. Who’s prepared?


Watch webinar on-demand – How do businesses provide financial services to build new revenue streams, decrease costs and increase customer loyalty without breaking the bank?

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Disclaimer: This article was compiled based on publicly available information released by owners*. It is not intended to be viewed, nor treated as an official source of information. *The sources consulted for this article:; BD Consulting; Gartner; Forbes; Informa Tech; McKinsey & Company – Overwhelming OTT – “Telcos’ growth strategy in a digital world” (2017); Orange website; The Economist; The International Telecommunications Union’s (ITU); The New York Times; The World Bank; UNCDPF; FintechOS analysts

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