The success of Telecom operators’ mobile money offers in Africa, driven in particular by forerunner M-pesa in Kenya, has led to the emergence of a new category of financial services: Mobile Financial Services.
While this success took almost 10 years to consolidate, it has encouraged telecom operators to expand the range of services they offer, and increased the added value provided to the customer. Some of these players now aspire to offer to a comprehensive banking offer capable of competing with the offers of legacy banking players. However, by addressing considerably diverse populations and customers, telecom operators adapt to local needs and put forward different offers.
Defining Mobile Financial Services
The definition of Mobile Financial Services is determined by the degree to which banking services are use in the target populations. The term Mobile Banking is used when dealing with populations for whom banking services have become commonplace, while Mobile Financial Services are those to whom they are uncommon or entirely unfamiliar.
In this context, financial services appear to be a new key component in the strategy and positioning of telecom operators. Have they become a must-have, though? Have financial services become a full-fledged component of the convergent telco offers of the future?
Telco operators have assets to monetise
Mobile Money was one of the first services offered in Africa, from as early as 2008. Initially hailed for its ability to facilitate Airtime recharging, the service quickly became an instrument for building customer loyalty. Its key success factor lies in the distribution network already well established by operators. This is a strong asset on which all operators have capitalised heavily.
However, the strength of these players can also be found in the weight of their brand and their customer base. In Africa, operator brands boast some of the highest recognition levels on the market, regardless of sector. In Europe, the main telecoms operators have a total nearly 300 million customers — a very substantial potential base that can be addressed directly.
Furthermore, operators have significant technical know-how around mobile uses. This gives them an advantage over competitors from other sectors. New technologies have enabled dematerialised first-time contact and subsequent interaction with customers. Today in Europe, most individuals do their banking via smartphone.
Lastly, to offer new financial services, a player must be able to rely on financial resources. While fintechs or other neo-banks need to resort to multiple fund-raising operations, telecom operators can rely on substantial existing financial resources.
The phone, then the smartphone, became the customer’s “life remote control.” As a result, financial services have naturally started to find a place in the offers put forward by mobile operators. First, through financing offers. From as early as 2010, operators in Europe were marketing offers to finance the purchase of smartphones. The idea was both to encourage people to get equipped with this type of terminal (and the data requirements that go along with them) and enjoy the substantial commissions connected with the distribution of credit offers. Other operators set out on the road to financial services via micro-payment on SMS or invoice, or have started to use financial services as a means of rewarding their loyal customers. In 2012, Telefonica for instance offered housing insurance to all of its loyal customers using its services for more than 4 years.
As the story telling would have it, then, offering a payment solution is the logical next step for an operator. After offering exchange by voice, by SMS, then data exchange outright, proposing to transfer units of value seems logical and natural. Telecoms operators furthermore stand out as the legitimate bearers of this offer, especially as the long-standing ones still enjoy a strong status as trusted third parties.