As the use of mobile is extending beyond calling and texting, opportunities arise for telcos to offer more and more services, including mobile banking. With this phenomenon on the rise, banks can no longer sit back, but should partner up with telcos to avoid losing customers and market share, research by the BearingPoint Institute shows. Especially in the West, where mobile banking is still relatively new, opportunities arise for banks in combining their strengths with those of telcos.
As more and more people have access to a mobile phone and the world is becoming increasingly interconnected via the World Wide Web, using phones for more than just calling and texting is gaining ground. Especially in rural areas of emerging and developing countries where city centres might be several days’ walking away, the number of people using a mobile phone for shopping or to deal with money issues is increasing. For instance, in 2011 only 24% in Sub-Saharan Africa had a bank account and only 33% in South Asia had a bank account, while more than half (57%) of the former had a mobile contract in 2012.
This offers opportunities and a new revenue source for telecommunications companies (telcos) globally, with research by Capco indicating that globally 2.5 billion people do not have a bank account and are lacking access to basic financial services, a group labelled the ‘unbanked’. In its most recent BearingPoint Institute report, consultants from BearingPoint address the issue of mobile banking and the opportunities for banks in partnering with telcos, instead challenging them.
The consulting firm underlines that banks have ‘no choice’ but to cooperate with telcos and over-the-top (OTT) service providers* as they start to push deeper into their territory to avoid losing customers and their market share. “Any model for banks to deliver mobile financial services by themselves is difficult to justify if measured against banking criteria such as transaction value alone,” explains Jean-Michel Huet, Partner at BearingPoint. “Working in partnership with telcos, however, offers banks a route to market, and keeps new players out of core banking activities.”
Mobile telecoms-based banking
Huet continues: “Banks may have greater ability to manage financial flows but telcos have a broader reach when it comes to customer engagement and service delivery.” In combining these strengths, profitable relationships can be formed. In Africa already several partnerships have been formed, such as between Orange Money and Equity Bank in Kenya and BICIS in Senegal, transforming the mobile financial landscape.
So far, such partnerships have not had much influence on the financial industry in Europe, where using mobile phones for banking is still relatively new and transactions are still almost exclusively done through the traditional banking services. “With the West yet to adopt mobile financial services in any real capacity, a significant opportunity exists to address this latent market need,” says Huet. To profit from the opportunities partnerships offer, market education on mobile banking, such as simplicity of use, security and the customer experience, is an important issue to address by both sides of the partnerships.
BearingPoint concludes: “Companies on both sides can act as pioneers, defining the standards and working at the front lines of development, ready to spring into action once the opportunity arises as early adopters, or simply to follow where others lead.”
* OTT service providers are those that have no stake in the infrastructure involved in either financial services or telecommunications.