Introduction
The opening up of the financial services industry has come at an opportune time. Telecom companies generate significant free cash flow that can be invested to participate and grow in this high-growth industry, particularly in emerging markets. The spike of this new variant of entrants creates stiff competition in the market for incumbents.
To begin with, telecom leaders possess several unique advantages:
- The ability to leverage on the significant existing customer base
- The capability to combine different services to offer advanced client management and bundled services
- Greater reach due to higher mobile and internet penetration compared to banking, especially in emerging markets
While diversifying the product stack to bring in financial products is a lucrative option, telco leaders entering this fintech space face competition from two directions. The first is from pre-existing fintech companies and neobanks (operating independently or in a partnership with a bank); the second comes from fellow telco companies trying to enter into the fintech space.
Over the years, telco leaders have floated over 200 fintech offerings in the ecosystem, and with the advent of 5G, AI, and blockchain, the future looks promising. Hence, the analysts at twimbit did a deep dive into the product stack and coverage of the financial service offerings of various telco companies to understand their unique propositions.
In this report, we help telecom leaders like you understand the financial product coverage of your peers across the globe (Figure 1). Learn the best practices of the top five telcos that have the most diversified portfolios in financial products, services, and lifestyle propositions (Figure 2).
Research methodology:
We conducted an in-depth product stack analysis of 30 telecom companies across the globe. Our aim was to identify the ones with maximum product coverage in the BFSI market (Figure 3). Based on the product coverage analysis, we came up with five telecom companies that offer the most diversified portfolio of BFSI products. Our analysis has its foundation on annual reports, sustainability reports, the respective company’s website and social presence, and other secondary research sources.
Deep dive on the top 5 telcos’ financial service product stacks
Retail Banking
Telcos see retail banking as an opportunity to disaggregate the components of traditional banking and offer targeted solutions with better service to retail consumers. Most telcos are able to offer cash deposit and withdrawal services. They either go through partnerships with existing banks or use their vast network of outlets as banking points. In addition, fintech solutions allow transfers to happen seamlessly.
Airtel Payments Bank: Providing financial services for the unbanked
Sunil Bharti Mittal
Chairman, Bharti Airtel
Airtel Payments Bank (A subsidiary of Bharti Airtel) is one of the leading neobanks in India, offering retail banking services. With over 500,000 Airtel retail outlets serving as banking points, it is able to make retail banking services accessible, even in rural unbanked regions.
Customers can open a savings account at any Airtel banking point. In addition, they get to earn interest rates of up to 6%, receive an online debit card, and obtain free personal accident insurance coverage of USD 1,345. They can deposit cash at any banking point and withdraw money via a banking point or select bank ATMs. Customers make transfers between accounts on the mobile platform’s Immediate Payment Service (IMPS) or Unified Payments Interface (UPI).
For workers from unorganised categories, Airtel Payments Banks offers Atal Pension Yojana, a scheme aimed at providing pension benefits and social security. It offers a minimum guaranteed monthly pension between USD 13.60 and USD 67.28.
To encourage further usage of its retail banking services, Airtel Payments Bank launched its new ‘Rewards123’ savings account. Customers can get ‘Rewards123’ at an annual fee of USD 4.02 and receive benefits ranging from certain cashback monthly on bill payments, load money benefits and shopping rewards. They can easily open or upgrade to Rewards123 through the Airtel Thanks app using Video KYC.
Source: Airtel Payments Bank website
Outcomes:
- 55 million customers as of 2020
- Total customer deposits worth USD 47.24 million
- Operating revenue of USD 64.92 million as of 2020
Business Banking
Business Banking as a product offering by the telcos is a relatively less explored proposition than retail banking. Telcos that offer business banking services can add value for businesses by packaging different functions, such as current accounts, business loans, payroll management, among others, into one unified business banking portal.
Jazz cash-Mobilink: Promoting microbusinesses through digital finance
JazzCash is a Pakistani branchless banking service provider. Having recognised the need for digital solutions in Pakistan’s sizeable SME sector, JazzCash seeks to introduce products that offer faster and more transparent solutions for businesses.
In particular, the company’s Business App aims to simplify digital payments and business management for businesses without the need for cumbersome bank account registration processes.
Features include the ability to generate a QR code for specific amounts in real-time, and to send customisable digital invoices to customers. Furthermore, the Business App comes equipped with state-of-the-art business tools that allow users to monitor sales and transactions, conduct salary disbursements and make supplier payments. More features will be added onto this app in the future, including the option to request for a business loan. Business owners can self-onboard from anywhere conveniently – all they have to do is provide basic personal and business information on the app itself.
Source: JazzCash website
To complement the Business app, JazzCash has a dedicated corporate solutions team that focuses on providing organisation s with customised solutions to disburse funds and collect payments. Channels available for the distribution and collection of funds include:
- Over-the-counter
- Mobile Wallet
- Card-based
In addition, to support freelancers in Pakistan, JazzCash and payments firm Payoneer have teamed up to enable freelancers to directly create or link their Payoneer account from the JazzCash application to receive funds.
Outcomes:
- Over 100,000 registered merchants nationwide
- Businesses witness higher efficiencies
Lending
Over 50% of the telcos we studied offer lending services. Since money is fungible and data is accessible to everyone, telcos can float credit products through their apps or by developing a separate portal or website altogether. Receivable financing, working capital financing and equipment financing are potential areas for exploration by these telcos.
GCredit by GCash – Expanding financial services to the underserved
Vijay Manoharan
CEO, CIMB Bank Philippines
GCredit is a revolving mobile credit service by mobile wallet GCash that caters to the underserved and unbanked population in the Philippines. Using behavioural data from a person’s use of GCash in the form of GScore, it can offer loans to those without any credit history. While it has similarities to a credit card, GCredit does not need its users to submit extensive documents.
GScore is a credit scoring technique that uses GCash users’ data to measure their credit history. The higher the score, the more financially worthy they are. The algorithm GScore uses puts weight on the quality of transactions, meaning cashing in an amount and then simply cashing it out will not give a high score. GScore readjusts every week and looks at a user’s previous week’s transaction history data.
Users can use GCredit to pay merchants or bills in the GCash app and selected Web Pay merchants, such as Apple Store and Shopee. If a user lets his GCredit accrue for a month, the total is by default at 5% atop the principal amount.
CIMB Bank Philippines has been powering Gcredit since 2021. The bank provides GCredit users with the opportunity to access bigger credit lines of up to USD2029. Monthly loan interest rates run as low as 1%.
Source: Fuselending website
Outcomes:
- GCredit is available to over 20 million GCash users
- Over USD 162 million has now been extended to more than 900,000 Filipinos
- Over 17,500 partner merchants nationwide
Wealth Management
The rise of artificial intelligence (AI) tools has changed the way companies offer wealth management services. According to McKinsey, a growing percentage of affluent investors and those under 40 prefer using digital tools to invest. These trends have enabled several telcos to produce innovative, personalised solutions for investors and make significant headways in the wealth management industry.
au Jibun Bank: Introducing AI innovations into mobile investing
Chisato Nakamura
au Jibun Bank Corporation Innovation Business Division
au Jibun Bank has been one of the pioneers in the mobile banking field since 2008. Having recognised the lack of understanding and interest in investing in financial instruments in Japanese households, au Jibun Bank aims to utilise AI tools to produce products that help lower the barrier between people and investments.
FX services of the bank include AI Foreign Currency Forecast and AI Foreign Currency Automatic Saving Plan. These services use AI tech to analyse huge datasets of historical exchange rates, thereby providing predictions straight to a customer’s smartphone app.
Users can also invest easily through its one-stop-shop banking app. They can view the rankings of popular investment trusts and check their total asset size, including cash deposits and investment trusts. To complement this service, AI Japan Market Forecast was launched to allow investors to track the latest market forecasts with the help of AI and machine learning. Investors can also integrate these features into Alexa-equipped devices, such as Amazon Echo. au Jibun Bank also provides a fully automatic asset management service, WealthNavi.
To attract beginner investors, the bank provides a “forex demo trading” capability that allows users to trade virtual funds in a simulated environment. They can then open their actual forex account via the service’s “simple mode UI”.
For the future, au Jibun Bank is planning to implement a user-friendly AI-enabled feature on its banking app to recommend investment trusts to its retail customers. Through AI, the recommendations will be tailor-made for each customer.
Source: au Jibun Bank website
Outcomes:
- AI Foreign Currency Automatic Savings Plan helped grow its retail deposits by 20.4% Y-o-Y in 2020
- AI Japan Market Forecast boasts a daily forecast accuracy rate of 64% from October to December 2020
- The AI Japan Market Forecast project won the Best Use of AI category at the Banking Tech Awards in 2020
Payment Wallet
Payment wallets are the most common feature of any telco fintech offering. The mobile wallet ecosystem presents a real threat to traditional banks and neobanks, mainly because it bypasses the many layers of regulations they typically face, making it an easy product proposition to float. Additionally, for individuals without a bank account, it is the perfect mode for financial management – payment wallets allow them to receive, send and pay money.
ZainCash – Integrating different payment features in one platform
Mobile money and payments are essential aspects of the Zain Group mission to offer financial services to the unbanked populations in the Middle East. ZainCash is an electronic mobile payment app service that provides users with secure and convenient means to conduct financial transactions and monthly payments. The app also provides businesses with different reporting tools.
Users can use the app to:
- Transfer money inside Iraq and receive it through thousands of agents across the country.
- Buy e-cards.
- Recharge Zain prepaid and postpaid lines.
- Pay bills for various merchants and services that are available on the app.
- Shop online from merchants registered with ZainCash.
- Review their ZainCash wallet account and transaction history.
- Pay retail shops through QR code.
- Find the nearest ZainCash agent for Cash-in and Cash-out.
In addition, ZainCash has launched a multi-currency international Mastercard linked to its users’ ZainCash Mobile Wallet. Customers can use the Mastercard globally for e-commerce, POS payments and ATM withdrawals.
Source: The ZainCash Google Play Store profile
Outcomes:
- Revenue of USD 6.2 million as of 2021
- Consumers can access previously unreached markets, products and services
Conclusion
The convergence of banking with telecom has led to the creation of fintech products that offer high levels of versatility and convenience. This evolution has the potential to bring about significant disruptions to the BFSI industry. It especially rings true as tech-savvy consumers edge away from traditional forms of banking to alternative offerings. Incumbent banks will face growing pressures from these new entrants moving forward and may have to work with telcos as their link to defending and growing their market share.
Both sides, however, stand to gain with the right collaboration in place. Telcos can leverage their branding, customer base and distribution network to create shared services with conventional banks. On the other side, traditional banks come in with their vast financial expertise and resources.
As a telecom leader, how prepared are you for the convergence of the two major industries?
Endnotes
Airtel Payments Bank, (n.d.). Airtel Thanks.
au Jibun Bank, (n.d.). au Jibun Bank (Online Bank).
Fuse Lending, (n.d.). How to Pay – Fuse Lending.
