Telcos constantly seek to expand their income base as traditional revenue sources dwindle. This obsession to identify new opportunities has driven some telcos onto the turf of credit card companies, banks, and insurers.
When Canada’s largest telco, Rogers Communications, decided to enter the local credit card market in 2013, it did so knowing that business is dominated by large institutions - including six banks, two retailers, and financial services subsidiaries.
Rogers had 9.4 million mobile subscribers in Q2 2013, a cable TV network with 2.2 million subscribers, and 1.9 million Internet customers. Market researcher Catalyst estimates the Canadian smartphone market grew 24% with a penetration of 68% in 2014. Christie Christelis of Technology Strategies International was quoted by Mobile Payments Today: “Even a two percent increase in mobile, TV and Internet subscribers from marketing the [credit] card would be very profitable for Rogers.”
While the verdict on Rogers’ credit card business is still uncertain, other telcos are making their own foray into a payments market valued by McKinsey at $2.3 trillion by 2018. The growth of the smartphone market raises great interest as retailers discover the power of social media to convert consumers into customers.
In Asia, where mobile growth far exceeds industry expectations, there’s opportunity for governments and regulators to finally bring financial inclusion to Asia’s unbanked individuals and SMEs - who for a variety of reasons are unable to use local banking services.
Takehiko Nakao, president of the Asian Development Bank, wrote in an article on emergingmarkets.org that only 27% of people in developing Asia are banked, 10% below the global median. In Cambodia, fewer than 5% of people have bank accounts.
Only a third of developing Asia’s companies have a line of credit or loan from a financial institution, and 16% of companies don’t have a checking or savings account.
Michael Yeo, senior market analyst at IDC Financial Insights, says telcos have become alternatives in places where the existing financial infrastructure is viewed as deficient in terms of services provided. “Telcos have [begun] offering money remittance and deposits to those who are unable to access a bank, and by offering services superior in convenience to banks’ existing offerings. The main pull factor for using telcos has always been the simplicity of getting started: A mobile phone has generally been all that is needed in terms of equipment.”