Telcos are the new banks, as telecom service providers in Europe and the US continue venturing into the financial sector.
Though mature telco banking endeavors are rare, some operators have identified banking as an opportune avenue for diversification, with differing methods and modes of approach, says GlobalData.
According to GlobalData analysis, telco banking offers are primarily meant to leverage and strengthen an operator’s incumbent connectivity-based business and brand identity, thereby reducing churn, improving customer loyalty and satisfaction, and increasing average revenue per user (ARPU).
There are also possibilities for new, complementary lines of direct revenue generation and opportunities for broader multiservice upsell and cross-sell – all of which build upon expanding service digitalisation.
Natasha Rybak, principal analyst: global telecom consumer services at GlobalData, comments: “Efforts to break into banking are especially in need of a cautious tack. Nonetheless, some telcos are linking their banking offers to broader benefits and loyalty efforts, making for a distinct differentiator in attracting customers with combination product advantages like discounts and bonus extras.
“For example, Orange Bank has demonstrated slow but steady growth and continues to actively enhance its portfolio of financial services with features including loans, premium and virtual credit cards and sub-accounts for children.”
While Orange Bank is the most high-profile telco banking venture in Europe, there are other examples, albeit limited in number. In Poland, Plus Bank has been in business for some time; in Romania, there is Deutsche Telekom’s Telekom Banking; and in Germany, Telefonica’s O2 Banking. In addition to these kinds of platforms supporting a traditional bank-style range of services – spanning regular, savings, and term deposit accounts; debit and credit cards; direct and automatic payments; and financing and loans – are telco financial services that are restricted to selectively targeted banking product specialties such as T-Mobile Money in the US; Rogers Bank in Canada and Movistar Money in Spain.
Rybak concludes: “Telco banking is representative of a systemic shift in the broader commerce segment, where a flurry of interrelated factors are colliding, converging, and ultimately, producing irrevocable underlying changes. Economic, technological, and bottom-line business mandates are overloading rusty financial rails, which are being transformed by digitalization. Telco commerce and, more specifically, telco banking are natural areas of emergent opportunity.”