The Fusion of the Industries and Emergence of Hybrid Organizations: Integrating Transaction Banking in Telecom

Banks and telcos most definitely should join forces. In fact, they have no other options and the process is well underway.

In the years to come, we’ll be seeing more and more hybrid telecommunications companies offering a variety of banking services and rich ecosystems. There is a good chance that you will completely forget what visiting a bank felt like — and it may not be a bad thing, after all.

The banking and telecommunications industries have always been mighty forces to be reckoned with. Addressing the essential needs for universal communications and accessible financial services, each has had a wide customer base and offered an ever-growing variety of life-improving, money-saving, and money-making products.

With time, however, it became apparent that as the demand for financial services grew, banks were not able to scale their presence accordingly. To a larger degree, the issue affected the markets of South-East Asia, Africa, and a fair number of developing countries with a large fraction of the population living in remote areas and having problems accessing traditional banking services in full.

At the same time, telecommunications companies had been expanding rapidly over the years to reach the farthest corners of the world. Having hit a certain saturation point, they faced two major issues: plummeting revenues from voice calls and a new strong competitor in the form of rapidly spawning OTT services. Telcos found themselves in a very unusual position, where over 80% of their business was suddenly selling video traffic from streaming services like Netflix and YouTube.

All of that, combined, made telecommunications companies — and banks as well — seek new, unconventional sources of revenue and business models that would let them grow and diversify their service portfolios. As surprising as it may seem, financial services and mobile payments as a telecom VAS turned out to be the potential next big thing for both.

FinTech & Telecom Merger: Integrating Digital Payments in Telecom

Looking at the two industries, what’s immediately noticeable is the number of similarities on the operational side:

Banks vs Telcos: comparing operational similarities between the two

Telcos have one huge advantage over banks: universal accessibility, including in rural and remote areas. According to trusted sources, global GSM coverage was as high as 95% in 2020, followed by LTE with an impressive 83%. With so much potential for reaching out to everyone, it was only natural for telcos to leverage this competitive edge for purposes other than just communications.

Throwing banking and FinTech functionality on top of the vast existing telecommunications network opens a multitude of doors on both business and consumer sides. The ability to use a regular feature phone as a telecom mobile wallet for paying utility bills and rent has proven to be truly invaluable for people with limited physical access to banks and those unwilling to deal with their complex processes.

Telecommunications companies can use this model of mobile payments to make money on processing fees, currency conversion, and accurate geo-targeted ads thanks to their inherent ability to capture user location and other relevant details. In addition to digital payments for telcos, some more complex revenue-generation scenarios may involve such financial instruments as deposits and cash management, end-to-end payments within the telco ecosystem, and more.

Forming Synergies

Both banks and telcos are well aware of the value of mobile payments and have been offering various solutions to customers over the years.

On the high-end side, Apple launched the Apple Card in 2019 in cooperation with Goldman Sachs and Mastercard. This card natively supports Apple Pay, offers 2% cash back (instantly redeemable) on all general purchases and 3% on Apple purchases. It also comes with fast and easy P2P money transfers and other great features.

T-Mobile responded to Apple’s strong move with T-Mobile Money, a mobile checking account service from T-Mobile and BankMobile that comes with no fees and offers an up to 4% interest rate for deposits up to $3000 made by eligible users.

There are numerous other similar mergers and launches around the world, with more and more traditional financial institutions giving birth to completely digital spin-offs or partnering up with leading telcos to keep up with market trends and expectations.

The majority of these new banking/telecom platforms are designed with scalability and extensibility in mind, which translates into powerful and functional APIs being offered to OTT partners and third-party developers. This, in turn, will lead to the formation of diverse software ecosystems with more payment integrations and financial tools.

Payments Implementation Engineering

Become the central payment services provider in your customers’ lives by creating a service that’s embedded in their devices and is a natural part of their routines. Disrupt the market by leveraging new digital payment technologies securely and sustainably. Enter the world of invisible payments with NRC’s expert payments consultants.

With over the years of experience in the finance and IT industry, we driven by the goal to help organizations in the telecommunication sector shape their digital strategy and efficiently capitalize on emerging technologies including IoT, location-based services, big data analytics, cloud computing, AI solutions integration and beyond. Our hands-on experience in building global delivery solutions for large enterprise clients as well as a strong awareness of telecom market trends allow us to support companies on their way to new business models.

Please contact us and share your thoughts on what you need built. We’ll take care of the rest.

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