How Telecoms Can Ride the Wave of Financial Services

How Telecoms Can Ride the Wave of Financial Services

Revenue diversification has become an increasingly urgent and strategic focus for telcos, as they have to cope with the most pressing challenges, both internally and externally.

For instance, traditional markets such as voice, SMS, and data roaming have become increasingly saturated, while over-the-top (OTT) players and internet companies such as Google and Apple have also posed fierce challenges by providing more inclusive services in packages, pushing telcos down into a pipe. The loss of direct engagement with customers also weighs on the revenue of telcos, not to mention the return gap on huge technology investments such as 5G and 6G, and the shrinking demographic dividend. However, the good news is that telcos have been proactively seeking to diversify their revenue beyond the core. In a survey of 16 global leading telcos by GSMA Intelligence, in 2020 ‘beyond the core’ contributed an average of 24% to total revenues – and for Softbank, one of the top three telcos in Japan, this figure was 41%. This demonstrates how new services beyond the core, like fintech, cloud storage, security, and IoT, are reshaping the revenue landscape.

Telcos should seize this moment to develop financial services as a profitable way to grow businesses. Moreover, compared with other players, telcos are much more privileged in capturing new revenue from fintech. Telcos have everything they need to succeed in the fintech arena: mature networks; a vast and loyal customer base and consumer data; and unique ID mechanisms (identifying customers through unique phone numbers). They have also built up robust lifestyle/community-oriented telco scenarios to millions of users through TV, games, videos, livestreaming, account top-ups, and transfers, creating more room for them to expand to even more lifestyle services. In service coverage, telcos have been able to expand, even to remote rural areas, through its networks of branches, shops, and agents, making it most efficient to spread the latest telco services and educate users at an economical cost.

Yet, it would be more rewarding if telcos could leap further to explore more value based on what they already have. For instance, how about paying for things both online and offline or applying for loans with one account, rather than just sending SMS messages and making phone calls? How about an approach to more inclusive scenarios such as retail, payment, and finance on top of TV and games? How about retaining your customers and building your business’ closed loop with embedded payment and financial service capabilities, instead of directing your customers to other third parties?

Simple questions these may be, but the core idea is how to utilize telcos’ advantages while ascending to the frontline of technological innovation and digital transformation most efficiently. Whale Cloud has provided professional software development, delivery, operation and maintenance service to over 250 clients across 80 countries during the past two decades. Such devotion and engagement enable us to accumulate a solid understanding and experience for the telco industry, business and its demands at different stages. In the meantime, as a strategic partner of Alibaba Group, Whale Cloud works with Ant Group together to bring about greater digital and financial inclusion with Alipay+ Payment Tech Services. Alipay itself currently serves more than 1 billion users and has transformed from a trusted payment tool to a digital open platform over the years. Ant Group has also been exploring the global payment technology services market since 2015, becoming a trustworthy brand of digitalization and financial inclusion. Now, Alipay+ Payment Tech Services enables partners to access world-leading product technologies, a full-stack product portfolio, overall business support, and the Alipay+ payment ecosystem. Why bother to start from scratch when you can expand and diversify your business stream by standing on the shoulders of giants?

With regards to the telco business, expanding telco scenarios into more highly-demanded and user-retention ones - such as embedded finance, Buy Now, Pay Later (BNPL), phone instalments, bill payment, and points exchanged for rewards - will capture more traffic for telcos. Traffic from those scenarios lays the foundation for telcos to access more verticals, such as retail, finance, communication, and security, promoting greater financial inclusion. Lastly, with extensive traffic, sector interaction and inclusion, telco apps are gradually scaling up to super apps, where users can locate all kinds of lifestyle services under one umbrella.

The secret to success is that we strive to be open, localize on top of the user experience, turning to a new chapter for our telco partners. Taking Globe Telecom in the Philippines as an example, in just five years, GCash’s business was able to expand into telco-beyond services, ranging from online and offline payments, financial services, social welfare to lifestyle services, empowered by Alipay+ technology and experience. The results have been rewarding, and its valuation has grown ten-fold to $2 billion. Also, convinced by Ant Group's technologies and experience, Vodacom South Africa launched the first-ever super app, VodaPay in South Africa, innovatively transforming the way SMEs and consumers interact.

Telcos can not only be the communication infrastructure on the backend, but they can also be the ecosystem provider and digital infrastructure for a society where businesses are nourished and users are catered to with inclusive digital lifestyle services in the most efficient manner.

Dou Huichang is the Vice President of Payment Business at Whale Cloud.

Li Zhixian is the Senior Director, Alipay+ Payment Tech Services at Ant Group.


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