As OTT services grow in value, telco revenues are moderating and the lack of growth opportunities in the core business is driving telcos to look at adjacencies.

Fintech is disrupting traditional financial services and offers a high value adjacency for telcos to play in where they can maximise their natural strengths.

Over the past 50 years, Telcos have delivered a strong value proposition through their network infrastructure by allowing us to instantaneously connect with each other. Through this period, they continuously developed their networking capabilities, improving speed and capacity. With the growth of the internet and wireless technology in the early 1990s, Telcos invested heavily in the development of the modern Telco infrastructure and have since become deeply entrenched within society through their mobile, voice and broadband services connecting the world together.

However, the advent of the internet has seen many over-the-top services like Facebook, Amazon, Netflix, and Google build higher value services over Telco infrastructure assets and enjoy significant growth, diminishing the value of Telcos in the process. Telcos understand that in order to sustain long-term growth, they will need to explore new avenues of growth through vertical adjacencies to capture the value their infrastructure creates. Fintech and financial services are areas ripe for disruption as mobile and e-commerce become increasingly relevant for consumers in the conservative and slow-paced financial industry. Telcos around the world are committing their efforts to enter the fintech space – an adjacent ‘everyday’ sector that offers multiple synergies – in order to capture a greater share of the consumer wallet and deliver higher value services. In this report, we explore the need for Telcos to diversify into other adjacencies, why fintech makes sense for Telcos, Telcos and their fintech strategies, global trends, Australian Telcos and fintech, as well as the risks and challenges that Telcos need to overcome.

Contents

Key takeaways

Introduction

Telco revenues are slowing down

Telcos moving into fintech use their natural strengths

• Negative perceptions and younger demographics are driving the uptake of fintech platforms

Fintech approaches adopted by Telcos

Payment Platforms

• Mobile money platform launches supported by favourable market characteristics
• Fintech scale boosted by telco reach
• Creating a fintech ecosystem

Single Service Ventures

Multi-Service Venture

• Axiata investing big in Digital
• Orange is the new Bank
• China Mobile’s Fintech Empire

Blockchain and Telcos

• Australian and New Zealand telcos are yet to make a move in fintech

Risks and Challenges

Conclusion

List of charts/tables

Figure 1. Australian retail Telco market revenue forecasts

Figure 2. Global investment activity in fintech

Figure 3. Bank perceptions in Australia

Figure 4. Millennials demonstrate a higher willingness to adopt fintech products

Figure 5. Select Telcos with fintech ventures, grouped by venture breadth and development approach

Figure 6. Key Success Factors for growth and achieving scale

Figure 7. Mobile payment platform ecosystem

Figure 8. Single-service Telco ventures into fintech

Figure 9. Axiata’s Fintech Ventures

Figure 10. Orange and Orange Bank’s complementary relationship

Figure 11. China Mobile’s activities in fintech

Figure 12. Risks and challenges for telcos venturing into fintech