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.
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
Mobile money platform launches supported by favourable market characteristics
Fintech scale boosted by telco reach
Creating a fintech ecosystem
Single Service Ventures
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
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