Banking dates back to the Mesopotamian era (i.e., 8000–2000 B.C.) when Babylonians depositing gold had to pay as much as one-sixtieth of the total deposited. In fact, the code commissioned by Hammurabi, king of Babylon c. 1792–1750 BCE, stipulated in several laws how citizens were to conduct their banking activities (i.e., loans, repayment, deposits, etc.). Today, in addition to their traditional role, banks act as middlemen between telcos and their customer base. But everything must come to an end sooner or later. Telcos are testing the waters for their dive into banking, chiefly through fintech. and while mobile payment is not new to fintech telcos, a full banking experience is still to be seen.
Telecom giants are worthy opponents for banks worldwide. They are on the fast track toward digital world domination. And for the last couple of years, they have been gaining momentum in fintech, especially after the COVID-19 pandemic that forced everything to go online. Despite their seemingly unrelated field of work, mobile operators have a prime position to take over the delivery of financial services.
Client Concentrations and Bases
There are fewer wireless telecommunications carriers than banks in most corners of the world. For example, the U.S. has 936 carriers but close to 4,700 commercial banks. Similarly, three companies control the Saudi Arabian Telecom market. Meanwhile, there are only 31 banks. As a result, a telco has a larger customer base than banks. And due to the nature of the services provided, citizens refer to one provider but may have several financial institutions.
Unlike the banking sector, telecommunications heavily rely on strong and mature marketing. Telcos would resort to modern advertisement strategies such as digital technologies (i.e., A.I. and data analytics, etc.), continuously innovating their customer experience. Meanwhile, it is rare for a traditional financial institution to employ such strategies, despite the research that has gone into it. As a result, telcos sport a broader client appeal, resulting in the following:
- Advanced Client Management
- Bundled Products
- Communication Capabilities
- Much More
Reaching Far and Near
Internet and mobile penetrations are much more significant in this digital age than banks. Worldwide, the number of people without a bank account is less than that of those without a mobile device and/or access to the internet. That fact alone provides telcos with an edge in marketing financial products. In addition, the upcoming generations are all mainly tech-oriented and don’t want to deal with the hassle of traditional banking.
In Banks, We’ve Lost Trust
Remember the tech-oriented generation on the rise? Well, paperwork aside, they are notorious for not having faith in the banking sector, especially after the late 2000s. In addition, in certain corners of the world, people have lost trust in their banking system mainly due to their predetor-esque behavior toward depositors. Today, these new workforce members are opening bank accounts against their better judgments and immediately withdrawing their pay once it is transferred.
What About Banks? Will They Be Left to Die?
The banking sector is nowhere near dying anytime soon. But that is not to say that it is immortal. At best, it is standing very close to the ledge. Initially, banks viewed telcos’ initiatives and projects to grant “unbanked” populations access to banking services as a threat. Thus, they sought to block telecom companies from offering such services.
The banks’ protectionism led to an impasse between them and the telecommunications industry. The only logical move then was to form alliances, combining banks’ culture of managing money and telcos’ brand loyalty building.
But What About My Personal Information? Is It safe?
Telcos cutting out the middleman is an interesting move that has raised several eyebrows, notably due to the sensitive nature of the information these companies will be handling. Nevertheless, big telecom understands that diving into fintech is equal to diving into the ocean head first and that there’s no such thing as a trial run. So, by that logic, they will have to abide by security measures to which all fintech companies adhere. Fintech telcos are not an exception, nor will they ever be. At the end of the day, the average person does not necessarily care for the ins and outs of the technology; they want a safe digital banking experience. Fintech Telcos need to consider the following risks:
Cloud Computing Security Issues
The most efficient financial services platforms are cloud-based, offering speed, scalability, and much more. However, they have an abundant data stream making them the perfect target for attackers. So the choice of the cloud provider is imperative.
These attacks are pest infestations; they can infiltrate your system through almost any means (emails, pop-ups, third-party software, etc.) and make an unbelievable mess, as they can cause whole networks to crash and burn.
Money Laundering and Cryptocurrency-Related Risks
Cryptocurrency can be used for money laundering because the source of the funds can be concealed. Fintech telcos that work with cryptocurrency should only use secure trading platforms because of this.
The digital age revolves around being able to do almost everything through our phones. Telcos seek to simplify banking. They want to cut the cord with the middleman and be responsible for everything themselves. While some may choose to join hands with the banking sector, others will make way for themselves in fintech. Nevertheless, there is hope their ventures will maintain their customer base’s personal information secure and safe.
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