The pervasive use of smartphones today has revolutionised the way individuals communicate, interact, and carry out transactions. Advances in connectivity have also led to expectations of superior internet, text and voice services among telco customers. Consequently, mobile network operators (MNOs) face the challenge of preserving profitability as traditional revenue avenues, such as voice calls and text messages, have seen a decline. 

Competition from newcomers like WhatsApp and Telegram has further amplified the pressure on telcos, or telecommunication companies, to offer alternate services to their large customer base. In response, telcos across the globe are beginning to leverage their wealth of data and existing customer relationships to transform how billions interact with their finances.  

Disruptive Impact on Financial Inclusion 

Telcos are now in a strong position to offer financial services and also promote greater financial inclusion. They are strategically positioned to leverage their massive, diverse customer bases, broad geographic coverage, and established trust to facilitate financial services. By bundling financial offerings with their traditional services, telcos can diversify and amplify their revenue streams while providing an invaluable service to consumers.

In addition, global mobile penetration rates are far higher than internet penetration rates, placing telcos in a unique position as the sole potential supplier of digital financial services to many individuals. It’s clear that telcos have a key opportunity to offer digital financial services to those individuals, providing previously inaccessible financial products. 

However, one factor currently limiting the global adoption of financial services provided by telcos is infrastructure concerns. Traditional mobile network standards, 3g and 4g, are still dominant in emerging markets, allowing consumers to interact with financial services during most circumstances, but are often do not fully support mass usage of high-bandwidth applications in dense urban areas.

An Opportunity for Telcos Unlocked by Cutting-Edge Infrastructure

The latest mobile network standard, 5G, enables a fully mobile environment via an increased amount of data transmission through wireless systems utilising high-frequency bands and advanced antenna technology. This next-generation technology promises a faster and more reliable connection in all circumstances, enabling telcos to level-up their digital financial services and increase financial inclusion with the help of fintechs.

Last year, there were a reported 1.05 billion active 5G subscriptions worldwide, almost twice as many as the previous year. Rapid growth is expected over the next five years, with subscription numbers predicted to reach almost 5 billion by 2028. Therefore, particularly in underserved areas where traditional banking infrastructure is scarce, telcos can bring financial inclusion to the masses by leveraging their superior network coverage. The advent of 5G aids the smooth functioning of complex, real-time financial transactions, making it even more feasible for telcos to offer such services.

However, the adoption of 5G in emerging markets, telco’s most dominant regions for digital financial services, is lagging behind. A 2022 report conducted by industry body GMSA shows that 5G technology in Sub-saharan Africa, Latin America and the CIS accounts for less then 1% of total mobile connectivity. Despite the slow adoption rate for 5G, success stories of telcos providing revolutionary financial services in these markets demonstrate that telcos can still achieve ambitious goals with older mobile connection standards.

Enhancing Innovation and Prioritising Privacy with 5G 

With the implementation of 5G, digital financial services are expected to continue to gain market share as the preferred payment method for consumers, thanks to their swift and efficient user experience. Data that will be captured via 5G will have a significant impact on financial services, teaching telcos about real-time customer requirements and enabling them to deploy innovative, bespoke solutions, further improving the digital customer experience. 

However, legitimate concerns about privacy and security have arisen, and it is imperative that telcos partner with fintechs focused on implementing cutting-edge security protocols as well as transformative financial services. This will help to ensure that telcos maintain their strong relationships with customers and that their positive impact on financial inclusion continues to build.

Overall, the convergence of telecom and finance can play a vital role in promoting revenue growth for telcos, boosting financial inclusion and transforming the digital financial landscape. As we stand on the cusp of a new digital revolution, we must ensure that 5G is utilised by telcos to enhance the fintech landscape while prioritising the safeguarding of customer data. The future of fintech depends on it.