In 1992, IBM brought to market its first smartphone, the Simon Personal Communicator. It was a revolution then. The phone could be used not only to make calls but also to send a fax, email, and text. It cost $899 at the time, which in today’s value works out to approximately $1435—almost the price of an iPhone 11 Pro Max. Interestingly, as opposed to the iPhone, the legendary Simon would reportedly only retain charge for one hour!
The explosive progress mobile phones would make in the following years exceeded even the most optimistic of projections. Mobile phones have evolved from rudimentary novel devices to being an indispensable fabric of our society. They have changed everything—from how we interact to how we receive, process, and consume information. This change has spawned several industries, including FinTech, which has changed how we access and consume financial services.
The massive growth of mobile phones has also turned Mobile Network Operators (MNOs) into key drivers of growth and financial inclusion. It would be hard to imagine the existence of the financial system in its current form without acknowledging its heavy reliance on telecom companies. In fact, so intertwined are the two industries that the distinction between them is continually blurring. The key link between telecom and financial services is a host of FinTech companies. These digital-native companies are transforming access to financial services through product innovation, efficiency gains, and better consumer experience redesigned from first principles. Niche enterprise-focused FinTechs offer platform solutions for compliance, identity verification, and authentication.
Here are some of the areas that feature the combined strength of telcos and financial services:
Mobile intelligence can be a powerful proxy to trust. Because of the diversity and volume of digital data associated directly and indirectly with phone numbers, more and more companies are adopting them as superior identifiers to traditional identity verification sources. The tenure of a phone line, event history, frequency of usage, location, and usage behavior provide comprehensive insights into the consumer’s digital footprint. Since these signals are generated over a long period, they lend credibility to a consumer’s identity. Unlike legacy identity verification methods using traditional data sources, Phone-Centric Identity™ provides real-time identity authentication based on dynamic and current data. Prove’s Phone-Centric Identity™ platform provides a modern way of proving identity with just a phone number. The platform helps combat fraud by detecting SIM swaps and provides a real-time measure of phone number reputation with Trust Score™.
One other key area where FinTech and telcos demonstrate synergy is in the area of mobile money. Some MNOs, especially in developing countries, have created robust financial platforms expanding access to financial services. One great example is Safaricom’s M-Pesa, based mainly in Kenya but extends to the East Africa region. M-Pesa’s customer base is over 25 million, just over half the entire Kenyan population and more than 80% of the adult population. The platform is popular in its simplicity and doesn’t even need a smartphone to work. It has been designed to work as a payment platform (both P2P and C2B), savings platform, lending platform, and government service delivery channel. So ubiquitous is M-Pesa in Kenya that the financial system and indeed the entire economy would choke in case of any extended downtime. It is also a critical financial service delivery channel for banks, microfinance institutions, and mobile money lenders. M-Pesa has captured both formal and informal sectors, and together with its parent company, Safaricom, it contributes 6.3% of the GDP.
Apart from creating standalone payment platforms, the MNOs have also evolved into payment platforms themselves through operator billing services, allowing payments for various value-added services and e-commerce services to be charged to a phone bill. The global value of operator billing service (also known as Carrier Billing) is upwards of $29.8 billion. This simple payment method can be a great substitute for credit and debit cards.
Lastly, MNO-backed digital banks have created a hybrid between telcos and FinTech. One great example is Orange Bank, an offshoot of the French telecommunication service provider Orange Telecom. It lends credence to the idea that FinTechs and, indeed, digital banks and MNOs have many areas of intersection. But even from the onset, MNOs had already crept into some form of lending through carrier lending to finance devices.
The FinTech industry and telecom companies are now inextricably combined. The future looks bright—it is time for regulators to find modalities of making these two industries work together while having an eye on the systemic risk they may pose to the financial system. Indeed, some FinTechs have far outgrown even mainstream banks, like Alibaba’s Ant Financial, forcing the Chinese government to take extreme measures to reign it in. The benefits of collaboration between these industries have created great convenience and better value for consumers.
Prove is the modern platform for Phone-Centric Identity™ and is used by over 1,000 enterprises and 500 financial institutions, including 8 of the top 10 US banks. Get in touch with us to learn how we can help you accelerate revenue, mitigate fraud, and reduce OPEX with our proven approach to identity verification and authentication that is tied to the phone and the phone number. To know more about our services, please contact us.
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