It’s easy to notice that the world of mobile financial services is always evolving. As we stand on the cusp of 2019 we have begun to consider which trends will rise to the top and shape the new year. Even more importantly, we must consider how these trends will affect the global unbanked population.
Unbanked and underbanked individuals around the world have long heard ‘NO’ from operators and financial institutions. As a result, around 80 per cent of the population in emerging markets is on prepaid mobile plans with almost no access to financial services, or a financial identity. They have not been offered the opportunity to build credit in a way that is feasible for them. However, in 2019 we will begin to see more opportunities that will make this possible. The most noteworthy will come from mobile operators and financial service providers as they will begin competing, partnering and engaging in new and exciting ways. Here’s how:
Financial services: Telcos are moving in
It has already begun; traditional institutions are partnering with telcos. These partnerships have lead to expanded digital service offerings for the underbanked in developing markets and transformed how the people within those markets complete transactions. The impact is clear. Kenya, for example, has seen a 16 per cent increase, rising from 59 per cent to 75 per cent, in financial inclusion from 2013 to 2017 (Brookings Financial and Digital Inclusions Project report). Alongside the proliferation of smartphones, the rise of financial inclusion due to these partnerships will continue to be seen across other emerging markets - Indonesia and parts of Southeast Asia, India and additional countries in Africa. While many people are without a bank account, smartphone ownership is on its way to being ubiquitous, even in these emerging markets. An enormous customer based, with unmet needs, is ready to be introduced to financial services companies and it’s the telecom operators who will make the introduction. Customers in these areas are ready to be offered the opportunity to use and grow their credit, and to quickly send money to each other.
The unbanked will benefit from data transparency requirements
The time for keeping consumers in the dark has passed. The General Data Protection Regulation (GDPR) in the European Union was just the beginning of providing a higher degree of protection on the internet for personal consumer data. The success of GDPR has and will encourage more countries around the world to update their data privacy laws. India, for example, is just now finalising their Personal Data Protection Bill. It’s a much-needed cornerstone if India wants to move toward a digital economy. Beyond formal legal frameworks, we’ll also begin to see greater value placed on making certain data security is in place. After a history in the dark, consumers will finally start to have transparency in regards to their data. Companies will no longer be allowed to continue on as they have, whether that’s legally or through the exerted pressure of consumers. What impact will consumers actually be able to see? For companies that are transparent about the information they gather, consumers will see that they now have control over their information; the consumer instead will be offered value in exchange for that same information. In turn, transparent companies will be able to obtain trusted customers and further expand access.
Trust will become the linchpin of future customer relationships. It will also completely change the available set of opportunities for the unbanked. They will begin to have access to a wealth of services offered by potential partners of a third party vendor app. Trusted consumers using the app or service more will build profiles, allowing companies to personalise their experience. While this process may be already happening, making the exchange transparent will be crucial to building consumer trust. For the unbanked, profiles with personalised user experiences will then enable financial services providers to begin offering a multitude of options, including credit.
Mobile financial services: More than just mobile wallets
Survival in 2019 will require mobile financial services to become more diverse. In order to grow and compete, mobile money markets will need to offer unique digital and mobile services. These services will span the spectrum of financial services, including more than the typical payments and deposits services. With plenty of room for growth, telcos and banks are likely to join the competition. However, new competition means the bar will be raised with respect to customer engagement. These new services will be vital to winning and keeping customers.
Prepaid subscribers will shift to financed devices
Device financing programs offer customers who otherwise could not afford the initial cost of a new smartphone another option. With the expansion of these programs it will be easier than ever for prepaid subscribers to buy a smartphone, and are relatively simple solution telcos can offer consumers who are typically excluded from smartphone ownership, due to the upfront cost. The proliferation of smartphones is necessary to support a rise in financial inclusion. Still, creditworthiness will be a significant factor, and companies like Juvo, through data science and emerging technologies, will be primed to offer support to telcos and credit to consumers who would have otherwise not had this option.
Consolidation means fewer, stronger telcos
More competition and continuing mergers & acquisitions (M&A) mean the number of telcos will drop, but those still left in the game will be strengthened. 2018 has seen the highest M&A year ever and it has been driven by the telecom and media industries. Coming in at $300 billion, Reuters reports that the boost in proposed media M&A is more than six times as high as the same period last year. These record highs pan out to a lot of market disruption, but what does this mean for the industry and the consumer? The impact will definitely be visible in 2019, as carriers like the new T-Mobile, combined with Sprint, and AT&T, combined with Time Warner, become even larger and continue to absorb parts of the market. Market consolidation is predicted to negatively impact consumers, primarily due to rising cost threats, but the rise of eSIM devices and the constant threat of digital MVNO startups will keep telcos in check.
What more will 2019 bring? As the year of the battle for customer loyalty, we’re looking forward to big moves from telcos and financial service providers, more transparency, and above all, increased opportunities for the unbanked.
Steven Polsky, CEO, Juvo
Image Credit: Centtrip