A Telco you can Bank on?
The other killer iPhone app for me was the idea using your mobile phone as an all in one theatre bookings, payments and ticketing device.
You could get hold of a copy of the local entertainment guide or billboard, scan the QR Code for the show or concert with your mobile phone camera, purchase the ticket with the phone and then display your entry ticket on the phone as proof of entry at the venue.
As I was thinking this through and I quickly came to the conclusion that in the very near future Banks will need to become (MVNO) phone companies simply because of the competition that will be created when telecom companies evolve into mobile banks.
Then I stumbled across this video clip on the future of mobile banking last year.
” In the very near future Banks will become phone companies and telecom companies will become banks. “
In the clip Dr Dixon basically says it all.
- He discusses how Banks will become phone companies and telecom companies will become banks.
- He talks about mobile payment systems, micropayments, mobile phone credit card transactions and loans.
- The economic impact of remittances from foreign workers using SMS credit to avoid foreign exchange transaction costs.
- How biometrics fingerprint technology will allow large mobile phone payments and the impact on revenues as the major credit card providers move towards mobile phone transactions.
The mobile phone market may be enormous by media standards but compared to the banking industry it’s just small change.
The chart below mixes global credit card transactions and Global mobile service revenues together into a single transaction pool. As you can see Visa has almost 5 times, and MasterCard almost 3 times, the revenues of the Mobile Telecoms industry.
Given the increase in transaction revenues why wouldn’t the Telcos want to become Banks? If anything the problem would be convincing Banks they need to become Telcos. One look at the figures and they’d shrug their shoulders and say: “Why bother? Why make our life more complex for so little return on our investment?”
The Telcos already offer a limited range of payment services via their billing platforms and Premium SMS services. They also have existing mechanisms for intra and inter service billing at a national and global level. So how hard would it be for them to scale up and deliver a full-blown mobile payments network?
The easy answer is it wouldn’t take that much efforts at all. But the reality is Telcos face enormous barriers of entry into the banking and payments markets.
The first reason why Telcos will find it extremely difficult to become banks is very simple. It comes down to one word. The word is…
TRUST
Trust is the value driver the binds the Bank Industry and its customers.
Without trust the Banker’s business quickly disintegrates. Without trust a Banker’s cashflow simply evaporates. We know this from experience thanks to the recent global financial crisis.
All over the world Telcos struggle with customers over issues of TRUST.
There are the issues of ongoing support and customer service that plague a high churn industry that increasingly struggles to keep its customers close.
More damaging however are the SMS scams and the billing problems that continue to plague the Telecoms industry. Put simply, if customers don’t trust their telco’s billing system why would they ever trust a Telco’s banking and payments system.
The second reason is regulatory and compliance.
Here in Australia (for example) APRA regulates and ensures the compliance of the Financial Service sector while the Reserve Bank oversees the end of day settlements across the national banking network.
To participate in this highly regulated market the local Telecoms providers would need to not only meet the rigorous and expensive compliance requirements but also be invited by the Reserve Bank to join the national payments clearing system. Both of which are highly unlikely at this point in time.
I suspect, at least at this stage, if the Telcos do enter into the credit and payments markets in a big way it will be through some type of partnership, J.V. or amalgamated product offering with the Banks.
One day you may find the Market Leaders from both the Banking and the Telco sectors realigning themselves into proprietory mobile payment networks. However this will not happen unless the Banking Industry can see any added value in chosing a single network provider.
This is highly unlikely at the moment given the cross-fertilization of the customer bases across both industries. But things may quickly change once the free mobile phone becomes the hook to retain or grow the Bank’s customer base .
The reality is, if the Banks do encounter competition in the payments, settlements, billing and credit markets, it will not be the Telcos that apply the pressure. The tipping point will come from one or more of the other players in the mobile phone value chain.
The most likely candidates at this stage being the handset providers. (i.e. Nokia). They have both the brand, the intelligent device, the global reach and the hunger to revolutionise the global banking industry.
Other posts in this series
nice information thanks :_)
banking system can use mobile app also