The world of mobile financial services is ever evolving, and as we prepare for the year ahead, we considered what some of the biggest trends shaping 2019 will be and how they will affect the world’s unbanked population on a global scale. The most significant trends and opportunities will come from mobile operators and financial service providers beginning to compete, partner and engage in different ways throughout the year. Let’s take a look:
#1: Telcos Moving Into Financial Services
In 2019, we will continue to see traditional financial institutions partnering with telcos to expand digital financial service offerings to the underbanked in developing markets, transforming how people transact. This is already starting to happen in places like Kenya, where their financial inclusion rate has been on an upward trend, rising from 59% in 2013 to 75% in 2017 (Brookings Financial and Digital Inclusions Project report). This trend will continue to spread across additional emerging markets, such as Indonesia and other parts of Southeast Asia, India and more African countries as the proliferation of smartphones continue to rise sharply in these regions. People may not have a bank account but they do have a smartphone. These telecom operators can deliver an expansive customer base to companies financial services companies that can help customers send money to each other and use credit.
#2: Required Transparency Over Data Will Help Better Serve the Unbanked
The General Data Protection Regulation (GDPR) went into effect in the European Union in May 2018, providing more protection for consumers’ personal data on the internet. As we move into the new year, we’re not only going to see more countries updating their data privacy laws, spurred on by GDPR - like India that is just finalizing their Personal Data Protection Bill - but we’ll also see a greater emphasis on ensuring data security. No longer will companies be allowed to keep consumers in the dark on their data. What does this mean for the consumer? The companies that are transparent about the information they gather, giving customers control of their data and offering value in return for it, will gain trusted customers and in turn be able to expand access. For the unbanked, this means gaining more access to an abundance of services offered by potential partners of a third party vendor app. Additionally, with this trusted consumer using the app or service more, a company will be able to personalize the user experience. Making this exchange transparent will be increasingly important to building trust. This data could then enable financial services providers to reach segments of the population that had been previously excluded, especially for credit, as well as manage risks and detect fraud.
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#3: Mobile Financial Services Become More than Just Mobile Wallets
To compete and grow in 2019 we will see mobile financial services becoming more diverse. Mobile money markets and financial services will begin to offer distinctive mobile and digital services, not only in payments and deposits but across the spectrum of financial services. This spectrum will span savings, loans, investments and even insurance. The services offered will be vital to winning customers. There is ample room for growth in this area and telcos and banks alike will begin to compete, raising the bar with customer engagement.
#4: Device Financing for Prepaid Subscribers will be a Gamechanger
Purchasing a smartphone for prepaid subscribers will become much easier with the expansion of device financing programs that offer customers, who otherwise couldn’t afford the upfront cost of a new smartphone. This will help telcos solve a big problem for consumers - how to proliferate smartphones across populations who cannot afford the heavy upfront costs and who are not tied into monthly service contracts. Of course, creditworthiness will be a crucial factor here, and some companies will take advantage of data science and emerging technologies to offer assistance to telcos and credit to customers who otherwise would not have this option.
#5: Telecom Consolidation - Increased Competition and Ongoing M&A will Lead to Fewer, Stronger Telcos
Telecom and media industries have driven the highest M&A year ever in 2018, with a registered historic high of over $300 billion, six times higher than last year, as reported by Reuters. However, what does all this market disruption mean for the industry and the consumer? In 2019 we’ll see the impact of this consolidation as carriers like the new T-Mobile, combined with Sprint, and AT&T, combined with Time Warner, become even larger and absorb more of the addressable market. Consumer advocates continue to predict that market consolidation will negatively impact the consumer, namely due to the threat of rising costs, however, the rise of eSIM devices and the constant threat of digital MVNO startups will keep telcos in check.