So you want to be a telco
Mobile operators have entered the fintech business first in regions where access to banking, insurance and other financial services is lacking; M-PESA made this strategy famous. Now banks are entering the telecom sector. It comes with opportunities and many pitfalls.
Retail banks and insurance companies face similar challenges to telecom companies: they prioritize customer experience for growth and profits, their IT systems can be complex, and they operate in heavily regulated environments. Large subscriber bases interested in both financial and telecom services present a significant opportunity for cross-selling, retention, and data analysis.
Revolut's recent launch of a lightweight MVNO through its financial services app demonstrates the potential for cross-selling. By offering data packages for local and roaming use, Revolut has successfully attracted customers due to the convenience of e-SIMs and low-cost roaming charges. While this appears to be a customer retention strategy, it may hold greater potential for the future.
In Africa, many banks have recognized this opportunity and are exploring different ways to expand their subscriber base through digital services. Partnering with resellers or MVNOs to offer telecom services can be a more cost-effective way to acquire customers compared to traditional branch-based approaches. This allows banks to cross-sell financial services to a wider audience.
However, managing fickle customer bases in the telecom sector can be challenging for financial institutions. Customers can switch SIM cards more easily than bank accounts, and market dynamics are constantly changing with fluctuating pricing and marketing promotions. To successfully manage the telecom side of their business, banks should assemble a dedicated team with incentives to cross-sell financial services.