2024-02-15 04:04:50
By Robert van Breukelen, Director of Operations at Itemate Solutions
The growing role of telecommunications operators in promoting financial inclusion through accessible and mobile-first financial services.
ABIDJAN, Ivory Coast, February 13, 2024 -/African Media Agency (AMA)/- Africa remains a melting pot for innovation in the field of mobile telephony. The continent’s telecommunications operators are working to fill gaps resulting from low levels of development in key areas, including banking and financial services.
A 2022 report estimated that just over half of Africa’s population was unbanked. The same report found that banks across the continent are investing in digital transformation projects, with the development of mobile money services a top priority among banks surveyed.
But it can be argued that telecom operators are better placed than their counterparts in the banking sector to develop tailor-made financial services products tailored to a mobile-oriented consumer.
Take the example of mobile money, which represents a significant growth opportunity for telecom operators. In 2022, the value of mobile money transactions in sub-Saharan Africa reached $832 billion, and there are an estimated 390 million mobile money accounts in East Africa alone.
Moreover, banks are finding it much more difficult to venture into the telecom space. Conversely, telecommunications are establishing themselves more easily in the traditional banking sector, as evidenced by the current rush of telecommunications operators into financial services.
Telecommunications sector boosting financial services through mobile money
This excitement was manifested in particular with the triumph of M-PESA. Initiated in Kenya by Vodafone in collaboration with Safaricom in 2007, M-PESA has experienced rapid growth, becoming the mobile financial service of choice in the developing world, with more than 17 million accounts opened in Kenya by 2012.
The M-PESA service allows customers without banking access to make deposits and withdrawals, transfer funds to other users, as well as a variety of ancillary operations such as purchasing telephone credit and payment of invoices.
Its popularity grew in response to the shortcomings of the Kenyan banking system at the time, whose constraints and high fees represented a major obstacle for the population wishing to access banking services and make payments or transfers.
Telecom operators across the continent are now capitalizing on their large customer portfolios, undisputed brand awareness, consumer analytics and deep visibility into customer habits to deploy an array of innovative financial services, encompassing payment solutions, money transfer services, insurance and other financial products.
Challenges and risks galore
However, this frenzy to diversify income is not without risk.
The financial services industry is highly regulated. Although the sector has been slow to reach full maturity, regulators are now catching up with the needs of a modern financial ecosystem.
A telecommunications operator offering loans, for example, will need to consider numerous regulatory requirements ranging from credit rating and risk analysis to laws restricting the flow of funds across borders.
For a continent so reliant on remittances, this additional regulatory oversight can hamper the adoption of new financial services and undermine the profitability of telecommunications.
Leverage the expertise of technology providers
For African telecommunications operators wishing to unlock new revenue streams by introducing financial services, the solution is to leverage the expertise and infrastructure developed by specialist providers. These keep pace with regulatory requirements while refining the user experience and optimizing back-office operational efficiencies.
For example, telecommunications operators using Itemate’s point-of-sale system can quickly and easily enable new financial service offerings through a single point-of-sale integration.
To encourage the adoption of new innovations in financial services, telecom operators can incentivize distributors to promote specific products – an insurance product or a loan offer, for example – with consumers being able to register and start using the product immediately, with the point of sale acting as the onboarding platform.
And as new regulations emerge, the provider can institute necessary changes that are rolled out across the telco’s customer-facing distributor networks, ensuring that customers can enjoy the convenience of mobile financial services while helping telecommunications operators comply with regulations.
Distributed by African Media Agency for Itemate Solutions
For additional information on Itemate Solutions, please visit: www.itemate.com
About Itemate Solutions
Itemate Solutions is a leading provider of customized digital solutions and software platforms, serving clients in ten countries across Africa and the Middle East for over 18 years. Our mission is to provide reliable, cutting-edge digital solutions that enable our clients to grow their customer base profitably.
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