Telecoms & FinTech Key Trends and Insights
ABSTRACT
In this article I look into how the telecommunications industry has evolved and its accompanying trends and compares these to developments in the financial services industry and FinTech.
In fast marketplaces such as telecoms and Fintech what was once the newest and most popular form of tech can quickly be overtaken and replaced. The major restructuring that occurred in telecoms has not happened in financial services just yet. However, for banks, the protection they have enjoyed is becoming eroded by regulatory changes and FinTech innovations.
This has the power to bring transformative change across the financial services industry in a way that we have already seen in telecommunications.
Telecom's Recent History
This is really the story of how telecommunications became decoupled from physical equipment and became a ubiquitous part of our lives.
The sudden and rapid technological developments of the 1990s created new opportunities but also provided significant threats much in the same way that today’s tech innovation involving AI. ML and blockchain are producing a similar competitive environment in FS and other key industries.
What happened in telecommunications is the convergence of previously distinct industries such as telecoms, information technology, entertainment, media, and consumer electronics into a new industry, the so-called multimedia information industry. Although it is on a far smaller scale so far, there are signs of a rebundling of financial products among different FinTech operators. For instance challenger consumer banks are starting to offer alternative wealth and investment products provided by partner companies.
Regulation in the Sector
The telecoms sector is highly regulated within the European Union by the European Electronic Communications Code (EECC). Its aims are to strengthen competition in the sector, stimulate investment, drive innovation and provide freedom of choice for consumers.
The story in FS is a little different where operators capture and hold enormous amounts of data on their customers, making them liable to strict legislation particularly since the 2008 financial crisis. The new banking regulations have been steadily adopted in the EU and elsewhere in order to counter increased levels of public mistrust in financial institutions. These strict, equitable guidelines have made it easier for FinTechs to enter the marketplace and be compliant.
The EU’s Payment Services Directive (PSD2) and similar open banking regulations introduce a set of regulatory changes breaking the monopoly banks have on accessing user data and transacting their funds.
Partnerships and Acquisitions
In rapidly changing industries such as that of telecoms and FS, the availability of state-of-the-art technological know-how, innovations and domestic and international market access are critical to success.
Mergers and Acquisitions (M&As) between mobile operator and mobile operator and mobile operator and broadband operators have been common as have mergers between mobile and fixed operators such as between BT and EE in the UK. M&As are pursued by incumbent financial institutions to meet demands by consumers and businesses, although the FinTech trend is towards merging with smaller non-direct competitors.
The Future for Telco and FinTech
The telecoms industry has reached saturation level for core voice services. Without new customers being available, players compete aggressively to keep market share. While the FinTech segment is growing through provision of diversified products and services there is a saturation point, particularly in highly developed markets like the UK. This will increase the already competitive nature of customer acquisition and retention in the sector.
We have already seen telcos challenged by OTT players like Netflix in TV services and various messengers and smartphone applications in the voice segment. They have experienced an ongoing erosion in revenues which has not been the case yet in FS where incumbent institutions have maintained their revenue levels up until this point.
Traditional financial firms and FinTechs alike must pay keen attention to the Big Tech companies (Facebook, Amazon, Google, Apple) as they continue to leverage their position to expand into FS so as to be best positioned to deal with competitive threats from this sector.
The biggest development for telcos in the next few years will be fifth generation (5G) wireless technologies. 5G should unleash the full potential of augmented and virtual reality, Smart Cities, and IoT.
Whether talking about the FinTech or telecoms industry the next few years promise to be disruptive with great opportunity for those able to adjust and evolve effectively.
