The retail financial services market has been the banks’ monopoly to the point of mobile technology advent. Smartphones, mobile Internet and technology have changed the situation, creating a new market of mobile financial services (MFS). Payment providers and tech companies, retailers and marketplaces, along with banks, were the first to offer financial services to consumers through a mobile interface. It has been not until recently that large telecommunications companies have entered the MFS market. Most operators in the process of launching mobile financial services. Despite the late start, Telecom Companies have every chance of obtaining a significant share of the MFS market for several reasons.
The growth of MFS market
In a ten-year period, the mobile financial services market going to continue to grow. Increase in potential customer base and demand will drive market growth.
An increase of MFS customer base
According to GSMA, 67% of the population use mobile communications. Half of the population has access to the mobile Internet. In the next seven years, the mobile Internet will become available to 5 billion people, who will make more than 60% of the World’s population. In 2025, 80% of mobile subscribers going to become users of smartphones. The potential MFS customer’s base will continue to grow with the increase in the number of smartphones and access to mobile Internet. The main customer’s growth going to be in developing countries.
Adoption of mobile financial services
The demand for mobile services going to grow among existing users of financial products. The pace of MFS adoption going to differ amongst products. The highest increase in the volume and adoption of services going to be in payments and remittances.
According to Merchantmachine, 6 out of 10-smartphone users practice paying for products and services by phone. According to Allied Market Research, in 5 years the volume of the mobile payments market going to reach 4.6 trillion US dollars. From 2017 to 2023, the market is projected to grow at a CAGR of 34%
Follow the estimation of Merchantmachine, 34% of smartphone users have downloaded a mobile wallet. China has shown the highest of 47% of digital wallet usage rate. In America and Canada, the figure is 17% and 16% respectively. The total number of users of the TOP-10 digital wallets exceeds 1.4 billion, which is comparable to 19% of the World’s population. The anticipation of the market for mobile wallets is to grow by an average of 11% from 2017 to 2023.
For the year 2017, the number of mobile money accounts increased by a record 20%. 866 million mobile money accounts were registered. In 2020, the number of accounts going to exceed 1 billion.
In the US, more than half of bank customers use mobile banking. In 2021 according to Javelin Strategy & Research report, the mobile banking adoption rate will rise to 58%. Other countries, going to show an increase of 10%.
Other mobile financial products
The adoption of mobile services will increase because of new financial offers. Deposits, loans, insurance, wealth management going to complement the list of companies’ mobile services.
New customers of mobile financial services
The increase in demand for financial services will occur at the expense of a new audience that previously had no access to financial services. According to the World Bank statistics, 1.7 billion adults are living without a bank or mobile money account. The availability of financial services through a smartphone and the Internet, the simplicity in the opening of the mobile money account going to drive the penetration of services among the unbanked and underserved population.
New MFS products
Mobile operators, limited by their own geography, going to be inferior to large tech companies in the MFS market. Apple, Google, PayPal, Amazon, Tencent going to continue geographic expansion in payments and funds transfers. Telco operators driven by the desire to increase market share will have to focus on the provision of card, deposit, credit and insurance products.
Partnership between telecom and financial companies
Telecommunications companies are able to increase the share in the MFS market through partnerships with other operators, Banks, payment and insurance companies. The partnership will expand the geography of services and product range.
In the next five years, competition in the Mobile financial services market will intensify due to the majority of offers from Telecom operators. The share of Mobile operators in the MFS market going to increase due to the potential of the customer base, the adoption of services, the development of new product segments and partner coalitions. Telecom trends drive fierce competition in the Mobile Financial Services market over the next five years, led by Telecom operators’ offerings.
Wallet Factory is a Mobile Financial Services Enabler (MFSE). The Company acts as a mediator between Telecom operators and financial institutions (banks, payment service providers, insurance companies). Wallet Factory provides planning, implementation and management of mobile financial services.
The article “Telecom operators in a bid for MFS market” is published as part of the Wallet Factory series on mobile financial services.