Intelligence Brief: Can mobile operators capitalize on the new fintech opportunity?

Fintech was clearly a hot topic at MWC23: there were 90 exhibitors in the fintech category, many keynotes and side sessions as part of one of the conference’s five themes.

There was even a 4YFN winner.

Fintech has become more prominent in recent years, in part due to the impact of the Covid-19 (coronavirus) pandemic on digital services. As more consumers take a digital-first approach to many lifestyle services (such as shopping and entertainment), and new services and applications become mainstream (such as metaverse and Web3), fintech will be an important tool for people and businesses to conduct transactions in a digital environment.

This reality unsurprisingly attracts innovation and significant amounts of investment in the fintech space. For example, 2021 was a bumper year for fintech companies, with figures from KPMG projecting total investment at $225 billion. Although investor sentiment declined in 2022, largely due to the deteriorating global political and macroeconomic environment, the fundamentals for growth, including high demand, digital-centric lifestyles and enabling regulations, remain strong.

In this context, mobile operators around the world are waking up to the fintech opportunity, as well as the challenge of the growing number of fintech startups pouring into the space (it is estimated that there are now more than 26,000 fintech companies around the world). In many ways, the fintech opportunity today mirrors the digital content opportunity a decade ago. As then, the argument now is whether the operators should bother to compete with more nimble start-ups. Unlike a decade ago, however, operators no longer have the luxury of strong revenue growth from core services and largely underpenetrated markets. Consequently, the need to diversify service offerings is now stronger than ever, and fintech represents low-hanging fruit for operators to exploit.

Operators are of course not completely new players in the fintech ecosystem. Several operators in Africa and other developing regions have been offering a variety of mobile financial services (MFS) through mobile money for most of the past two decades. The latest GSMA Mobile Money State of the Industry report shows that total transaction value reached $1 trillion in 2021, with Africa accounting for more than 70 percent of the figure. A question that often comes up, however, and on which there are different views, is whether mobile money can be competitive with other fintech services, and drive profitability for providers and effect for consumers.

The GSMA Intelligence team at MWC23 explored this topic extensively in meetings, keynotes and other forums with various industry stakeholders. In all conversations, one recurring theme stood out: mobile money is no longer just about providing basic financial services to the underserved, it is now a mainstream financial service in markets where it is offered.

For example, Chris Meng, VP of Huawei’s Northern Africa Carrier Business, talked about the provider’s one-stop platform, which powers Ethio Telecom’s Telebirr and Safaricom’s m-Pesa, and provides flexibility for operators to add new applications and services on a mobile wallet . . Frehiwot Tamru, CEO of Ethio Telecom, revealed that Telebirr reached 29 million customers in less than two years after launch, with products such as merchant payments and microcredit, and Sitoyo Lopokoiyit, CEO of m-Pesa Africa, highlighted the company’s consumer products for 59 million users , as well as its solutions for 730,000 businesses and 59,000 developers.

So, what did we learn at MWC23? A lot. Here are some takeaways:

• The MFS landscape is evolving – MFS has been through three phases. The first, which started before 2010, was characterized by basic money transfer and cash-in cash-out (CICO) services. Here, mobile money helped to reduce the economic exclusion gap in low- and middle-income countries. The second phase between 2010 and 2020 saw fintech start-ups come up with solutions to integrate MFS into people’s lives, enabling digital payments for a wide range of digital services, including e-commerce and online gaming. The third phase, which took off at the beginning of this decade, is underpinned by the inclusion of credit services in MFS offers. This has the potential to open up new opportunities in the consumer and SME market for operators going forward.
• Regulation is a key enabler – The success of MFS to date, along with its future growth, is a function of the policy and regulatory environment. MFS has taken root in markets where operators have been allowed to lead the distribution of services, such as Cameroon, Ivory Coast, Egypt, Morocco and recently Ethiopia, while discussions are ongoing in several others, notably Algeria, Libya and Tunisia. Enabling regulations go beyond simply allowing operators to play in this space, they enable collaboration with other ecosystem players and partners, including banks, existing fintech players and various public and private institutions to implement mobile payment and credit solutions.
• Diversification and innovation will drive future growth – There is a strong argument that diversification and innovation of mobile money services, based on a business model that is flexible, adaptable and cooperative, will be crucial for success. To this end, the concept of the super app is much more talked about, where an operator uses a one-stop app to provide access to multiple services through a single interface to create new financial solutions, after a series of deployments. For example, m-Pesa’s super app allows customers to download in-app mini-apps to complete tasks such as ticketing, deliveries, shopping, license applications, insurance, etc. with businesses, government agencies, utilities and other companies.

For operators, especially in developing regions, fintech is a matter of how, not if, given the growing opportunity and need to create new revenue streams in an increasingly challenging competitive environment. As I highlighted in my keynote on this topic at the North Africa Operations Transformation Forum (OTF), held at MWC23, critical success factors include having the right solution and building partnerships with relevant ecosystem players. The number of fintech exhibitors and suppliers at the event, including Evina, Huawei and MobiFin, to name a few, certainly points to the potential for the mobile industry in the fintech space.

– Kenechi Okeleke – Director of Regional, Social and Policy Research, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and do not necessarily reflect the views of the GSMA, its members or associate members.