From iPhones to iLoan

Luke Taylor
Author: Luke Taylor CCO & Deputy CEO
Date: 4th July 2016
Categories: Technology, Financial, Banking, Telecoms, Fraud protection

There is an increasing tendency for financial and telco companies to ‘bang heads’ as communication service providers begin to encroach on what has, until now, been financial territory – financial service provision. The opportunity for CSP’s is that they have much more influence in their customer’s lives as well as collect rich and insightful data about their customers – and thus experience a much stronger and interactive relationship with their customer than financial institutions. The basic function of a retail bank is somewhere for your employer to pay your salary, customers to get a mortgage or a loan. Ultimately there’s not a great deal of interaction on a day to day basis. Your phone on the other hand, especially your smart phone, is now your personal assistant, your buddy; it has your life stored on it, knows where you are, connects to numerous services and recognizes your friends and family - many people report they cannot live without it.  In that unfortunate time, when individuals get into financial difficulties, loans will not be repaid, mortgage payment will be delayed, but the phone bill will always be paid, allowing the consumer to ‘live’ their life.

CSP’ are at a huge advantage here, compared with what maybe a naive mental image of bankers as stuffy old men hidden behind closed doors. CSP’s are now able to say ‘not only can we provide you your lifeline (your phone), but now we can offer you bespoke interaction and applications and importantly financial services, loans and cash facilities that reflect your specific needs.’ I occasionally use my credit card when I travel on the London Underground, but I could just as easily use my phone, with Apple Pay, or the recently launched Android Pay – and that way I don’t even have to bother with getting my wallet out. My phone is usually to hand anyway...  A subliminal first step of moving away from a relationship with the financial service provider?

Safaricom in Kenya, an existing customer of our complex event processing software solutions is somewhat unique, that it already offering micro loans, credit facilities and money remittance already under their M-Pesa brand which generates profits of over a quarter billion US dollars.  Other CSP’s and financial businesses have introduced similar services and branchless banking to progress financial inclusion. Since this successful inception, regional and governmental authorities and regulatory bodies have now realized that having a CSP offering financial services without a banking license or regulation is not acceptable. Therefore, how close are we to a CSP or handset manufacturer buying a bank/applying for a banking license in the near future? I am sure they must have thought about it… If customers still perceive banks as secure institutions, Apple, Google, Vodafone (or others) could purchase a bank and say ‘here is our end-to-end, no third-party required full financial offering for customers, everything from Apple Pay to ‘iLoans’ on one device.’

With buzzwords like IOT, 5G, OTT, SDN, NFV, etc., CSP’s have a number of strategic initiatives on their plate, I wonder where banking is on this list?  Who will take the first step? Will a CSP with its vast amount of funds or liquidity in place start its own bank, will a CSP acquire or merge with a bank?  We will just have to watch this space...