When telecoms meets financial services
Do telcos hold the key to providing much-needed financial services to the unbanked? Brainstorm spoke to Vodacom to find out.
In 2018, the South African Reserve Bank issued new banking licences to several newcomers. This was the first time the central bank had done so in decades. At the time, the decision was seen as an attempt to challenge the dominance of South Africa’s large and well-established financial institutions. Not only did the move present opportunities for newcomers to enter the market – think TymeBank and Bank Zero – but it also opened up the playing field for businesses from other industries, like insurance and telecoms, to join the race for the unbanked.
We’re using our niche as a telco to improve financial services by using the data we have about our customers to directly benefit them.Mariam Cassim
It was around the same time that Mariam Cassim joined Vodacom as the chief officer for the telco’s new Financial Services division. According to Cassim, the financial services market has expanded so much in recent years that the race between the banks and other players isn’t really a race at all. In fact, she believes there’s enough space and opportunity for everyone to dip their toes into the game. But it’s important to create products that offer something different, she says. If you want to stand out against the more established players, like banks, and to compete with the shiny, tech-driven new fintech players, you need to present financial products and services in a unique and interesting way. And you have to do so as cost-effectively as possible, she says. For a telco, this means using the customer base you have, and the data at your disposal, to create products that people actually need.
Vodacom’s financial services business includes three areas – insurance, payments and lending. Chatting to Cassim about these different divisions, it’s clear that the differentiator is versatility and speed. For example, its insurance products span everything from device insurance to funeral cover. Similarly, as part of the telco’s payments offering, it has launched its own physical point-of-sale device aimed at small businesses. This Android-based POS system doesn’t only process payments; it can also be used to help entrepreneurs grow their businesses. Finally, the brand’s lending product – called VodaLend – digitises the process of applying for a loan, allowing small businesses to apply for, and receive, a loan in as little as four hours.
As one of South Africa’s largest telcos, Vodacom has access to a plethora of customer data. This is another major differentiator for the brand. “The amount of data that a telco has about its customers is incomparable to anything else. People have their mobile phones on them 24/7. You might leave home without your watch or wallet, but you’ll likely turn back if you realise that you’ve forgotten your phone.”
Cassim and her team are actively developing solutions that use Vodacom’s customer data to create financial opportunities. In addition to this, they’re leveraging this data, in a responsible way, to make the products more appealing.
For example, VodaLend is one of the only players in the country that uses telco data as a proxy for customer credit scoring. “This is a completely disruptive offering. We’re using our niche as a telco to improve financial services by using the data we already have.”
Take, for instance, an individual who has been a loyal Vodacom customer for 25 years, but they’ve only run their new, small business for a few months. Vodacom has 25 years worth of history about this specific customer and can use this data to benefit him or her in a number of ways.
It all comes down to using customer insights to rethink existing products and transforming them into something that better suits the lifestyles of our customers, she continues. “We want to break down our products into bite-sized chunks so that they are easier and more palatable for customers to consume.” Acknowledging that a large percentage of the South African workforce is paid weekly wages, but insurance products are typically priced on monthly rates, Vodacom developed a funeral policy product that is charged weekly and is available from as little as R2.50 per week. “Because we know so much about our customers, it just makes sense to use this data to offer better pricing and create more personalised propositions.
“As a telco, we also have an exceptionally wide footprint. It doesn’t matter if you’re in a city centre or a rural community, you’ll be able to buy airtime. For us, the opportunity lies with leveraging these formal and informal distribution channels to promote our new products and services.”
Is the traditional telco dead?
A couple of years back, we saw the telecoms business boom with the rise of voice services. A few years later, these brands enjoyed similar success as the world turned its attention to data. “Globally, I really believe we’re seeing voice and data markets hit levels of saturation. For telcos to remain relevant going forward, I believe they need to come up with ways to monetise their brand and further sell to the customer base they already have.” Remember that customer with the 25-year history with Vodacom? Well, Cassim says, the value of this decades-long relationship goes beyond just data. During this time, we’ve also earned this customer’s trust and this relationship comes with a degree of brand loyalty.
“Where some of the new players in the financial services market still need to earn a customer’s trust, we already have it.”
For telcos to remain relevant going forward, I believe that they need to start looking at other products and services.Mariam Cassim
From a personal perspective, Cassim believes disruption and innovation isn’t about recreating the wheel, nor is it about doing things in the same way that other players are doing them.
“I believe you’re not really adding value if you’re just doing much of the same,” she says. “With every product we create, I want to be able to see how it’s different to the products already out there.”