Telcos as bridge to financial inclusion

30 Jan 2018

Telcoin CEO and co-founder Claude Eguienta shares his views on how telco operators can do their part to solve the country's financial inclusion initiative.

In June 2015, I wrote of the idea of telcos entering the financial services industry sector, in part as a response to an extremely crowded telecommunications sector where revenues were stalling while margins were plummeting on the back of deregulation, competition and disruption. One technology that industry observers are speculating, if not developing proof-of-concepts around, is the blockchain – a decentralized database that records digital transactions.

RELATED: Bank your money with your favorite telco

Analysys Mason noted that blockchain can prove beneficial to telco operators in areas like billing, eSIM provisioning, number portability databases and mobile money. The analyst lists nine use cases for which blockchain-based solutions, either public, private or hybrid, can improve telco operators’ activities. The analyst believes that operators transitioning to IP-based and virtualized networks will benefit from blockchain-based solutions by facilitating the integration of their systems and make their internal, as well as client-facing, processes more cost-effective.

Figure 1: Nine areas where telco operators could deploy blockchain

Source: Analysys Mason 2016

Internal processes: OSS and BSS processes (such as billing, eSIM provisioning and number portability databases) can benefit from hybrid blockchains, which have both public and private (intra-firm) facets.

Roaming: hybrid blockchains with permissioned and public components could facilitate the implementation of databases that usually require costly integrations and trusted access settings. One possible example is databases used for subscriber authentication during roaming.

Connectivity provisioning: public Wi-Fi authentication and payments could be made more cost-effective through autonomous blockchain-based transactions between devices and access points.

Digital asset transactions: the extremely low transaction costs enabled by blockchains (compared to those of credit or debit card transactions, for example) make them amenable to micropayment-based business models for digital assets, including music, mobile games, gift cards and loyalty points.

M2M and automotive: it is likely that some of the first applications of blockchains to telecoms will be in M2M and automotive, as described in the examples above.

Smart cities: public blockchains are particularly suited to use cases where high levels of transparency and auditability are required, such as smart city initiatives. Blockchain-enabled smart charging stations are being explored by German utility RWE, while South African start-up Bankymoon allows smart meter users to pay for electricity with Bitcoin.

Mobile money: distributed ledgers and cryptocurrencies could enable more cost-effective international remittances between subscribers of an operator’s opcos (operator codes) in different countries. Blockchains could also reinvigorate direct carrier billing by significantly reducing the costs of micro-transactions.

Healthcare: secure EHR storage and transmission on permissioned blockchains.

Identity management: Microsoft is developing a blockchain-based identity management platform to enable authentication across devices, apps and organizations. Operators could develop similar solutions, or partner with organizations developing them.

Enrique Velasco-Castillo, senior analyst at Analysys Mason, believes that “telecoms applications of blockchain technology are ripe for innovation. Vendors could be instrumental in leading this transformation by developing solutions that make the most of their operator clients’ virtualized, IP-based next-generation networks. These networks can be coupled with the capabilities of blockchains to enable cost-effective, distributed, resilient and transparent transactional processes.”

Telcoin CEO and co-founder Claude Eguienta (pictured) is optimistic of the use of blockchain by telco operators to expand their already existing capability around mobile payments. The startup itself is not a telco operator but believes that the telco industry is in a position to help achieve financial inclusion – the desire by many governments to give access to financial products to as wide a population as possible.

Citing World Bank data like telco operators serving 5 billion unique subscribers and only 1.2 billion bank accounts, he believes that if you want to provide financial services to people you might as well do so thru their mobile phone. “Using telco operators as points of distribution, we’ll also solve a few problems along the way such as the complexity of remittances, or even access to cryptocurrency,” he proposed.

By partnering with telcoin, telco operators can differentiate themselves by carrying more than voice and data. They should carry financial services. “Telcoin is not about telco operators entering the cryptocurrency business but rather telco operators entering the financial services industry thru cryptocurrency,” he explained.

In this exclusive video interview with Telecom Asia, Eguienta offers some insights into how telco operators can leverage cryptocurrency to gain competitive, differentiate services. He cites how mobile money or e-wallets is helping transform the economy and the telco industry.

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