Ajay Adiseshann, Founder, PayMate India
India is in the midst of a digital revolution, and the telecom industry is leading the change. Digitization is offering telecom companies an opportunity to rebuild their market positions, reimagine their business systems, and create innovative offerings for customers. In fact, it could enable telecom operators to improve their profits by as much as 35 percent in the coming years, as opposed to the current 9 percent.
India is the second largest telecom market with more than 1 billion subscribers reported in 2015, and the sector saw a growing 3G footprint and data usage that year. Through sweeping economic reforms, initiatives to open-up Indian markets to global business and investments in areas like digital technology and Smart Cities, India has made great progress over the last two decades. Digitization is creating tremendous opportunities for economies across the globe, and with the Government's Digital India initiative, the goals of bridging the digital divide in the country, increasing global competitiveness, fostering innovation, and creating jobs definitely seem attainable.
Digital is now a priority for most CEOs of industrial companies in India. Industrial leaders are digitizing essential functions within their internal vertical operations processes and are focused on driving both revenue growth and operational efficiencies. According to PwC's Industry 4.0: Building the Digital Enterprise report, more than a quarter (27 percent) of the industrial companies in this survey have rated their level of digitization as high, and this value is expected to rise to 65 percent within the next five years in India. Globally this number is expected to grow from 33 percent to 72 percent during this period.
The Telecom-Fintech Affair
Defying the tangible properties of time and distance, the telecom industry together with the fintech sector, has brought the world to our screens, with anytime and anywhere access. It has enabled us to shop, trade in stocks, transact with banks, and so much more at the touch of a button. The key to this evolution are digital payment apps that focus on integration.
As per the Ericsson Mobility Report India June 2015, smartphones make up only 15 percent of the mobile phone subscriptions in 2014 but by 2020, this number will reach 55 percent. Because of network effects, it will be more convenient for everyone that mobile payments work for both basic mobile phones as well as smartphones. Moreover, the data consumption is expected to reach 1869 petabytes per month by 2020. Online services such as e-health, e-education, e-governance, and banking are expected to ride on the success of data growth.
Bidding Adieu to Cash
The vision of Digital India cannot be complete without digitizing cash-use in our country. India's demonetization drive in November last year opened a gateway of opportunities for digital payments, as they became the preferred choice among businesses and individuals alike, for making secure financial transactions. It has put India on the verge of a digital payment revolution – one that promises to make financial transactions more secure for everyone.
Even post demonetization, we are witnessing a lot of movement toward electronic transactions. According to a joint report by Google and Boston Consulting Group (BCG), the total payments conducted via digital payment instruments will reach $500 billion by 2020, which is approximately ten times higher than it is now. The main contributors to this boom are consumer to merchant transactions at the point of sale, followed by B2B and peer-to-peer transactions.
Enhanced Internet connectivity and high rate of penetration of smartphones in the Indian market have altogether shaped India's payments landscape in favor of digital payments. Here is how the telecom industry can create revolutionary growth not only for itself but also for the economy with digital payments:
- Keep customers engaged: The telco industry should continue to focus on consolidating their relationship with customers in both online and offline modes. They should aim at providing a single unified experience to customer linking all engagements and accounts into a single user interface as a unified app, encouraging the customers to transact more, digitally.
- Enable security: Bringing the entire country into the financial ecosystem via smartphones will provide a platform to deliver government benefits to the citizens directly by eliminating middle men and thus removing leakages and pilferages.
- Eliminate price wars: Key digital trends have triggered operators' transformation toward being digital service providers. Mobile phones provide a one-stop solution for last mile delivery but the price war amongst the Indian telecom sector and the intense competition brings new challenges to the fore, slowing the full potential of digital payments.
- Forge relations with OTT services: Mobile operators need to be open and receptive to partnering with OTT service providers and exploring new revenue opportunities.
- Leverage big data: The telecom industry is both a consumer and provider of big data services. The exponential growth in the volume and velocity of data generated is creating huge opportunities in big data.
The Way Forward
The ever-widening availability of technologies such as mobile, artificial intelligence, cloud, analytics, and platforms is dramatically altering the way we live, work, and interact. The telecommunications industry is playing a critical role in enabling this digital revolution unfolding around us. According to a Google–BCG report, the number of mobile wallet users is already three times the number of credit cards issued in the country (24 million in 2015–2016).
The telecom ecosystem has provided the fundamental building blocks – access, interconnectivity, and applications – that are enabling this digital revolution to take place. A large share of potential value stemming from digitization across global industries over the next decade is dependent on the telecom industry delivering essential infrastructure, applications and productivity improvements in all areas. Fintech players are also focusing on digitizing the transaction flow and helping the businesses to receive and send money while sitting in their comfort and with a click.
With millions of subscriber relationships and decades of experience in driving interoperability and collaboration, telcos are uniquely positioned to compete in the platform economy. However, to capture value, they will have to clearly identify a strategy to build, buy, or partner for each customer use case.