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Vodafone Network Mobile Recording’s New Verticals and Features Vodafone widens the scope of its in-network mobile recording service Publication Date: 18 Nov 2015 | Product code: TE0005-000758 Rik Turner Vodafone Network Mobile Recording’s New Verticals and Features Summary Catalyst The recording of mobile communications (voice calls and SMS text messages) became a regulatory requirement for institutions trading in the UK capital markets in November 2011. A similar regulatory requirement is expected for all other countries in the European Union as a result of the second version of the Market in Financial Instruments Directive (MiFID II). Vodafone launched an in-network mobile recording capability for the UK operations of global banks in 2013, a service that Ovum profiled in 2014. Now it has extended the remit of the service, expanding it to other verticals and adding new features. Ovum view Mobile communications recording became a legal requirement for trading floors in the UK in 2011 and is set to expand to the rest of the EU in January 2017. That said, the actual deployment of recording capabilities has been slow in the UK, with the most realistic estimates suggesting that only somewhere between one-third and two-thirds of the mobile phones covered by the 2011 regulation are currently being recorded. For the rest, the situation is almost certainly that the employer has “banned” the use of mobiles, leaving the responsibility of complying with the ban to the individual trader. Ovum has long argued that several of the technical approaches to achieving mobile recording were actually barriers to its adoption by banks, because they either impaired the end-user experience or, in the case of a service provided by a mobile virtual network operator (MVNO), they added the operational complexity for the bank of managing an additional supplier contract. We viewed the desirability of mobile recording as a tick-box option on contracts with the bank’s existing mobile provider. The Vodafone Network Mobile Recording (NMR) service is the prime example of just such a service. Initially the service was only for high-end banks – the tier-1 institutions serviced by Vodafone Global Enterprise (VGE). Now, however, the target market is expanding to other financial services organizations in the UK. Beyond that, Vodafone is also starting to offer NMR in other verticals, highly regulated or otherwise, which Ovum sees as a logical and desirable step. As Vodafone refines NMR with new features and expands the offering to new verticals, it is an open question whether it might also at some point expand it to new geographies. After all, the MiFID II regulation is EU-wide, so at the very least, it could target financial institutions and other with trading floors in those EU countries where it has operations. Ovum sees this as a logical move, though the company has yet to announce any plans in this direction. Key messages . NMR was initially focused on the capital markets. More capital market phones require recording in the UK. Vodafone is also extending NMR to other verticals. Vodafone is adding new features to NMR. © Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2 Vodafone Network Mobile Recording’s New Verticals and Features Recommendations Recommendations for enterprises If your company is in a regulated sector such as financial services or healthcare, the likelihood is that at least some of your employees’ phone calls will need to be recorded. You may already be recording fixed-line calls, but if you now need to extend that capability to mobiles, you should definitely consider the Vodafone NMR service as a means of doing so. It offers in-network recording of voice calls, with a better user experience than on-handset software alternatives. Vodafone has added SMS recording, which is part of the regulatory requirements of both the UK regulator (the Financial Conduct Authority) and the European Securities and Markets Authority in the MiFID II regulation coming into force in January 2017. Even if you are not in a highly regulated sector, meanwhile, the desire to improve the customer experience of interacting with your company may well be making you think about call recording. Again, the NMR service is worth looking at as a means of achieving it, particularly now that it has added a call notification capability, both pre- and mid-call. The capital markets requirement is expanding NMR was initially focused on the capital markets NMR was launched in the UK in 2013 and targeted at major investments banks. It aimed to enable them to comply with the 2011 regulation that requires all traders’ mobile communications to be recorded. Ovum has accompanied the evolution of this market requirement, commenting on its progress (and lack of it) in successive reports, as outlined in the “Further reading” section. Even now, four years after the regulation came in, by no means all UK traders’ mobile phones (the number of which is the subject of differing estimates) are now being recorded, Initially, part of the problem was the immaturity of the technological solutions proposed for mobile call recording. The end-user experience was often poor, particularly with the so-called app-based approach that required software to be downloaded onto the handset. A better alternative was for a recording service to be provided in the mobile network, but initially this was offered only by specialist MVNOs. There was clearly a need for recording to be provided as a service by the mobile network operators (MNOs) themselves. It had to be a tick-box item on broader contracts, so that, for example, a bank could specify that only its 500 traders would require it and its other 20,000 employees would not. For this reason, it was an important development when Vodafone, the MNO with overwhelmingly the largest share of phones in use in the City, launched NMR 18 months after the UK regulation came into force. Vodafone was careful to offer NMR to only the largest institutions: those that fell within its VGE customer base. Other competitors in this market include MVNOs such as Truphone and Teleware, as well as another MNO, EE, which provides network-based recording via a partnership with former Orange division Etrali. © Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3 Vodafone Network Mobile Recording’s New Verticals and Features More capital market phones require recording in the UK The market is poorly defined, but working on the basis that approximately 30,000 traders’ phones would be covered by the regulation, companies active in the sector estimate that somewhere between one-third and two-thirds of the market is now being recorded. This shows that there is still some work to do for it to be fully compliant. Vodafone now plans to expand NMR beyond the VGE segment of its customer base to encompass smaller institutions. These may be banks, hedge funds, or other types of company with a trading floor, all of which fall within the remit of Vodafone UK. Such companies may have as few as 50 or 60 mobile devices to be recorded. This marketing effort should see an increase in the total percentage of the target market being recorded. MiFID II extends the requirement to the rest of the EU In more recent times, the need to record traders’ phones has been extended to the rest of the European Union by MiFID II. The European Commission suggested a significant number of revisions to the initial directive in a consultation introduced in December 2010. This was prompted by developments in technology since the first MiFID in 2004 (not least the huge expansion in mobile phone use in the business world), as well as the increasing complexity of financial products and services and the flaws highlighted by the financial crisis of 2008–09. The result of this consultation and review is the Markets in Financial Instruments Directive (2014/65/EU) (MiFID II) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR), which were approved by the European Parliament on April 15, 2014 and by the European Council on May 13, 2014. MiFID II and MiFIR were subsequently published in the Official Journal of the EU on June 12, 2014 and came into force on July 2, 2014. Member states must adopt and publish the measures transposing MiFID II into national law by July 3, 2016; they must apply those provisions from January 3, 2017. MiFIR will apply from January 3, 2017 and, given that MiFIR is a regulation, it will automatically become part of every EU country’s domestic law on that date. MiFID II and MiFIR make major changes to a number of areas of the current MiFID framework, including market structure, the transparency regime for the trading of financial instruments, commodity derivative markets, reporting of transactions to regulators, investor protection, and supervisory practices and powers. Mobile recording falls under the last of these headings. In part drawing on the experience of the UK, MiFID imposes a requirement for mobile communications recording across all EU member states. Among the changes to the existing UK regulation, it massively extends the retention period for recordings from the six months required by the UK’s Financial Conduct Authority to five years. This obviously represents a business opportunity for service providers and Vodafone is poised to take advantage. © Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4 Vodafone Network Mobile Recording’s New Verticals and Features Vodafone is also extending NMR to other verticals Adjacent financial services markets are an obvious next target Vodafone is now widening the focus of NMR to retail banks – in particular their wealth management divisions – and the insurance sector, both of which are covered by MiFID II.

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