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Challenges and Opportunities of Digital Financial Services

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Challenges and Opportunities of Digital Financial Services BigTechs, interoperability, e-commerce: challenges and opportunities of digital financial services Part of the Orange group About Sofrecom Sofrecom, an Orange subsidiary, has developed over 50 years a unique know-how about operator businesses, making it a world leading specialist in telecommunications consultancy and engineering. Its experience of mature and emerging markets, combined with its deep understanding of the structuring changes affecting the telecoms market make it a valued partner for operators, governments and international investors. In recent years, over 200 major players in over 100 countries have entrusted strategic and operational projects to Sofrecom: transformation and optimization, technological modernization, innovation and development. Sofrecom assists its customers’ digital transformation, boosting their operational performance and service differentiation, thanks to a highly innovative approach to customer experience, very high broadband, mobile financial services, e-government, change management… 2 Sofrecom’s strength lies partly in its diversity, with more than 1,700 consultants and experts of 30 nationalities working in 11 agencies around the world. Sofrecom is above all a network of men and women, a powerful network of knowhow and expertise which ties its personnel to customers, Orange experts and industrial and local partners. Sofrecom’s Know-How Network is also the guarantee of a transfer of know-how, skills and expertise for sustainable transformation based on internationally certified methodologies. For more information, please visit our website : www.sofrecom.com Sofrecom, The Know-How Network Summary P.4 GAFA and BATX extend their foothold in financial P.11 Mowali tackling payment interoperability in Africa services P.14 Mobile payment, the main growth lever for P.6 Traditional mobile money assets weakened by new e-commerce in Africa models P.16 Mobile money supporting the farming of the future P.9 The agent networks central to the differentiation strategies of digital financial service providers P.18 Conclusion Challenges and opportunities of digital financial services Introduction he digital financial services market has been shaken up in recent years by new players such as Apple, Facebook and Alibaba. The dazzling success of services like Alipay and WeChat Pay reflects consumer and corporate interest in new online payment servicesT and marketplaces that are seamlessly integrated into communication tools and services. Today, BigTechs such as these are focusing their expansion plans on Africa. This new competition is putting pressure on the design and marketing models of telecommunications operators, the principal providers of digital financial services in Africa. Having long enjoyed almost exclusive competitive advantages, they must now rethink and evolve their positioning to reflect this new market reality. One of these advantages is the distribution network. Although it is by no means unique, it is an asset that operators should treasure. What they need to do now is recreate value at 3 contact points across the network to turn them into growth levers. Driven by strong consumer demand, interoperable digital financial services are fast becoming a reality. They are opening up new growth opportunities across the board, and will extend ecosystems and spur the creation of new services such as contactless and online payment. E-commerce, which is really taking off in Africa, is also relying heavily on digital financial services to support its expansion. These needs open up real service development opportunities for all the sector players. So, to stay ahead of the curve despite the profound changes brought about by new forms of competition like OTT (Over The Top) services, telecommunications operators must rethink their value proposition and their operating model. At Sofrecom, our experts help you design and implement your strategies to achieve these objectives effectively. The purpose of this report is to analyse the digital financial services market and explore the new challenges that telecommunications operators must overcome to maintain their influence in the sector. Our aim is to continue supporting you and guiding your choices so that you achieve your business and human goals. Rambert Namy Head of Business Consulting, Sofrecom Challenges and opportunities of digital financial services GAFA and BATX extend their foothold in financial services Vincent Weber - Mobile financial services management consultant GAFA1 and BATX2 have been engaged in the financial services sector for several years now. While their strategies and models vary according to the location, they have transformed the sector in under five years. These perpetually successful digital economy players now enjoy a prominent market position in financial services, and are continuing to innovate. Developed countries: from mobile payment to of users’ everyday lives. As for Google, access corporate financing to payment transactions gives it more data to monetise. The discovery of its secret alliance In recent years, GAFA have really scaled up their with Mastercard in September 2018 shows just initiatives in the US and European financial 4 how important data is to the Google corporation. services markets. Initially, their approach consisted Thanks to this partnership, Google is able to match mainly in providing new digital payment solutions. online advertising with the offline purchasing In 2013, Amazon introduced Amazon Pay to habits of consumers. enable its customers to pay online. In the following year, Apple launched Apple Pay, a smartphone payment app based on contactless NFC (Near-Field Emerging countries: specific approaches tailored Communication) technology. As for Google, in to local needs 2018 it brought all its payment services (including its mobile payment, electronic wallet and mobile But GAFA’s playing field is no longer limited to money services) under the umbrella of Google Pay. developed countries. They have taken several The approach is often the same, regardless of the initiatives that reflect their commitment to expand company: simplify the customer experience as far into emerging countries. In India, there are already as possible, and integrate payment into the digital more than 20 million Google Pay users. While it giants’ applications ecosystem. initially concentrated on payment services, Google is now seeking to monetise its user base and New financial services have subsequently been has already launched a range of instant loans in launched, very often through partnerships with partnership with four leading Indian banks – HDFC major banking operators. Thus, Amazon has been Bank, ICICI, Kotak Mahindra and Federal Bank. providing loans to merchants since 2014. The e-commerce giant also plans to partner with major Facebook is also asserting its position as an OTT players like JP Morgan in the United States to (Over The Top) financial services provider, by provide health insurance for employees. In March developing its first pilot projects and partnerships 2018, Apple announced the release of Apple Card with African banks. Marc Zuckerberg himself in the United States, backed by Goldman Sachs promoted the chatbot, a new virtual assistant and Mastercard. that helps customers use payment services and manage their banking directly from Facebook These companies have different strategic interests. Messenger. By natively integrating payment functions into its telephones, Apple is trying to enhance their value Thus, United Bank of Africa, Diamond Bank and proposition and make them an indispensable part Guaranty Trust Bank in Nigeria have taken the 1 Refers to America's Internet giants: Google, Apple, Facebook and Amazon. 2 Refers to China's Internet giants: Baidu, Alibaba, Tencent and Xiaomi. Challenges and opportunities of digital financial services plunge: they have agreed to be “disintermediated” application that allows users to chat, transfer and allow Facebook to liaise directly with their money or buy goods online from independent customers on their behalf. retailers. It natively integrates with the M-Pesa payment platform and seems to draw extensively In this model, the bank provides the banking on the methods that have made WeChat Pay a service and Facebook distributes it. Facebook has success. made no secret of its ambitions to replicate this model in other African countries and Asia. Both GAFA and BATX have now made it very clear that they mean to expand their activities and sales in the financial services sector, especially China's Internet giants, BATX, are certainly not in developing countries. In Africa, mobile money lagging behind with their aggressive expansion operators will definitely have to update their models strategies in the financial services sector to withstand this new competition. In this race to diversify financial services, China's Internet giants are also performing extremely well. Their financial services platforms are a colossal commercial success in China, and are quickly becoming popular abroad. At the start of 2019, the Alipay service developed by e-commerce giant Alibaba had over one billion active users worldwide, and more than 40 million retailers in China accept Alipay payments via a QR (Quick Response) code. The same applies to WeChat Pay, which has capitalised on the user 5 base of its instant messaging system. Alipay's parent company, Ant Financial, is developing numerous international partnerships to increase acceptance of Alipay and enable Chinese tourists to use it in different
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