Telecom firms play a critical role in connecting people: 85% of the US population use smartphones today, and the penetration rate in the UK has reached 92%. This access to a massive market creates a unique opportunity for the key telecoms players to offer streamlined, end-to-end customer journeys, which can be powered by frictionless digital payments.
Our first post in this series, Growth in digital payments: A cross-industry view, provided an overview of how the growth and evolution of digital payments are transforming all industries. In this post we will go deeper into the essential areas that will make a real difference for telecom industry players and how harnessing the latest payments capabilities can empower them.
The recent economic slowdown has had an impact on telecoms, as it has on companies in many other industries. To maintain market relevance, keep their bottom line healthy and continue to grow customer value, both incumbents and new players need to focus on these three key goals:
- Increase customer engagement
- Improve customer journeys
- Reduce costs
Increase customer engagement
One of the key priorities for telecoms is to improve customer engagement levels. Although most players have a large customer base, many are now thinking about how to increase the number and frequency of interactions they have with their customers.
One approach is to offer a digital wallet or payments solution to engage customers more regularly. There is an opportunity to embed convenient and flexible mobile payments solutions that customers are likely to use on a daily basis.
Players that want to take engagement to an even higher level can create a super-app, where customers can find solutions for many of their daily needs (travel, shopping, payments, etc.). In recent years, super-apps have become popular mainly in Asia and Latin America, but interest is picking up in Europe and other markets. Super-app services fall into three main categories:
- Financial services. The apps can support customers’ needs by offering financial services including banking, wallets, insurance and QR code payments. Large incumbent telecoms companies are already exploring financial services offerings today—examples include Orange Bank, T-Mobile MONEY and VodaPay.
- Merchant services. The app can offer services like grocery shopping, buying movie tickets and making travel bookings. The charges for these purchases can be added directly to the telecom customer’s monthly bill or paid using a digital wallet.
- Media and entertainment services. Many other services on a super-app—such as news and media, entertainment and cloud storage—can be integrated into monthly bills and paid through the app using subscription add-ons.
With their access to customers’ mobile devices and their location, telecoms have an advantage over other market players when it comes to deploying a digital wallet or a super-app. Offering new features and payment capabilities could significantly increase customer intimacy and loyalty.
Improve customer journeys
Customers today have high expectations of seamless digital journeys, with companies like Amazon, Netflix and Uber setting the gold standard.
Customers prefer end-to-end experiences and expect transaction capability (such as payments) to be instant, invisible and flexible. Understanding customers’ needs and offering personalized, seamless payment experiences are essential for all service providers, including telecoms.
Customers have also come to expect flexible payment options, including GPay, Apple Pay, payment initiation service providers (PISP) and responsible point-of-sale lending.
Telecoms can reduce their basket drop rates by offering alternative payment methods for their monthly contracts, as well as pay-as-you-go top-ups. This could include pay by link, PISP payments, digital wallet payments and instalment payment options.
Telecoms that meet these expectations first will gain a competitive advantage.
As they navigate the highest inflation rates seen in decades, a lot of companies are looking for ways to reduce their operating costs. Thanks to the innovative digital payments solutions available, telecoms can significantly reduce their costs by, for example, improving collections processes, reducing manual interventions, and using Open-Banking-driven payments to reduce misdirection and card transaction costs.
Two key solutions could create significant opportunities to reduce costs:
- Request to pay. This solution enables payers and payees to have a two-way conversation through a wide range of options covering most popular scenarios. We’ve seen the number of instant online and mobile payments rise exponentially since the introduction of Faster Payments in the UK just over 10 years ago. However, the collections space has remained largely unchanged so far. There is huge potential for payment systems to be a constructive force and catalyst for change by driving a conversation between payers and payees.
- Variable recurring payments. Variable recurring payments (VRPs) are an innovative new payment method, based on Open Banking, which allows a personal or business banking customer to give a regulated PISP consent to initiate ongoing payments over a long period. (You’ll find a detailed discussion of VRP in the blog post Will UK expand Open Banking payments using new VRP?) VRP could be a great opportunity for telecoms, since the vast majority of their customers currently depend on direct debit for recurring payments.
In addition to these two key solutions, telecoms may be able to reduce their costs by optimizing their payments systems, including through consolidation of their gateway providers.