Worldwide, telecoms are facing an identity crisis as they struggle to compete on something other than price and coverage. Although telecommunication is one of the world’s most essential services, staying relevant as more than just a commodity is at the top of every telecom’s strategic agenda.
Today, we think of telecoms primarily as bandwidth providers, and we think of that bandwidth primarily as a commodity. We don’t care what mobile provider we are using, as long as the network is available when we need it and the price is competitive. In some ways, banking is just the same. We all need fundamentally the same banking services: a safe place to hold our money, to receive and send payments, the opportunity to gain interest so the money doesn’t lose value, and the ability to borrow money when we need it for our personal and business needs. The companies that are in a good position to provide this are telecoms.
We’ve all been in a situation where we lost our phone, couldn’t find a WiFi hotspot, or suddenly found ourselves lost in a city where we didn’t download the offline maps and our phone conked out. Not having access, even for a few minutes, is nerve-wracking. Therefore, telecoms have become experts at providing some of the most reliable service on the planet.
From this perspective, telecoms are already bearing the responsibility of having highly secure and trusted networks. Ask any internet security expert and they’ll tell you that it’s safer to use your mobile phone network for banking than any public WiFi network.
With such a trustworthy reputation, it makes sense for telecoms to be looking into providing mobile banking services to under-served populations. Banking requires a high level of availability and security, and it is being conducted through phones already. In fact, most of us already use mobile banking solutions of some kind, and our mobile carrier just serves as the connection between ourselves and the banks or exchange. A recent report from Bank of America states that 62% of Americans use mobile banking. How can a telecom differentiate when there isn’t much difference in actual offerings between companies?
This is where Distributed Ledger Technology, or DLT, comes in.
Telecoms need to find the proper partners to work with in order to put themselves in the position of providing basic banking services to customers. Using DLTs is a perfect way not just to introduce banking services, but to provide a transaction platform which doesn’t incur the kinds of exorbitant fees associated with banking.
DLTs were created with this in mind. Juniper Networks published a paper on Blockchain & Distributed Ledgers, Potential opportunities for the telecom and networking sectors in July 2017 that states, “On the cost side, there is potential for blockchain to remove intermediaries, or otherwise reduce business-process friction where centralized functions act as bottlenecks. Distributed ledgers may also align better with other decentralized functions and capabilities, such as edge-computing or the desire to manage some security capabilities as close to the end-user as possible.” This could have positive results for consumers in the United States and Europe, but it has farther reaching benefits as well.
Eventually distributed ledgers will change the world. In some African countries mobile minutes are a form of tradeable currency. More than 40% of the adult population in Sub-Saharan Africa uses mobile banking. In these economies, where micro-transactions are the norm, it’s important to use a form of trade that is low-cost and easy to use. A DLT could provide the perfect solution and help transform the economy of a nation.
Currently, distributed ledger technologies have a problem.
DLT suffers from the no accountability problem. If a transaction is made in error, there is no authority to confirm or deny/return the transaction funds. There are no “Charge-backs” like they have for credit cards. In the DLT, you don’t know who you are sending your coin to based on their wallet address. The CTFC said that the “cryptocurrency community should try to regulate themselves. Telecoms are the perfect answer to this problem. By using blockchain technology with the security measures already in place, they are uniquely positioned to create apps that will combine people’s identification and identity to their mobile wallets. Doing so provides that layer of assurance that there is a third party making sure transactions are legitimate and that the correct recipient is getting the money.
So I say to the telecom industry, stop fooling around with all kinds of services that have failed to provide them differentiation in the past. No, I do not need a new emoji, ringtone or camera filter. Telecoms need to concentrate on what they can provide better than anyone else: secure and reliable infrastructure.
Today, the big opportunity is for mobile carriers to move into financial services, and the first movers will have a prodigious advantage.