New Straits Times

Tel­cos, cryp­tocur­ren­cies key to fi­nan­cial in­clu­sion?

- The writer is Tel­coin chief ex­ec­u­tive of­fi­cer and co-founder

telecom­mu­ni­ca­tions land­scape glob­ally has been ad­versely af­fected by the ad­vent of smart­phones, re­sult­ing in the ero­sion of legacy rev­enue streams.

Weaker profit mar­gins, slower growth and com­pe­ti­tion from over-the-top ser­vice providers are forc­ing telco op­er­a­tors across the globe to look at di­ver­si­fy­ing their busi­nesses to re­main rel­e­vant to con­sumers and en­ter­prise cus­tomers.

While many tel­cos have evolved to be­come dig­i­tal ser­vice providers, the sec­tor re­mains vul­ner­a­ble to shifts in tech­nol­ogy cy­cle, com­peti­tors’ ac­tions and con­sumer de­mands, leav­ing it ripe for dis­rup­tion and trans­for­ma­tion.

Par­tic­u­larly in South­east Asia, strong mo­bile pen­e­tra­tion in the re­gion, cou­pled with the rapid growth of the In­ter­net, dig­i­tal ser­vices and so­cial me­dia is an­other key driver of trans­for­ma­tion.

Ac­cord­ing to a re­port by Google and Te­masek, South­east Asia is one of the fastest-grow­ing emerg­ing smart­phone mar­kets with 480 mil­lion In­ter­net users by 2020, 90 per cent will be ac­cess­ing the In­ter­net from their smart­phones.

In Malaysia, smart­phones will ac­count for the ma­jor­ity of mo­bile phones pur­chased by 2023 and the growth driven mainly by in­creased re­liance on these de­vices, ac­cord­ing to a re­cent Euromon­i­tor In­ter­na­tional re­port on mo­bile phones in Malaysia.

With more than 641 mil­lion con­sumers in South­east Asia in 2017, 51 per cent are monthly ac­tive In­ter­net users, the re­gion’s dig­i­tal econ­omy is set to reach US$200 bil­lion (RM838 tril­lion) by 2025, pre­sent­ing a huge mar­ket for tel­cos to tap on to boost tra­di­tional rev­enue streams.

How­ever, de­spite the high mo­bile pen­e­tra­tion rates and pro­jected eco­nomic growth av­er­ag­ing 5.1 per cent for this year across the re­gion, a vast ma­jor­ity of South­east Asians still do not have ac­cess to mod­ern-day life’s ba­sic bank­ing fa­cil­i­ties.

Ac­cord­ing to KPMG, only 27per cent of the re­gion’s pop­u­la­tion have bank ac­counts.

Malaysia’s fi­nan­cial in­clu­sion is one of the high­est in South­east Asia, with 85 per cent of adults hav­ing a bank ac­count in 2017, ac­cord­ing to the Global Fin­dex Data­base of World Bank.

This was in part driven by the im­ple­men­ta­tion of poli­cies that lever­aged on mo­bile phones and bank­ing agents.

This num­ber falls to about five per cent in emerg­ing mar­kets like Cam­bo­dia. The lack of ac­cess to fi­nan­cial ser­vices cre­ates bar­rier for this stra­tum of so­ci­ety to bor­row, trans­fer or save money which in the long-run helps them to over­come poverty.

South­east Asia is also mo­bile in other ways. Ac­cord­ing to Bloomberg, Thai­land, Malaysia, and Sin­ga­pore, have be­come the re­gion’s mi­gra­tion hubs and are home to 6.5 mil­lion mi­grants from Asean coun­tries, with Myan­mar and In­done­sia be­ing the top sources of mi­grants.

In 2015, mi­grant work­ers send US$62 bil­lion re­mit­tances to their home coun­tries in Asean.

The value of re­mit­tance was equiv­a­lent to Myan­mar’s gross do­mes­tic prod­uct in 2016 and three times that of Cam­bo­dia’s.

This presents a lu­cra­tive mar­ket for money trans­fer op­er­a­tors and fi­nan­cial in­sti­tu­tions that sup­port re­mit­tance ser­vices.

The re­gion’s re­mit­tance sec­tor could very well find al­lies in the telco in­dus­try as well as in cryp­tocur­rency.

While cryp­tocur­ren­cies are still largely con­sid­ered an in­vest­ment or spec­u­la­tive ve­hi­cle, the bor­der­less na­ture of blockchain tech­nol­ogy, cou­pled with the vast and deeply en­trenched mo­bile net­works across South­east Asia, could un­lock the un­banked and un­der­banked econ­omy by sup­port­ing in­stant fund trans­fers and re­mit­tances, mo­bile wal­lets and e-com­merce.

Re­cently, the Se­cu­ri­ties Com­mis­sion Malaysia and Bank Ne­gara Malaysia an­nounced that they are de­vel­op­ing new cryp­tocur­rency-re­lated frame­work.

Malaysia’s fi­nan­cial in­clu­sion is one of the high­est in South­east Asia, with 85 per cent of adults hav­ing a bank ac­count in 2017, ac­cord­ing to the Global Fin­dex Data­base of World Bank.

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