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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