New research has found that mobile operators are in a strong position to enter the FS market.
Datamonitor’s new report, New entrants in European FS 2002, finds that traditional banks and insurers face a serious threat from lateral entrants. The biggest threat will come from mobile operators.
Consumer brands from Centrica to Volkswagen have already launched finance offerings, and mobile operators are starting to follow suit: Vodafone launched a UK-only micro-payments system in March 2002 and is running trials of a ‘wallet’ payment system for larger payments in the UK, Germany and Italy. Orange will launch its UK service in the next few months.
Making the move further financial services could work well. Operators’ customer numbers compare favorably with even the largest utilities. For example, Vodafone has increased 11.1 million active UK users, and has a total of 99.9 million globally. Even the UK’s smallest operator, Virgin Mobile, has more than 1.5 million customers.
They are already in a billing relationship with these customers; customers with contract phones have already undergone credit checking. So there could be scope for a loan to be repaid as an addition to a mobile phone bill.
Operators have also built up considerable brand strength: brands such as Orange are seen as ‘cool’ and ‘fresh’, like successful eBanks Egg and Smile, which could count in operators’ favor. At worst, the brands should be no harder to stretch than those of other lateral entrants.
Datamonitor found that 20% of consumers in France and Sweden would purchase banking products from telecoms companies, compared to 19% in Spain, 13% in Italy, 12% in Germany and 4% in the UK. The figures are similar for insurance products: outside the UK, consumers would be happier to buy from mobile operators than supermarkets.
Although mobile operators’ current debt problems could restrict their ability to move into financial services, they also need to increase revenues by all available means. The outcome may be that they form alliances with traditional financial services providers, rather than going it alone.
