Disruption is an overused word, often describing a potentially more significant than anticipated growth cycle rather than genuine creation. However, when a dramatic shift toward new ways of doing business occurs — there is true disruption afoot. Telcos have a real opportunity to disrupt and to create $1T in value by shifting away from an increasingly constrained, price-competitive market and becoming global facilitators of value transfer. Not to mention, as de facto arbiters of digital identity (via cell phone numbers). To take advantage of these opportunities, telcos must collaborate to create greater value through new business processes, supported by blockchain.
The traditional paths of isolationism and staying in one’s swim lane by using tactics like price as a competitive advantage are no longer sufficient to stave off massive digital competitors. Telcos face Average Revenue Per User (ARPU) declines at the hands of Over The Top (OTT) competitors and market saturation. However, with fewer viable traditional options comes the freedom to pursue nontraditional moves and new growth opportunities.
For telcos, there is enormous potential to move into payments, building a global value transfer network that eventually scales to provide vast amounts of data that will lead to a new source of revenue. The key to creating a global value transfer network is collaboration – a network, by definition, must connect the world. Blockchain technology makes this collaboration and value transfer at scale possible. Blockchain enables high volume value transfer between users while preserving security and transparency across the system. As carriers build and maintain a blockchain network for end users, they will be able to support enormous transaction volume between any parties with a cell phone. Critically, this network would support unprecedented global financial inclusion, introducing untapped revenue into the system.
Blockchain and telecom are natural partners. The telecom industry has five key advantages that make it a perfect fit: security, size, trust, quality, and familiarity with complex collaboration. At its core, blockchain is a massive exchange network. Telcos are well positioned to facilitate a global network of lightning-quick exchanges. Using blockchain, telcos can do what the digital players have done — expose a pot of gold that few realized was even there.
We believe value can be achieved in three phases:
- Prove and monetize the concept
- Scale and expand the blockchain platform
- Harness the full potential of the new system to monetize data and unlock cross-industry value creation streams
The “prove and monetize” phase will see the creation of a telco-led blockchain platform that will disrupt the payments industry by facilitating value transfers between users. Almost everyone in the world has a cell phone; the same cannot be said for bank accounts, creating a massive competitive advantage for those whom can bridge the digital and financial divide. By addressing core customer issues of speed, price, and security in payments, telcos could stand to access both untapped markets and steal market share from major payments players.
Payments are a potentially massive market. Domestic and international travel spend contributed $2.3 trillion to global spend in 2016. Global remittances are estimated at $444 billion for 20173 and mobile remittances, including international airtime top-ups, are expected to amount to $25 billion by 2018. The total of that market alone is almost $2.7 trillion. This ecosystem is only partially served by any one industry, and together these sectors exchange and create trillions in value, and fully penetrating these markets would yield massive returns.
There is also demand on the consumer side. Banking and credit services are often slow and extremely costly, and in some cases unsecured. Current digital payment networks are either limited to banked individuals or cannot support payments between payment systems. A telco-supported blockchain network facilitates universal access, offering value transfers that are secure, globally interoperable, rapid, and cost-effective.
The next two phases could build upon the first, allowing the verticalization of the blockchain network, and opening it up for industry customization. This will not only help streamline operations and settlements between industries but also produce vast amounts of consumer and industry data that can be readily monetized.
As with any genuinely new idea, especially one that is global and dealing with financial transactions, regulation is an obvious challenge. The closer telcos get to facilitating monetary transactions, the more likely it is that they will be required to maintain greater consumer protections. However, telcos are already well versed in compliance. In terms of evolving regulations around blockchain, it is critical to understand that we are talking about only transactions between established currencies, supported by regulated and trusted actors – not cryptocurrencies. While blockchain regulation is still evolving, nations are deeply committed to supporting fintech developments, as evidenced by the regulatory sandbox structure created in countries like Singapore.
Finally, it is essential to understand that no one telco can do this alone. To seize in the massive potential revenue that’s up for grabs, telcos must join to support a blockchain network that can facilitate transactions at scale. It is by collaborating that telcos can displace traditional payment players and reveal huge new potential revenue streams for themselves. By forming a blockchain consortium, telcos will be able to realize trillions in potential revenue and give the industry a huge boost, but also fundamentally reshape the global economy for the better.
1 https://www.gartner.com/doc/3827065/predicts–top-predictions-blockchain
2 https://www.wttc.org/-/media/files/reports/economicimpact-research/2017-documents/global-economic-impactand-issues-2017.pdf
3 http://www.worldbank.org/en/news/pressrelease/2017/04/21/remittances-to-developing-countriesdecline-for-second-consecutive-year
4 https://www.juniperresearch.com/press/press-releases/mobile-international-remittances-to-exceed-$25bn-b
