Telecom fintech convergence: Riding India’s next growth wave

There used to be a phrase—a one-horse town. It referred to a place so small and self-contained that a single horse could suffice for all transportation needs.

For a long time, telecom operators have resembled such towns—content, and perhaps even complacent, within the confines of the data and voice business. Then one day, the distant sound of carnival loudspeakers reaches them. It appears that every other town is heading to this festival, their horses galloping into a new and expansive arena. Hyperscalers, which were once focused solely on large enterprise technology, have now entered the fray. Neo-banks, unburdened by legacy systems, are plunging in with enthusiasm. Even e-commerce platforms and retailers are eager to test the waters. So, what might still be holding telcos back?

Very little. Fintech is a gala that cannot be overlooked. There is much to display and many ways to shine. Whether one chooses a dressage routine or a jockey-led sprint, participation is what matters. Once a player steps in, the path reveals itself.

If anything, telcos may enjoy an advantage in this arena. They can capitalise on their existing infrastructure to offer fintech solutions, including mobile wallets, digital lending, e-commerce gateways, and Unified Payments Interface (UPI)-based payments. Do they not? Are there not international precedents that highlight this edge? Consider NTT Docomo’s Cards, Telefonica’s Vivo Money in Brazil, Movistar Money in Colombia and Spain, Orange Money in Africa, Orange Bank in Europe, and of course, the poster child—Safaricom’s M-Pesa.

Stallions Out of Stables: Telcos Eye Fintech Turf

Varundeep Kaur, CIO of Spice Money, affirms that telecom companies in India are increasingly utilising their infrastructure to offer digital lending, mobile wallets, and UPI-based payments, among other fintech products. “Their large customer base, widespread distribution channels, and technical skills enable them to grow into financial services.” She also cites how Airtel Payments Bank offers Airtel Money, which enables consumers to make payments using USSD or the Airtel Thanks App. Then there is Jio Payments Bank, which offers digital payment options connected to its telecom services.

“Particularly for those without conventional bank accounts, these wallets let consumers participate in digital business and simply control their money. Some financial services have adopted the UPI to provide easy bank-to-bank transfers. This combination enhances user convenience and promotes cashless transactions nationwide. By partnering with financial institutions, telecom companies are also moving into digital lending.” Kaur remarks.

She offers examples such as Bharti Airtel, which has partnered with Bajaj Finance to offer loans via its digital platforms. Then there is the Airtel app, a partnership that lets Airtel’s large client base directly access several credit options, including business loans and personal loans.

Telcos are not only capable but also proving to be immensely powerful in leveraging their existing infrastructure for fintech solutions. Their widespread network, massive subscriber base, and rich data insights are unparalleled assets, underlines Ankush Sabharwal, Founder of BharatGPT.ai.

“We are seeing this play out globally: from M-Pesa in Kenya revolutionising mobile wallets, remittances, and micro-lending like their Fuliza overdraft service, to Airtel Payments Bank and Jio Payments Bank in India seamlessly integrating UPI-based payments and offering full-fledged digital savings accounts,” he said.

Shikhar Aggarwal, Chairman of BLS E-Services, also highlights the significant adoption of mobile wallets through telecom providers, with companies like Jio Financial Services and Airtel Payments Bank demonstrating the potential of such integrations. “Additionally, telcos can harness their data analytics capabilities to offer personalised digital lending solutions, particularly to small merchants and individuals with limited credit history. UPI-based payments have further strengthened this ecosystem, with telecom players seamlessly integrating with platforms like BHIM and PhonePe. Reports indicate that telecom-affiliated UPI handles have grown by over 40% in the last year, highlighting their increasing influence in digital payments.”

India’s largest telecom players have quietly transformed into serious fintech contenders. “Leveraging their digital infrastructure, massive subscriber bases, and physical retail networks, companies like Reliance Jio, Bharti Airtel, and, to a lesser extent, Vodafone Idea, are now offering everything from UPI-based payments and wallets to digital lending and insurance,” reckons Srawesh Subba, Practice Director, Everest Group.

Telcos get an edge here with their infrastructure, he analyses. “They already manage millions of daily digital interactions. Their apps are installed by default; they own the customer relationship, and they are familiar and trusted brands, especially in rural India. For users, this creates a natural gateway into digital payments, lending, and beyond.”

It is interesting to see how these fintech frontiers are helping drive the pace and direction of financial inclusion, thanks to the specific advantages telcos bring through their reach, footprint, and legacy.

A Horse with a Big Cart: Inclusion in Full Stride

“Telecom-backed financial services are radically transforming digital payments, loans, and financial inclusion in India. With their wide reach and technical infrastructure, telecom companies are uniquely positioned to help close the financial shortfall in poor areas,” states Kaur.

The effect of telecom-backed financial services is, unequivocally, profound. It is not just convenience. It redefines access to finance and propels inclusion. Sabharwal seconds the inclusion-impact. “Think of M-Pesa in Kenya, which has turned a basic mobile phone into an end-to-end financial instrument for millions, or how Orange Money is introducing basic banking services to underserved populations across Africa. And then, of course, the advent of telco-fintech partnerships that leverage mobile data to lend to those who do not have traditional credit histories – that is the apogee of this revolutionary power.”

With their extensive reach and deep penetration even in remote areas, telecom companies are bridging the gap between traditional banking and the unbanked population, adds Aggarwal. “For instance, mobile wallets and USSD-based banking services have enabled millions of users to access basic financial services without needing a formal bank account. According to a recent report, telecom-led payment solutions in India have facilitated over 500 million digital transactions monthly, significantly contributing to financial inclusion. Their ability to offer low-cost, scalable solutions makes them a key driver in democratising financial access.”

Subba reiterates how telcos benefit from physical presence. “In places where bank branches or even ATMs are scarce, a mobile recharge outlet doubling as a banking point can be transformative. Airtel, in particular, has doubled down on this physical-digital hybrid approach, which has proven to be a winning strategy for financial inclusion.”

Kaur illustrates how, utilising its extensive network, Airtel Payments Bank offers services such as UPI-enabled digital payments, insurance, and pension plans, reaching millions nationwide. It is intriguing to see financial institutions and telecom companies collaborating, especially to amplify this effect. “Through Airtel’s digital channels, Bharti Airtel’s cooperation with Bajaj Finance allows several loan solutions to be distributed, therefore enlarging access to credit for a more diversified consumer base.” Kaur weighs in.

Abhishek Gupta, AVP – BI and Strategy at Cars 24, shares some insights from his experience in the telecom sector, which dates back about three years. “I think it is important first to clarify what we mean by financial inclusion. Is it just about enabling digital payments, or does it also include access to savings, credit, insurance, and investment products? When viewed in this light, telecom companies do not typically own these financial products—they are not banks or non-banking financial companies (NBFCs). So they may not be creating these solutions from scratch.”

However, where telecom players truly shine is in distribution, according to Gupta, who offers a different perspective. “They have a massive reach—online, offline, urban, rural—far beyond what most financial institutions can manage on their own. And with connectivity now being as essential as food, clothing, or shelter, telcos are in a unique position to bring financial services closer to people who have traditionally been left out. They may not be redefining financial inclusion alone, but they are enabling it in a big way.”

Turns out that inclusion has more than one direction and more than one connotation, indeed. It can range from income-strata to geography to digital literacy levels, too.

From a financial inclusion perspective, collaborations between telcos and fintech players have been instrumental in reaching last-mile customers, with initiatives such as micro-loans and sachet-sized insurance products gaining traction, Aggarwal adds.

Gripping the Reins: Hurdles on the Fintech Trail

Although telecom providers have the infrastructure to enable fintech applications, they may encounter challenges such as regulatory compliance, data security, and the need for specialised financial knowledge, Kaur points out. “Established financial institutions can help in reducing these problems by bringing telecommunication reach with financial savvy.”

There is more, as Subba examines. “The RBI restricts payments banks from lending directly, which is why Airtel ties up with licensed banks for loans and credit cards. Digital lending norms have also tightened. Apps can only disburse loans if backed by regulated entities. On the other side, reforms like zero USSD charges and video KYC have helped unlock inclusion, particularly for users without smartphones or traditional documents.”

Gupta surmises that while telcos have the infrastructure and data to play a strong role here, if we look at the mobile wallet and UPI space specifically, the reality is that telecom players have not broken into the top tier—at least not yet. “It could be that they entered a bit late, or perhaps their focus was elsewhere, initially. However, when it comes to digital lending and broader fintech solutions, the story is somewhat different.”

He also highlights that telcos entered this space at roughly the same time as other players, and in many cases, they are investing seriously. “They already have a strong base of users and real-time data that can help with things like credit risk assessment. So while they may have missed the early bus on wallets and UPI, they are very well-positioned for the next wave of fintech innovation.”

The models for fintech and telcos will vary, and sometimes, that can be a good thing. Unlike banks, telcos do not rely on interest income as their primary source of revenue, as Subba points out. “They treat fintech services as a way to keep customers within their ecosystem and upsell later. Payments are free, but the data and engagement are valuable. Loans, insurance, and investments offered through partners or owned NBFCs generate monetisation opportunities. In Jio’s case, it is an ecosystem play: you can recharge your phone, shop on JioMart, get a quick loan, and invest all on the same platform.”

Who is The Horse-Whisperer, Next in Line?

To put it simply, telecom companies in India are well-suited to provide fintech solutions by leveraging their existing infrastructure to advance financial inclusion and digital transactions, Kaur believes. “Their ongoing success in this field will rely on deliberate alliances, regulatory compliance, and a customer-centric focus.”

Note the unique position that telcos occupy in the digital ecosystem, Gupta highlights. “They essentially power the digital infrastructure that every other service runs on. And that gives them access to user behaviour data at a scale and depth most apps cannot match. This opens up some exciting possibilities, especially around smarter credit risk models and more personalised financial offerings.”

Of course, partnerships and evolution will need to happen within a regulatory framework that protects consumers while still allowing innovation to thrive. It will be exciting to see how regulators adjust their stance as these collaborations deepen. Recent guidelines by the RBI on digital lending and KYC norms have shaped how telecom-fintech partnerships operate, ensuring security and transparency, Aggarwal observes.

“The business models emerging from this space—such as revenue-sharing agreements between telcos and fintech players—are proving sustainable, with projections suggesting that the telecom-fintech market could grow at a CAGR of 25% over the next five years.”

The PwC’s Global Telecom Outlook 2024–2028 also says that Telecoms service Average Revenue Per Unit (ARPU) will continue to decline over the next five years, with mobile ARPU falling at a CAGR of –1.3%, and fixed broadband ARPU essentially flat at a CAGR of –0.1%. Fixed voice ARPU is expected to decline more strongly at a CAGR of –4.7%. Telcos can indeed find their next calling in the still-bursting fintech space.

As Subba captures well, telcos are not just network providers anymore. “They are increasingly becoming the digital banks of the future, whether directly or through strong partnerships. In a country where financial access still depends heavily on geography and awareness, this is a game-changer.”

The infrastructure, reach, timing of this pivot, inclusion agenda, and ability to collaborate and innovate —all seem to be ducks in a row for telcos now. However, competition from huge, deep-pocketed, and fast-to-innovate hyperscalers cannot be countered with small or uncertain steps, especially when regulatory pressures and responsibilities add more weight to the ride.

It is okay being a one-horse town, but telcos will have to think beyond the one-trick pony.