Reinventing Device Financing for Telcos

Typical device financing or paying for an up-front device on a contract / pay-as-you-go model, has been a norm in the developed world for the past 30 years or so.

Consumers across the globe continue to look to buy the most up-to-date model and stay ahead of advances in device technology. Extended finance deals or paying for the device through an up-front contract and monthly payment plan, also continues to be commonplace in most markets. But as more providers take steps towards extending mobile phone leasing to underserved markets, new demographics and segments with thin credit files, while offering the lasts handsets and access to high-speed services, they face a multitude of challenges.

Credit Risk Assessment Still Weighs on Telco Providers

It’s a tricky balancing act for Telco providers to managing their credit risk and assessment strategies. The relentlessly rising prices of mobile devices has already capped the profit margin for many providers, while access to the hugely popular but expensive 5G network is also now a mandatory expectation across all the customer segments. As a result, going after new and emerging smartphone markets can be choppy.

The ultra-competitive cell phone market poses a fine line between winning more share of emerging 5G smartphone sales while also fully understanding exposure to risk.

Challenges hinge on the physical nature of the product that is being financed. The device on its own can cost upwards of US$1,000. But once the device is in the hands of the customer it may become untraceable if it goes offline.  What happens if the customer fails to pay the monthly fees, recovering the devices is also expensive and typically hard to do.

Profit for telecom providers doesn’t come exclusively from device financing. There’s also revenue from the monthly service charges. But business success largely hinges on Telcos’ ability to ensure customers stick with the leased device as well as opting for pre-bundled services for as long as possible.

Typically, from a credit origination perspective, this is where many providers meet their biggest challenge as risk analysis proves much harder without the right lending or credit-risk infrastructure in place.

Fast, Smart, Data Analysis Now Drives the Telco Customer Experience

Although a mass of customer data is collated for existing or previous customers the ability to properly ingest this data is not always as straightforward. Legacy technology, data and system silos can mean well-informed actionable insight is not available at the crucial point of credit origination.

But with the help of a cloud platform architecture, companies can now turn to greater adoption of data ingestion, analytics and advanced credit risk capabilities, to help improve the acquisition process and deliver exceptional customer experiences.

The ability to deploy new analytic models, credit risk policies or add additional data sets quickly and efficiently is critical to best serving customers in current changing market conditions. It ensures appropriate risk-priced offers go to market far faster. As a result, creating improved customer experiences, enhancing longer-term customer loyalty and continuously improving service levels - crucially all while lowering costs.

Mathematical optimization is also being leveraged by forward-thinking organizations to efficiently balance key trade-offs such as new customer growth, onboarding, profitability, voluntary churn and credit risk.  The solutions shed unparalleled insights into what is possible when it comes to structuring offers, while also allowing organizations to simulate multiple scenarios based on a range of pre-defined metrics relating to everything from competitor behaviour, macro-economic conditions and consumer preferences. 

Data-on-Demand Also Equates to a Fast Route to Reducing Costs  

Instead of paying for all data options at once, or via a blanket purchase of specific data sets, providers can instead opt to reduce their costs by making customer decisions based on the most accurate, appropriate and up-to-date data sets.  The ‘just-in-time’ mindset towards delivering real-time, fully risk-aware customer acquisition can result in increased processing speed, reduces costs and improved customer experience.

Telcos also stay on the right side of data regulations and steer clear of the risk of data breaches by only retaining a minimal volume of customer information.

To win an edge in the ultra-competitive telco marketplace, providers’ ability to harness the power of mathematical optimization and simulation, to continually learn and improve acquisition strategies, customer experience and customer retention is a key differentiator. 

‘What if’ scenario analysis not only applies to optimization and simulated business outcomes, but also informs and weighs on organizations’ core credit policies and strategies.  A single cloud platform that enables the business users to rapidly pivot, change direction, test, simulate and deploy is vital in clarifying risk-reward analysis to customer portfolios and onboarding.

Optimization Proves a Winner for Top-Performing Telcos

As traditional Telco financing models have evolved to better serve their customers, we've helped deliver and meet the demands of shifting mindsets within our clients' enterprises. Top-performers are moving form account level scoring to informed and optimized customer management.

To meet the demands of consumer expectations, our clinets adopted the FICO Platform to ensure they better understand customers' financial health, the impact of strategic changes, while also ensuring communication and engagement is always relavenat and meaningful. It included being able to score millions of users and accounts every month, to gauage shifting financial circumstances, analyse, optimize and adjust engagement strategies accordingly.

Thanks to having a holistic customer overview, better-informed insights and intelligence is  continually applied to all aspects of the optimal offer - from marketing, originations and collections. It has resulted in more personalized and approriate offers based on customers' personal credit position, increased business wins, lower churn and reduced delinquency.

Pre-Screening Customers Is Winning Telcos Greater Market Share

There's a mass of insight available - but decisions need to be properly, pre-emptively and sufficiently well-informed with potential customers carefully pre-screened. With the help of cloud-based platform architecture, telco companies can turn to greater adoption of AI and analytics, to improve acquisition, retention and service.

At the same time, there are added benefits from combining more data siloes, to leverage more informed insights for a comprehensive customer view. It's also hugely efficient. Analytics models can go live within a matter of hours - rather than months - with an ability to plug into even more data sets and sources as needed – from transactional utilities insights to real-time analysis of household spending.

Appropriately risk-priced offers can go to market far faster, creating far superior customer experiences, enhancing customer lock-in and providing continuously improving service levels, while lowering telecom costs.

Omnichannel Communication Always Speaks Volumes to Customers

As soon as a customer is on-boarded and their device is suitably financed with the right services secured, an omni-channel communications approach is a critical route to continually ensuring great customer experience. It offers a host of real-time strategies including timely payment reminders sent to customers via the customer’s favoured channel at the most effective moments. Success hinges on keeping them engaged and connected throughout the lifecycle of their account and not just during the origination or acquisition process. Experience shows it’s a fast and smart way to keep customers engaged, informed and returning, while also helping Telcos evolve beyond historic device financing models.

How FICO Is Helping Telcos

To learn more about how we’re helping Telcos across the globe, click on the links below.

• Read the post Rise of Telco Cloud-Based Platform Solutions
• Transforming the customer experience for telecommunications
• High-volume digital interactions
• Read Smart Telcos Compete on Experience, Not Price
• Read Why Poor Affordability Analytics Create a Disconnect for Telcos