Neobanks are broadening their portfolio of services, with eSIM and telco services as key value-adds.
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Summary
Neobanks are broadening their portfolio of services to engage existing customers and upsell users into more premium subscriptions, and eSIM and telco services are key value-adds.
Fintech meets telco is a new twist on an established partnership
Fintech and telco are two industries that have long converged—most notably in Africa, which saw the birth of M-Pesa. Through mobile money, service providers have enabled financial inclusion within unbanked communities that have struggled to access banking services.
Many telco firms have recognized how financial services can contribute to revenue and building brand loyalty for service providers. Established services, such as the mobile payment platforms in Africa, continue to evolve and expand. For example, in 3Q24, the fintech customer bases of Vodacom, MTN, and Orange amounted to 83 million, 62 million, and 32 million, respectively. Vodacom’s fintech business contributed 22% of group service revenue (excluding Safaricom), according to Omdia’s Mobile Financial Services Subscription and Revenue Forecast: Africa, 2023–29.
However, in recent years, fintech firms have started recognizing the opportunities to provide telco services to their customers as a value-add. This shift in mindset is largely due to the emergence of eSIMs. With embedded SIM cards, service providers can remotely provision connectivity services to smartphones, making it easier for financial service providers to embed connectivity services within the portfolio of financial services they sell to customers. From a commercial point of view, most financial services providers offering eSIMs are classified as branded resellers; the entire service proposition is created by mobile virtual network enablers (MVNEs) and their telecom operator partners. Financial service providers simply apply their branding to the service and integrate telecom services into their apps.
Neobanks are among the first groups to embrace this trend. Notably, Revolut, bunq (Figure 1), Nubank, Zolve, and KOHO have introduced connectivity services, mostly focusing on roaming.
Figure 1: bunq’s subscriptions all feature eSIM
Source: bunq
Will neobanks become telcos?
In a word, no. However, Nubank is the first neobank to make a leap into the telco world with the launch of NuCel, a mobile phone service for Brazil, in October 2024. NuCel has been developed under the mobile virtual network operator (MVNO) model in collaboration with Mexican telecom América Móvil’s Claro.
Nubank is unique in that it seeks to spin out an entire telco offering, but most neobanks see telco services as a feature to complement their existing offering. For example, a bunq spokesperson gave Omdia their reasoning for launching an eSIM:
… for us, it’s all about making life easy for our users. Whether they are new or existing users, we look at how every feature can add value to their lives. Our eSIM does just that: it’s designed to give travelers instant connectivity without the hassle of physical SIM cards.
There is a trend in banking where infrastructure is being repackaged and sold to third parties that wish to launch a financial services product known as banking as a service, or BaaS. The telecom sector is experiencing something similar. It is at the start of the “telecom as a service” wave, with startups Gigs and shaka leading the trend with a mission to “democratize access to the mobile service industry.”
Neobanks are less concerned with providing domestic telco services but more focused on catering to users who travel frequently for business or pleasure. A bunq spokesperson provided more detail about their target user for eSIMs:
At bunq, we’re making life easy for location-independent users. We’ve partnered with BetterRoaming who provide coverage in 160+ countries. Most travelers told us they care about one thing while on the move: reliable data. That’s why currently our eSIMs support roaming only.
eSIMs are benefiting from the post-COVID-19 pandemic recovery in travel
eSIMs have been available for some time. Google’s Pixel 2 was the first eSIM-compatible handheld device, released in 2017. Apple’s first eSIM-compatible smartphones were the iPhone XR, XS, and XS Max, released in 2018. However, the market took many years to gain traction. Telecom operators have long tried to find a convincing business case and have been—and are still concerned about the competitive threat of eSIMs.
COVID-19-related lockdowns also inhibited the take-up of eSIM; international roaming is the most appealing use case from a consumer point of view. Unsurprisingly, it was only in 2024, with the return of international traveling, that eSIMs started becoming popular.
Telecom-travel specialists have a key role in promoting and facilitating the adoption of eSIMs. Airalo, an eSIM marketplace, reports it had sold more than 10 million eSIMs by mid-2024. Neobanks are acting and playing in the same market as travel specialists, contributing to the growth in the popularity of eSIMs. This trend has been confirmed by bunq:
We’ve seen a massive surge in eSIM usage since the launch, with many users activating an eSIM while traveling or working remotely from all over the world. So far, local data packages are the most popular choice, with the US, Turkey, and Thailand leading in usage.
According to the International Air Transport Association (IATA), more than 5 billion people are expected to fly in 2025, a new record. Thus, eSIMs will likely increasingly become a standard feature for neobanks globally, and it will be intriguing to see whether neobanks seek to expand their telco offerings further.
Appendix
Authors
Philip Benton, Principal Analyst, Financial Services
Dario Talmesio, Research Director, Service Provider Strategies & Regulation
