A telco is a bank.

You deposit money in a bank; you withdraw money from it; you convert between currencies; you buy and sell using electronic banking locally and internationally. SWIFT, VISA, and other clearinghouses interface between the banks. Then there’s correspondent banking: this is what is triggered when you roam.

Buying phone credit is a parallel to foreign exchange transactions: credit for money. Loading the credit is like depositing the money in a bank. You withdraw the credit in products and services, buying calls, texts, internet services, music, apps etc. Some of the purchased products may be paid for by direct debit of the customers credit. Here the customer must have explicitly, in clear incontrovertible terms, given permission for these debits.

Being a post-paid customer amounts to having a credit line with a bank which you ought to settle monthly, usually. Roaming involves international money transfer, like using your debit card in a foreign country. You may even transfer credit and some other services to another of the same telco’s customer, as also with money transfers. Telcos have their own clearinghouses too.

Thus, a telco is a bank, albeit a highly specialized and narrowly tailored one. A lot of them have fairly large cash balances already. And with an existing customer base and their infrastructure, telcos could easily convert to full fledged banks as we know them—instantly profitable and very liquid.

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