When Revolut founder Nikolay Storonsky was asked on 20VC which new product most excited him, he said eSIMs—and for good reason. Connectivity is a $1 trillion+ industry that has, until now, resisted the wave of digital innovation that transformed financial services in the 2010s. The opportunity here for fintechs like Revolut is huge.
As the finance and telecom industries converge, it’s interesting to speculate on how the distribution of connectivity will change. What does a phone plan from your neobank look like? And why do analysts predict that fintechs will capture significant telecom market share where others have failed?
A new business model
MVNOs have been trying to repackage connectivity for years, with limited success. Their core proposition is simple: a cheaper phone plan. To deliver on that promise, they engage in aggressive price-cutting strategies that compromise on data prioritization, coverage, and user experience. The result is a product with low perceived value and a business model riddled with challenges.
MVNOs typically report ARPU figures that are 30-40% lower than established networks. Their price-sensitive consumer base is fundamentally disloyal, leading to high churn. And they’re squeezed on CAC—most newly minted networks pour millions into marketing campaigns and celebrity endorsements just to get a sliver of the brand recognition enjoyed by established carriers.
It’s a model that has proved unsustainable for many upstart networks. But for neobanks, the outlook is decidedly different.
Last year, leading investment firm XP Inc estimated that Nubank—a pioneer in this space—could reach 11 million prepaid customers and 7.5 million postpaid customers in 3 years, a 7% share of mobile users in their primary market. In the analyst’s calculations, this will generate a Net Present Value (NPV) of $650 million for Nubank.
So, why are neobanks succeeding where others have failed?
The winning formula
When it comes to capturing telecom market share, neobanks have several advantages that traditional providers lack.
Zero CAC, built in demand: With some of the highest NPS scores of any industry, fintechs don’t need to burn millions on celebrity endorsements or race to the bottom on pricing. Their vast, engaged customer base is already primed to switch.
Native marketing: Imagine getting a notification from your neobank offering a better mobile plan bundled with exclusive perks. All you have to do is tap to switch.
High-quality connectivity, low cost to serve: By partnering with Gigs, the world’s first end-to-end telecom OS, fintechs can automate everything from eSIM distribution to customer support, cutting cost to serve down to virtually nothing. Gigs provides access to top-tier networks across multiple markets through a single integration, meaning fintechs can offer the highest quality connectivity to their customers.
More value: Freed from the “low-cost, low-quality” telecom model, fintechs can offer better connectivity services to users. High-speed data, nationwide 5G coverage, greater flexibility, and tailored offers, all wrapped up in the same world-class UX that first earned them a place in our digital wallets.
Test and expand: Modern APIs and infrastructure let fintechs enter the mobile market fast. A small team can launch an MVP in weeks, test product-market fit, and scale efficiently, without the usual risks and complexities of launching a telecom service.
Carving a share of a $1 trillion+ market
The telecom market is massive—the number of mobile users exceeds the number of bank account holders. That leaves plenty of room for fintechs to carve out their share of the market.
To stand out, fintechs can tailor connectivity services to their specific audience, just as they did with banking.
Their trump card is that, unlike traditional networks, they don’t rely on phone plans as a primary revenue stream. This frees them to think creatively about how connectivity fits their broader business model. As well as generating direct revenue, phone plans drive indirect revenue through increased customer acquisition, product engagement and retention.
Winning strategies include:
Smartphone financing: Using proprietary data and underwriting models to give a broader set of consumers access to the latest devices, cementing long-term customer relationships.
Bundled financial products: Incentivizing credit builder cards and savings accounts with special connectivity offers.
Teen phone plans: Onboarding a whole new generation of customers by offering kids their first bank account and their first phone plan in one.
Exclusive rewards: Winning over consumers with added benefits such as cashback, free roaming, or a free subscription to a streaming platform.
Love your bank, love your phone plan
Fintechs have already achieved the impossible—making people love their bank. Now, they’re doing the same with telecom.
For consumers, this marks the end of the one-size-fits-all phone plan. Expect more intuitive mobile services, smarter perks, and a seamless digital experience designed around your needs.
For neobanks, this is more than just a chance to provide customers with a new product they’ll love. It’s an opportunity to become the go-to provider for two of life’s core essentials: finance and connectivity.
By bringing digital banking and mobile services under one roof, neobanks will further cement their place at the heart of the app ecosystem, the digital economy, and our daily lives.
These are the players that converted millions of customers by swapping generic banking models for a fully digital, customer-centric approach. It’s hard to imagine a sector more qualified to shape the future of connectivity.