Telecommunications

How blockchain and telecommunications work together

Blockchain and telecommunications work together by minimizing fraud losses, automating revenue collection and enabling peer-to-peer payments.

Following its mainstream popularization in recent years, blockchain has seen a steady increase in applications, whether in the form of proofs of concept or pilot projects. While the oldest and most obvious application area for this technology is the banking and financial services industry, blockchain can be used to revamp any process that would benefit from decentralization, transparency, increased data security and immutability. Consequently, blockchain adoption has spread out of finance and is spreading to other sectors like healthcare and agriculture. The telecommunications industry is one such industry that can benefit immensely from the adoption of blockchain. The use of blockchain in telecommunications can not only help improve telecommunications services, but also create entirely new business models.

Blockchain in the telecommunications industry

Here are some areas where telecommunications companies can leverage blockchain capabilities to maximize operational efficiency and profitability:

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Minimize losses due to fraud

Blockchain’s ability to save data on an immutable, transparent, yet secure network can solve problems with user identity and privacy. Since all blockchain data is encrypted and can be anonymized, this can facilitate secure storage of customer data. It can also help prevent fraud in the telecommunications industry, which, according to a CFCA survey, costs more than $38 billion a year. Most of these fraudulent cases involve spoofing, which can be avoided by listing subscriber data on a blockchain. Blockchain can also be used to secure corporate private branch exchange (PBX) systems, which support organizations’ internal communications. This will minimize the probability of hacking and prevent data leaks. Since telecom operators are mandated to collect and verify user identities, they can use their blockchain records to monetize this data by providing online identity management services.

Automation of revenue collection

Blockchain-based smart contracts, or contracts that execute after agreed-upon terms are fulfilled, can be used to automate billing and payment processes for telecom service providers. Most subscriptions are based on contracts that charge the user based on their usage. Telecom operators can not only keep a transparent record of network usage on a blockchain, but can also accept payments directly through automated transactions enabled by smart contracts. This makes revenue collection easier for the operator and makes the payment process more convenient for customers.

Enable peer-to-peer payments

Many telecom networks are already experimenting with digital wallets that allow small payments between subscribers without having to use cards or carry cash. With the growing preference for mobile payments among the global population despite concerns over fraud and cybersecurity, the introduction of blockchain in mobile payments will be a welcome change. Telcos can host entire payment ecosystems using their existing infrastructure and benefit from a platform business model. These peer-to-peer (P2P) payment platforms can not only be used to transfer funds between individual users, but can also be used by businesses to accept payments for goods and services.

Making the most of blockchain in telecommunications would require companies to find innovative applications capable of independently generating value. However, due to the uncertainty surrounding the future of technology, it may not be ideal to immediately dive into disruptive innovation with blockchain. Businesses should start small and integrate blockchain into their processes in increasingly broad applications.