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Handset Financing: Everyone Wants It, So Why Do So Few MNOs Offer It?

 MNOs and banks face similar handset finance challenges: managing defaults on loan repayments. Learn more!
March 4, 2024

Across both developed and emerging markets, technology can act as the ultimate equaliser, bridging the divide and providing more equal opportunities to people around the world. In particular, mobile devices and the capabilities they offer can help people to access services they might otherwise not be able to procure and help businesses and customers to stay connected 24/7.

It’s no surprise then that, in today’s smartphone-driven world, everyone wants to get their hands on the latest smartphone device whether it’s Apple or Android.

Mobile Network Operators (MNOs)are in a unique position to meet this ever-increasing demand for easy access to smartphones, however, they need to apply strategy and discretion before handing out smartphones to customers.

Read on to learn about handset financing and why so many MNOs are hesitant to offer it as a service, as well as what you, as an MNO, can do about it.

Why is Handset Financing So In Demand?

As inbuilt features get released, built-in features continue to upgrade and capabilities keep developing, the cost of smartphone devices continues to rise each year, making it more and more expensive for customers to keep up with the latest smartphone release.

This doesn’t stop customers from wanting to access these smartphones, if anything, it makes them all the more valuable and in-demand.

Handset financing as a service allows customers to access the latest version of their favourite smartphones without having to pay the exorbitant cost for it upfront. Instead, customers agree to pay the price off in scheduled instalments over a contracted period agreed between them and the MNO, after which they will own the device.

Understandably then, customers are all eager to obtain smartphones through handset financing. But it’s not only customers who are eager to reap the benefits of handset financing as a service. Handset financing is a great asset to MNOs looking to offer it as a service to customers.

Within the telecommunications world, a persistent legacy problem is that of feature phones. Many existing customers still operate from feature phones that run on 2G and offer very little revenue opportunity for MNOs and are increasingly difficult to service.

Handset financing allows MNOs to migrate existing customers off 2G feature phones onto 4G smartphones. This migration allows the 2G spectrum to be re-farmed into 3G and 4G which increases the data usage of these customers.

It also allows customers to access a range of new features, products and services that come with smartphones, increasing their service expenditure and bringing in more revenue to MNOs.

It’s also a viable means of winning over new customers and instilling customer loyalty in both new and existing customers.

It’s a clear win-win for both customers and MNOs, so why are so many MNOs apprehensive about handset financing that prevent them from going all-in and taking advantage of this lucrative service?

The Challenges And Risks of Handset Financing

The big problem that MNOs have with handset financing is the same problem that banks face every day: what happens if a customer defaults on paying back their agreed loan?

If a customer stops repaying their loan, it’s on the bank to contact and chase them to convince the customer that they need to honour their loan agreement. It’s an exercise in patience and could potentially result in thousands of lost capital.

MNOs face the same conundrum over handset financing. If a customer stops paying back their agreed amount for their smartphone, they still have the smartphone and the MNO could potentially be looking at thousands of rands worth of lost stock.

It all comes down to risk. Are the benefits of handset financing worth the risk for MNOs? Many MNOs will say no, however, with a pre-defined strategy in place, handset financing is still a viable service offering that MNOs can leverage while minimising the risk they take on.

How Can MNOs Overcome The Handset Finance Hurdle?

While handset financing may seem like a risky venture, it also enables MNOs to increase their customer base, reinforce customer loyalty and elevate their net revenue. As the saying goes, with no risk comes no reward. The key is knowing how to mitigate that risk so that it’s minimal.

Because there is an inherent risk in offering mobile devices to customers because they may not pay the amount back, the best way to lessen this risk is to be very particular about which customer you choose to offer handset financing to.

Just as a bank wouldn’t offer a loan to a client without an established record of them honouring prior repayments, MNOs shouldn’t offer mobile financing to customers without examining their credit and repayment history first.

The problem here is that not every customer may have an established credit history, especially in developing markets. How can MNOs work around this problem? The answer may surprise you in its simplicity: by creating a credit history from scratch for customers by offering them mobile financial services.

By starting with small advancements in airtime and data lending, MNO scan track and monitor which customers pay back their loans on time or in advance. They can then offer incremental loans in the form of mobile moneylending, which allows customers to access digital services through advancements to their mobile money wallets.

Once a customer has a solid track record of on-time repayments, MNO scan then target them for handset financing. Starting with smaller loans that gradually get bigger over an extended period will help MNOs identify high-potential customers who will be ideal candidates for handset financing and pose little to no risk of defaulting on payments.

Viewing handset financing as an end-point in a series of services instead of a standalone offering will help MNOs to mitigate the inherent risk and increase their bottom line by selling additional products and services to customers.


The best way for MNOs to not take on any risk when offering handset financing is to outsource that risk to an external mobile financial services provider. Airvantage is one of the largest service providers to mobile network operators across Africa.

Our extensive credit access means that we take on the risk while you reap the benefits for your business.

If you’d like to learn how Airvantage can help you to launch handset financing as a service to your customers, book a consultation with us.

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