Zap in Tanzania and Orange Money in Uganda have been successful in expanding local digital economies for a few years now. In South Africa, organisations such as FinMark Trust and the Centre for Financial Regulation and Inclusion are making markets more accessible to the poor. Although payments and fees will continue to drive mobile money usage in Africa over the next few years, consumers are increasingly looking to do more—place deposits, obtain insurance and, if possible, even buy a mortgage. It means banks and microfinance institutions will need to partner with platform providers and leverage those platforms to offer banking products and services. This increases banking activity, even as banks eliminate the cost and effort of investing and maintaining infrastructure such as branches and ATMs. Beyond payment platforms, banks can look to partner with other players in the consumer ecosystem, for example retailers. By opening up banking APIs to retailers, banks can provide for faster payments without a need for intermediaries. For example, ‘Yes Bank’ in India opened its APIs to Snapdeal, a retailer, and has gained significant business benefits.
AFRICA’S BANKS CAN LEAPFROG TO STATE-OF THEART TECHNOLOGY The potential for banks in Africa to leapfrog their counterparts in advanced economies is real. Digitisation can enable Africa’s banks to surpass their counterparts in Asia and Europe; Europe, for example, is working through PSD2, the Payments Services Directive formed by the European Parliament. As banks begin to extend their partnerships to retailers and other third parties, they must gain the flexibility necessary to meet requirements of this growing ecosystem. Consumers will continue
to take advantage of digital to make transactions from any place and any time. With increasing partnerships, the question is whether banks have the capability of processing transactions and make subsequent updates across systems which are real time and 24/7? This would require a support system and a back-end technology infrastructure which can facilitate immediate and convenient payments to meet consumer and business demands. While several banks in advanced economies are
A major challenge for Africa’s banks lies in having to think and act like startups and fintechs, where decisions are made quickly and new and innovative products are launched. — Chet Kamat, Senior Vice President, Oracle Financial Services plagued with barriers from a legacy infrastructure set up several decades ago, a majority of Africa’s banks have a relative advantage when it comes to adopting new technologies and processes. However, a major challenge for Africa’s banks lies in having to think and act like startups and fintechs, where decisions are made quickly and new and innovative products are launched. Adapting to change, focusing on speed to market, customer experience and building an infrastructure which supports change will determine success for banks.
AFRICA’S BANKS AND MICROFINANCE INSTITUTIONS CAN LEAD THE WAY Digital innovations have brought
large sections of previously unbanked societies a step closer to a formal banking setup. Mobile money has taken microfinance to several parts of Africa and continues to present a huge opportunity as more than 80 per cent of the African market remains untapped. Challenges like unavailability of credit history, high risk of defaults, lack of collateral, poor infrastructure and connectivity continue to hamper progress. With increasing financial inclusion goals, microfinance will remain essential to Africa’s success and microfinance institutions (MFIs) must build capabilities to reach out to the under-banked and unbanked population. MFIs should be able to support families by helping them set up micro enterprises and have the capabilities to provide services to non-smart phone users as well. They must be able to create a virtual presence in remote locations and provide access to the full spectrum of financial services. The success of microfinance initiatives are linked to several factors but in essence they should be able to offer multiple models of deployment, deal with low bandwidth operations, tackle infrastructure issues, reduce the possibility of fraud, keep costs under control and ensure streamlined operations. Furthering a ‘cash-lite’ economy, banks can help customers pay for things without cash, receive money from foreign shores, and obtain micro loans and insurance products. Without any legacy infrastructure or status quo to hamper progress, the existing banking landscape in Africa is ready for disruption. Banks have to act quickly if they are to take advantage of the huge potential and opportunities available, which are simply unique to Africa. This is a chance for Africa’s banks to succeed by acting ‘different’ despite Africa being no different from the rest of the world.
www.bankerafrica.com
page 42-43 Tech 036.indd 43
43 24/07/2016 15:14