Even though 800 million people in the sub-Saharan region of Africa don’t have access to mobile internet, mobile money solutions from mainstream banks have recorded successes in African countries with large populations of the unbanked, prompting a shift towards the growth of digital banking Africa strategies across the continent.
Africa’s young population, the large numbers of smartphone users, and the dearth of access to commercial banking services has created a situation that favours the rapid growth of digital banking solutions across the Sub-Saharan region of the continent.
In a bid to take advantage of existing telecoms infrastructure, Africa’s banking industry has decided to go mobile-first, and this seems to be a smart move as mobile broadband networks serve over 70 percent of the population, indicating a great chance of success for digital banking Africa.
Besides, because digital accounts can bring down transaction costs by close to 90 percent, financial institutions could be raking in huge profits while maintaining low expenses for customers.
According to Thairu Ndungu, Consolidated Bank of Ghana’s Deputy Managing Director, the biggest drivers of digital banking are the young and tech-savvy, who prefer to check their bank balance on a smartphone rather than visit a bank branch or ATM hundreds of miles away, especially in the rural areas.
Ndungu, speaking in The Hague while attending the Temenos Community Forum 2019 said: “The biggest opportunity [for digital banking] is the young demography across Africa, People between the age of 20 to 35, who are very technologically conscious, are looking at ways of banking like it’s social media… and as such, banks have now the opportunity to attract those kind of clients by moving more and more to the digital side of banking.”
This new breed of young banking customers expects to have 24/7 access to services, whether it’s sending money to family via international transfer or being able to access Twitter.
For Standard Chartered, the British Multinational bank, the latest trend is a result of a retail banking sector, which, in trying to respond to low levels of banking uptake and significant reliance on cash in sub-Saharan Africa, has come up with innovative business models.
All the same, this drive for digital transformation does not signal a halt to investing in the physical infrastructure of banks, what it means is that the strategy has changed from an operations-based one to a customer-centric strategy. Reaching clients more extensively and serving them practical products takes precedence over every day processes.
In an interview with CIO Africa, Michael Gorriz, Standard Chartered Bank’s Group Chief Information Officer, said “A digital delivery model can bring affordable banking to many more people than a traditional physical branches-only model,”
“This does not mean we are downplaying the importance of our physical network. Our branches still have a role to play, but it is moving away from being transactions-focused and instead used as a means for us to educate our clients on digital, as well as advising them on more complex wealth and investment matters.”
Mobile Money Pioneers
A paper on banking in sub-Saharan Africa by the European Investment Bank reports that by 2014, 11 percent of sub-Saharan Africans had mobile money accounts – the highest globally. This had grown to 21 percent of adults by 2017.
The ‘mobile money’ payment system is quite popular in sub-Saharan Africa. It involves the use of a mobile device to send, receive, spend, and store money without recourse to the banks or needing to open an account. The service is also useful for the payment of products and services at restaurants and shops in a way that’s fast and secure.
Mobile money is a handy and low-cost solution in less-developed or rural areas, where the customary banking and financial services are non-existent, and not viable for small businesses and low-income households.
In sub-Saharan Africa, the number of mobile money accounts exceeds that of traditional bank accounts, confirming the region as number one in the world when it comes to using mobile money services, according to Chris Skinner, a financial markets commentator.
M-Pesa, launched in 2007 by Safaricom, a Kenyan telecommunications company affiliated with Vodafone, is the most popular mobile money service. M-Pesa (M for mobile and ‘pesa’ means money in Swahili) is a phone-based payment service where users can convert messages into cash at authorised agents and shops across the country.
Currently, about three-quarters of Kenya’s adult population (22 million people) are using M-Pesa and the company has extended its services to other African, Eastern European, and Asian markets.
Go Digital or Face Extinction: Banks Urged to Adopt Digital Banking Africa Solutions to Remain Relevant In the African Market
Traditional banks and financial institutions, after seeing the unparalled demands for mobile money services, have decided to take a chance on digital banking solutions to avoid going extinct in the market.
Earlier in the year, Standard Chartered launched the second stage of its digital-only retail bank in key African markets resulting from the success of the first phase in Côte d’Ivoire(CDI) in 2018.
Now, Standard Chartered Bank customers in Tanzania, Zambia, Uganda, Botswana, Ghana, Zimbabwe, and Kenya, have access to more than 70 banking services, including account opening, without going to a physical bank.
Analysts and economists at the BMCE Bank of Africa and the Institute of Africa agree on the advancement of digitalised services for the deposit, withdrawal, and transfer of money as well as applying for loans, as being vital to overcoming the challenges of financial inclusion in West and Central Africa. Two regions with high levels of mobile penetration that will likely ease the adoption of digital banking Africa.
“The demographics of the clients sourced to date are also good indicators that our digital proposition is truly meeting the needs of the customers,” explained Gorriz, “71 percent of our clients are under the age of 35; 96 percent of their transactions are conducted outside of our branches; the accounts are also highly transactional with usage of up to four times a week.”
Digital banking Africa may present an opportunity for financial institutions to attract rural and underbanked populations. If the digitalisation of banking services can maintain its current momentum in sub-Saharan Africa, the continent’s countries with the lowest banking penetration levels will possibly enjoy a better-quality and all-encompassing access to banking services, promoting financial inclusion within these markets.