At least 40% of the African banking customers prefer to use digital channels for transactions, roughly the same share as those who prefer branches.
In four of the continent’s major banking markets, the share of customers who prefer digital channels is significantly higher than the share preferring the branch channel, according to a 2018 report by McKinsey & Company on Growth and innovation in African retail banking.
Banks can adopt one of four distinct digital strategies: The first is to digitally transform their existing operations, to increase their share of digital sales and transactions to beyond 60% to 70% on each measure, as Kenya-based Equity Bank has done.
Second, banks can partner with telcos or fintechs to deliver mobile financial services to their clients at a cost below that of the branch network. An example, also from Kenya, is M- Shwari, the mobile-based loans application formed in partnership between Commercial Bank of Africa and Safaricom.
The third digital strategy is to build a digital bank from scratch as Nigeria’s Wema Bank did in launching ALAT, Africa’s first fully digital bank, in 2017. Finally, banks can build an ecosystem or platform of non-banking services. Alipay in China and the Commercial Bank of Australia have applied this approach at scale in areas such as travel and hospitality (Alipay) and home-buying (CBA).
Banks, telcos, ministries of finance, central banks and leaders in the banking industry from 10 nations across the West African region are set to gather in Lagos at The Future Banking Tech West Africa Summit to discuss efforts aimed at increasing financial inclusion in the sub-region by 2020. The Summit will address over two days of panel discussions and case studies showcasing the full value chain of the region’s banking and financial sector to best achieve financial inclusion and sustainable banking sector growth.
The ongoing Fourth Industrial Revolution is a technological transformation that is changing the way we live, work and communicate. It is altering every aspect of our society and economy, including the financial sector.
In Sub-Saharan Africa, 44% of the population subscribed to mobile services in 2017. By 2025, the number of subscribers is expected to grow to 52%, and 87% of those subscribers are expected to have mobile broadband access.
Results of a recent Global Findex survey reveals significant progress in financial inclusion driven by a new generation of financial services accessed through mobile phones and the internet. Still, with 57% of its population lacking any form of bank account, Sub-Saharan Africa remains the region with the greatest potential for the adoption of digital financial services.
Commenting on The Future Banking Tech West Africa Summit, Khalila Baldwin, director of the Summit, says: “At such an exciting time for the financial space in West Africa, we knew it was imperative to launch an event capturing as many of the dynamic components of this sector as possible. A key focus of the event, and many new policies being driven within the region, is to ensure financial inclusion is increased across West Africa. We therefore wanted to shine a light on the leading strategies increasing access to finance with the top financial stakeholders in attendance.
“Late last year the Central Bank of Nigeria announced the introduction of Payment Service Banks, and amidst so much buzz around Telco’s entering the financial space in Nigeria we also wanted to provide a platform for both the traditional and non-traditional financial entities to converge” Baldwin adds.
The study shows that digital strategies are dynamic, requiring constant readjustment based on client feedback and changes in market conditions. Although all financial institutions had a compelling business plan and strategy before developing their digital financial services, these had to be constantly fine-tuned and adopted to successfully grow their businesses.
The original digital financial services assumptions, in particular around client outreach and uptake, had to be adjusted to the realities of financial services providers.
Moreover, a digital strategy requires internal support from staff, and a financial institution has to define ways to overcome their clients’ initial resistance and fear of going digital.
The study also revealed that most successful digital financial services implementations used strong data-driven approaches to monitor and assess digital financial services operations and they are using those insights to refine products and services, thereby improving customer service and the overall experience.
That said, given that most financial institutions in the study started their digital financial services offering from scratch, internal capacities needed to be built and the costs for that development were often higher than anticipated.
The institutions also had to learn how to assess and work with external partners (such as mobile network operators, technology companies, among others). For several of the participating financial institutions, managing partnerships was a challenge. With respect to agent banking, financial institutions saw the importance of prioritising quality over quantity and providing the right incentives to network agents.