Amid fintech boom, report details how African banks can still gain an edge
There is no doubt that Africa is currently witnessing a ‘financial revolution’ led by fintech startups. As it seems, traditional financial services providers (banks to be precise) are scrambling to catch up with the trend.
For many years, the banks had their chance to transform the sector. But they were rather reluctant/slow until now, thanks to the competition posed by fintechs companies. How can these banks catch up and possibly gain an edge? That’s the main talking point in a recent report by CR2, a Dublin-based banking software provider.
According to the report which was titled “Africa’s Fintech Transformation: Traditional Banks can still Gain an Edge”, Africa’s fintech takeover is being powered by the gains in mobile internet penetration and revenue from foreign venture capitalists.
The investors’ interest in African fintechs was primarily spurred by the success of M-Pesa in Kenya which, though not backed by any VC funds, has been able to emerge as a compelling case study on the viability and scalability of financial technology on the continent.
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To this end, foreign investors have thronged to the continent, bringing along with them billions of dollars over the years which have mostly gone to fintech startups. The likes of Chipper Cash, Paystack and other notable fintechs are now giving banks a run for their money. And thanks to partnerships with some globally-recognised financial players such as Visa and PayPal, the momentum continues to grow in favour of African fintechs.
However, this does not mean that African banks have been completely rendered powerless in the face of the revolution. Not at all. As the new report by CR2 pointed out, some of continent’s largest banks caught the frenzy early and have since begun to improve on their ‘legacy infrastructure’ whilst building new ones all in a bid to compete by offering novel digital products and services to their customers. Some of them even resorted to partner with fintechs to launch online wallets and other payment services all in a bid to meet more unbanked customers. But there is more they can do.
In its capacity as an innovation partner selling technology to more than one hundred banks across Africa, CR2 recommended the following as a way African banks can gain an edge in the face of the digital revolution happening in the African financial sector:
- African banks should consider offering a seamless digital onboarding experience for their customers.
- They should consider providing multiple day-to-day payment options for customers, including innovative remittances and lifestyle banking.
- African banks should definitely broaden their service offerings to unbanked market segments.
- They should operate on both smartphone and USSD in order to expand access to segments of Africa’s population with and without Wi-Fi connectivity and mobile feature phones. To be fair though, BI Africa has observed that a lot of banks are already doing this. However, their services are often bad. So, they should consider improving on their internet and USSD services.
- Also, banks in Africa should connect to ATM access to continue to offer access to cash parallel to online payment options.
- They should choose a digital banking platform vendor that supports Open API banking.
