By Gwenael Trotel, Standard Bank’s Head of Consumer Solutions and Digital Cards
The financial services landscape is fast changing. Technology is disrupting traditional offerings and those who have previously been unable to access banking services are now being brought into the fray through digital and more accessible offerings.
It is not only the likes of Western giants like Facebook, which recently announced the launch of its digital currency Libra, who are shaking things up. African players are making steady progress in bringing the continent closer to a cashless society.
According to 2015 figures from the World Bank, sub-Saharan Africa is home to 350 million unbanked individuals, which accounts for 17% of the global total. This number is likely to have come down in recent years due to the rapid uptake of mobile money technologies.
Financial inclusion is critical to reducing poverty and igniting economic growth. As specific regions within the continent lack physical infrastructure to support traditional banking services, this must be achieved through digital offerings like mobile money and alternative lending products. The introduction of lower-cost smartphone offerings and data packages means more individuals can access these digital services.
As it stands, there are home-grown digital banking solutions that already exist and have made big strides in closing the banked versus unbanked gap, domestic and cross-border remittances also play a critical role. It is expected that there will be further positive momentum in this regard as the mobile consumer base continues to experience strong growth.
This bright future is not without challenges, however. The main challenge to overcome for many African countries is to provide access to an affordable and reliable mobile network. GSMA’s 2018 mobile internet connectivity report reveals that at the end of 2017, 3.3 billion people (44% of the global population) were connected to the mobile internet. This represents a year on year increase of almost 300 million people.
The coverage gap, which refers to populations with no access to 3G or 4G network coverage, has halved since 2014, falling from 25% to 13% in 2017. From a sub-Saharan Africa perspective, the data shows that 40% are not yet covered or connected. In South Africa, data costs are still a bigger hurdle to true digital adoption than access to capable devices.
However, there are various initiatives that have been launched to address this challenge. For example, Rwanda plans to roll out Wi-Fi for access in rural buses and at bus stops, which will offer screens and an integrated electronic payment system. In South Africa, there are advanced plans to expand access to spectrum and this is expected to drastically improve speed, price and connectivity to networks.
Nigeria is making it easier to start up a business by introducing a digital platform to pay stamp duties. This will lead to a reduction in the time it takes to start up an entity from 19 to 11 days.
In fact, the World Bank’s Doing Business 2019 report highlights that sub-Saharan Africa implemented a record number of reforms for a third consecutive year. A total of 107 reforms are in the pipeline and will work to support digital transformation. In the area of electricity for example, economies within the region introduced eight reforms, the highest number for any region worldwide. Rwanda led the way in terms of reforms implemented (7 in the past year), while Gabon, Guinea and Sudan were also among notable reformers, producing five each.
Within the fintech space, there has been notable disruption on the payments front. While some countries outside of Africa – even those in the developed world – are only now starting to have conversations around using digital technology to open accounts quickly and easily, NIBSS Instant Payments (NIP) in Nigeria, an online, real-time payments solution, was developed in 2011 already. NIP quickly worked its way up to holding the status as Nigeria’s preferred funds platform. The platform has spurred further growth in digital banking, with other payment service providers leveraging off the technology to operate services like chat-banking, card-less payments and IOT proof of concept initiatives.
The challenge of including more individuals in the formal financial sector can be overcome. This has already been demonstrated across the continent with the success of mobile money services launched in certain countries. While India’s real-time payments system, Unified Payments Interface, is heralded as one of the biggest fintech success stories in the world, recent reports highlight that India can learn from successes in a country like Kenya to improve financial inclusion in rural areas, where it is struggling to make headway. Products such as Standard Bank’s Instant Money let people transfer money without bank account and has processed more than R60bn, and is present in 9 countries.
According to a report by Inc24 only 5% of India’s population used a mobile phone or internet to access bank accounts, in comparison to Kenya’s 32%. M-Pesa is rightly seen as the world’s most successful money transfer service. It enables millions of people who have access to a mobile phone, but do not have or have only limited access to a bank account, to send and receive money, top-up airtime, make bill payments and much more.
The expectations and demand patterns across the continent often display stark contrasts. It is little surprise, for instance, that QR Code – based mobile payment solutions like Snapscan now occupy a vast user network across South Africa, where demand is on the rise for efficiency and ease of use.
Mobile phones are fast becoming the new credit card, with MasterPass, the digital wallet payment service makes shopping online in South Africa as simple as ‘click and pay’. Other recent innovations include using the Shyft Forex app to buy, send and store foreign currency instantly on mobile phones or tablets.
Standard Bank is committed to driving positive and sustainable technological change across the continent. We are using technology like Virtual Cards for online payments, SnapScan, Shyft, SlydePay, tap-to-pay, Samsung Pay, Garmin Pay and others to make sure we consistently deliver exceptional client experiences user-friendly solutions.
As competition heats up in the digital banking space, with new players coming onto the scene, Standard Bank is applying cutting-edge technology on a broad scale to support further digital initiatives across the continent. This is to ensure that we capitalise on opportunities to drive increased financial inclusion and meaningful economic growth in our continent. Africa is our home and we remain committed to drive our growth.