The banking sector in Sub Saharan Africa (SSA) faces extinction unless it becomes innovative by going digital to become resilient.
In addition to the new normal brought about by the covid-19 pandemic, the sector has remained stuck in the past as innovations in the tech sector propel other sectors forward.
Bankers from SSA and China attending the Huawei Sub-Saharan Africa Financial Services Industry Online Summit 2020 have agreed that digitising the sector will enable it to weather the current effects of the pandemic while allowing sustained growth post-covid era.
In Kenya, for instance, mobile money pioneer Safaricom is rolling out a Visa debit card giving it an edge over all the banks in the country combined. The communications behemoth which is the most profitable blue chip in East and Central Africa has an estimated 33.1 million subscribers in the country of 50 million.
Mobile banking has made it possible for every Kenyan with a mobile phone to have a virtual bank account. This means that many Kenyans who do small transactions do not need bank accounts since they can conveniently carry out their business entirely on mobile.
A 2019 survey by FSD on financial inclusion showed that among the leading reasons cited for lack of using banks is the lack of affordability or financial situation of households.
Last month, Safaricom and Visa announced a partnership that will enable M-Pesa customers to pay for products easily. The partnership will enable the development of products supporting digital payments once it secures regulatory approval.
The partnership will cover over 24 million M-Pesa customers and the services will be available at more than 173,000 Lipa Na M-Pesa merchants from Safaricom and more than 61 million merchant locations throughout Visa’s global network, and over 3.4 billion Visa cards in more than 200 countries and territories.
This means a huge shift in how people interact and do business with their banks.
During the pan-African conference themed “Accelerating Digital Transformation, Enable Business Growth Again”, Huawei Southern Africa Region vice president, Liao Yong, told the 1200 delegates that advances in ICT present unique opportunities for the banking sector, especially when almost 70% of the region’s population don’t have a bank account.
Banks, telco operators, fintech and ICT services companies were represented at the event with Yong adding, “All of these ICT advances will be critical enablers to a thriving banking sector in Sub Saharan Africa. As we can see, the merging of these two curves of ICT and banking services is powerful. But how much we can unleash the power, depends on how much and how soon the banking sector goes digital.”
There has been a rapid uptake of mobile technologies in the region with strong economic growth in the past 2 decades.
According to GSMA, statistics show that 4G mobile broadband technology adoption will overtake 2G in 2023 and the total of unique subscribers in SSA will reach 600 million by 2025, representing half the region’s population.
Most customers are moving from using physical branches and the reality can only accelerate due to digitisation. This shift will create a new banking model meaning that banks have to evolve to remain relevant.
In China, bucking the decline in Q1 GDP, the financial sector recorded a 6% year-on-year growth. Analysts attribute this growing to the sector’s years of unremitting efforts in digital transformation.
Lucille De Kock, Head of Data Analysis and Product Management at FNB, South Africa, introduced FNB’s fundamental shifts across all dimensions to transform the bank into a helpful, trusted and people-centric money manager leveraging digital and data platforms.
Kenya Commercial Bank (KCB) head of DFS Alex Siboe Wekunda said that 97 per cent of all transactions are done digitally which lead to substantial growth during the pandemic.
“Luckily enough, we had invested well in our platform, so we’re able to handle the traffic that comes through this ecosystem,” he added.