Generation Overlooked: s Serving silver user GUEST EDITOR n Natasha de Terá Julius Nyerere Ngesa, Head of Digital Banking at Diamond Trust Bank, reflects on how culture and demographics influence financial services Africa is predicted to be home to one-third of the working population of the world by 2050, such is the ‘youth bulge’ that many of its 54 countries are experiencing. So how does technology – and financial technology specifically – respond to a demographic shift that’s going in precisely the opposite direction to that of most post-industrialised nations? The almost universal adoption of feature phones – which are rapidly being upgraded to smartphones – led Africans of all ages to leapfrog financial tools and services that most mature adults grew up with in the West. There, they progressed from cash and cheques to cards, mobile and digital payments over a number of decades. In Kenya, which led Africa’s payments revolution, people went from shillings to payments via SMS in a matter of months. Walk down a sunny sidewalk in Nairobi now and you’re as likely to use your phone to transfer money to a streetperson’s M-Pesa account as you will use it to buy a coffee in one of the city’s up-and-coming bars. We asked Julius N. Ngesa, now based in Kenya, but with experience at mainstream banks across Africa, to tell us how culture and demographics are shaping the country’s financial services. THE PAYTECH MAGAZINE: Who is the incumbent banks' typical customer in Kenya and why do they choose a bank over a mobile money service? Julius N. Ngesa: The typical bank customer dwells in urban and peri-urban areas, especially in cities and towns along the major transport corridors. They are
AFRICAN FOCUS aged between 26 and 55 and are mostly formally employed or in business. Mobile money and, in particular, M-Pesa has driven overall financial access from about 32 per cent in 2006 to 83.7 per cent in 2021 in Kenya. All other mobile money providers lag behind in all facets – store of value, payments, lending, etc. But most banks also have a high adoption of mobile banking services and more than 95 per cent of all mobile banking transactions in the majority of banks are transfers between bank accounts and mobile money wallets. Many employers still prefer to process salaries to bank accounts. This is a key driver for bank accounts. Most successful retail banks build their propositions around salaried employees: salary accounts, salary advance loans, credit cards, mortgages, insurance, etc. TPM: Is including older people in the financial system even seen as an objective for service providers there? JNN: The latest FinAccess Household Survey report 2021 indicates that young people (18-25) and older people (above 55) are the most excluded in accessing any form of financial services or products, at 22.5 per cent and 14.9 per cent. Lack of a National ID is quoted to explain the high exclusion rate for young people. With older people, it could possibly be as a result of lack of education and that they live in rural areas. That said, banks and mobile money operators have noticeably developed simple access to either mobile money wallets or bank accounts via USSD/SMS channels, which has significantly contributed to financially including the older generation. Feature phones are also simpler to navigate, cheaper to acquire, have a longer battery life and are more hardy and durable, especially in rural areas.
TPM: How is wealth defined locally? Does money flow from older parents to adult children or the other way? JNN: People are still deeply attached to land/physical assets than more liquid assets. Wealth is passed between generations mostly as an inheritance from parents to their children. To do that, they mostly use traditional family inheritance processes/mediation, since many people do not believe in writing wills – although this is quickly changing, especially with the middle class and wealthy families. In my view, any new financial service in this area would most likely target wealthier families and probably take the form of trusts. TPM: M-Pesa (among others) now has a lifestyle super-app. What impact could these financial/non-financial apps have? JNN: Most personal financial management (PFM) apps and financial apps with PFM features have not done fantastically well in the market. That makes further investment unattractive. Perhaps it is because they do not command any network effect, like M-Pesa, to gather sufficient traction? Or the user experience is not that great? Or perhaps they are not solving a real problem? Or the consumer does not wish to have a mixed platter of their financial footprint, social life, personal fitness, insurance, etc, easily accessible in one app?I believe a deeper understanding of customer pains and gains should drive the right-sized digital solution.
A young country’s view 46
ThePaytechMagazine | Issue 12
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