THE QUEST FOR
THE EMERGENCE AND
ACCESS BANK:
FBC TRANSFORMATION
‘TRUE FINANCIAL INCLUSION’ HELPING CUSTOMERS ACCESS MORE
RISE OF OPEN BANKING
DELIVERS RESULTS
WINTER 2021
DIGITAL BANKING IN AFRICA A VENTURE CAPITAL’S PERSPECTIVE
FIRST BANK OF NIGERIA: A BANK FOR TODAY AND TOMORROW
DIGITAL BANKER AFRICA INTERVIEWS DR ADESOLA ADEDUNTAN, CEO OF FIRST BANK NIGERIA
DIGITAL BANKER AFRICA I CONTENTS
COMMENTARY
10 14 18 22
The top 10 digital banking trends for 2021
18
Africa’s mobile money and the digital banking future: Re-starting the journey Payment technology from a regulatory and compliance perspective: Experience from Nigeria Digital banking in Africa A venture capital’s perspective
COVER FEATURE
CONTENTS
BANK OF NIGERIA: 24 FIRST A BANK FOR TODAY AND TOMORROW COMMENTARY
30 34
The Quest for ‘true financial inclusion’ COVID Kairos Creates Opportunity for PWD Digital Accessibility in Kenya
34
DIGITAL BANKER AFRICA I CONTENTS
38 40
44
How open APIs can solve Nigeria’s financial inclusion problem How emergence and rise of open banking
FEATURE
44
Access Bank: Helping customers access more
48
The digital effect
52 54 58
INTERVIEW
Mobile Payments on the Rise As Kenyans Go Cashless
62
FBC Transformation Delivers Results How banks are turning to social media to attract customers in Africa
64 58
68 70
54
Finbank Innovation Conference: Where banking meets technology Regional KYC Utilities: The Start of Global Partnerships on a Common Compliance Platform Cryptocurrency Signals A New Dawn In African Finance Can AI prove to be the perfect fraud detector?
70
DIGITAL BANKER AFRICA I FOREWORD
Welcome to the winter edition of
DBA 2021! We start the year with an
While Nuru Mugambi provides a
Despite the uncertainty and loss
exciting edition packed full of
highly thought-provoking piece on
experienced across the globe during
insightful opinion pieces. You’ll
the impact of digital banking for
2020 there are some unforeseen
find contributions from leaders
customers with disabilities.
positive outcomes being witnessed
within the digital finance industry
During the last couple of months
across Africa for both customers
reflecting on the rapid changes
digital currency has seen an upward
and financial services themselves.
in 2020 which have inadvertently
trend with Bitcoin reaching all
However, there is still more to do.
sped up the implementation
time highs, making headlines on
What we have seen is a reactive
of digital banking across the
a daily basis and driving up the
consequence to a totally new
globe. Imran Sumra discusses
prices of other cryptocurrencies
and unexpected situation. The
the technology behind many of
at the same time. However the
readjustment period has now begun
these advances whilst also noting
volatility of the crypto market
and what is evident is that we are
the challenges that lie ahead in
means cryptocurrency still remains
on the cusp of a new era.
creating a more consistent and
a concern for many investors.
secure digital banking service.
CONTRIBUTORS LIST I DIGITAL BANKER AFRICA
THANK YOU TO OUR CONTRIBUTING WRITERS IN DBA WINTER 21 DR. ADESOLA ADEDUNTAN
Chief Executive Officer at First Bank of Nigeria Limited
GUSTAVE SUGIRA
Commercial Director of the Finbank Innovation Conference & Expo
ADEDEJI OLOWE
Trustee of Open Banking Nigeria and CEO at Trium Networks
IMRAN SUMRA
Chief Executive Officer at FinSense Africa
HERBERT WIGWE
Chief Executive Officer at Access Bank PLC
JACQUELINE JUMAH
Head, Digital Financial Services Enhancing Financial Innovation and Access (EFInA)
NURU MUGAMBI
Public affairs director at Kenya Bankers Association
SHURU M. KABIRU
DM Payments System Compliance The Central Bank of Nigeria
OLU OYINSAN MBA
Managing Partner at Oui Capital
JOHN MUSHAYAVANHU
Group Chief Executive of FBC Bank
WEBSTER RUSERE
Managing Director of FBC BANK
Editor: Anthony Bempong Executive Editor: Noel Morrison Deputy Editor: Henry Scott Art Director: Pritesh Patel Layout Designer Abdhesh Kumar Jha Chief Sub: Kwabena Mensah Bonsu Head of Online Development: Lee-Anne Doughlin Online Development: Gerald Hutchfull, Paulette Davidson Subscription Manager: Stephen Rock Marketing Manager: Siobhan Copland Marketing Assistant Jason Hall Circulation manager: Nathan Asare Head of Sales: Michael Scott Production Editor: Rebecca Mcglynn Business Development: James Walters, Lloyd Quansah, Paul Da Associate Producer: Dean Kirby Head of Accounts: Wayne Sykes Publisher: Percival Marshall ISSN 2752-4485 www.digitalbankerafrica.com Images by www.istock.com All information contained in this publication has been obtained from sources the proprietors believe to be correct, however no legal liability can be accepted for any errors. No part of this publication can be reproduced without prior consent from the publisher.
THE TOP 10 DIGITAL BANKING
TRENDS FOR 2021
A
s we all know this is the era of science and technology, our young generation enter into a
new digital world that speeds up the process of the traditional banking industry to branchless banking. Digital banking can be defined
applications online. With this said, banks must continue to stay abreast of digital banking trends that are all necessary to improve their customers’ digital experience. Let’s see the digital banking trends
as moving online all traditional
for the year 2021:
banking activities using technology
CHATBOTS:
and innovation that will allow customers to join a bank and handle their banking activities without physically ever entering a bank. Customers have quickly shifted to online and mobile devices and banks have had to invest in their digital transformation as customer requirements now include paying bills, mobile payments and loan
Many banks started testing bots to automate customer service and make it available 24/7 on customer-preferred channels such as Facebook Messenger or WhatsApp. This will be beneficial both for the bank and for its end customers. Customers do not want to search through FAQs, or wait for the primary customer
service representative. In the past bots in the banking system were a low-cost alternative to humanbased customer service that help customers to locate the nearest branch or ATM, get information on exchange rates and banking products or monitor their latest transactions.
SMALL AND MEDIUM ENTERPRISES: Banks also have to consider the small and medium enterprise (SME) segment. In the past, business customers have been divided into product based customisation according to the needs of customers and due to complexity of each business.
evolution of working processes,
to do in a physical-first distribution
and the challenge of integrating
model.
human work with AI applications is a paramount concern for the industry. The good news, however, However, banks have come to know
is that structured applications
the potential of such a market. They
and pilots are starting to produce
are slowly moving to standardised
interesting results, both in terms
value-added services offerings.
of savings in eliminating repetitive
Banks can increase their revenues
tasks and in sharpening the focus
by increasing their traditional
on customer service.
Many banks have initiatives aimed at targeting demographic-based clusters such as young people, Millennials or older people, but some banks are now targeting customers based on lifestyles, values, aspirations, mindsets and underserved needs.
business customers products and
Banks have to select a niche and
services like business financial
identify and approach niche
management (BFM) solutions,
customers with a dedicated
USE OF API’s FOR THE TRANSFORMATION TO AN OPEN BANKING PLATFORM:
as well as digital transformation
value proposition. In the last few
Application programming interface
like ecommerce set up or digital
years the most forward-looking
(API) is the most important topic
marketing campaign management.
customers have joined the banks
in the banking industry today, and
that use innovative technologies
many people believe it will become
to shape niche-specific products
even more important with the
and services. These banks
introduction of the Payment service
are developing new customer
directive. API’s change the way
touchpoints and relationship
banks open their boundaries to deal
models in a cost-effective way,
with changes in technology and
something that was always difficult
demand.
customers and retaining them. Banks have started offering their
DIGITALISE THE WORKFORCE: Banks should invest in intelligent tools to digitise its workforce. Artificial intelligence (AI) is the key technology behind the
SELECT A NICHE:
BUILDING PARTNERSHIP BETWEEN BANKING AND FINTECH:
updates are used for many services while customers are offered support via in-app chat.
Fintech companies provide the
BLOCKCHAIN:
technology that enables financial
Bank executives believe that new
institutions to automatically
technologies such as blockchain
process their financial services,
and artificial intelligence (AI) will
using specialised software and
have the greatest impact on the
algorithms that are used on
banking sector.
computers and smartphones. People want to conduct transactions via mobile, and these activities include managing their financial needs for example applying for a loan, or optimising their investment strategies. Fintech companies provide both individuals and businesses the digital tools which give innovative ideas and software solutions.
ADVANCED TECHNOLOGIES MONEY AND PERSONAL FINANCE MANAGEMENT (PFM) TOOLS: Customer-focused banks are changing their way of banking. They are now concentrating on the next phase in the evolution of personal finance. The potential benefits of the strategy include enhancing customer engagement and retention through ongoing “non-sales-only” interactions with the brand, and opening new feebased revenue streams by charging for certain types of high-value alerts, such as overdraft probability notification and management.
EXPANSION OF DIGITAL PAYMENTS: Cash is not king and banks are focusing more on digital payments in 2021. All the banking processes are automated and real-time
HUMANISING DIGITAL EXPERIENCE: Digital Interaction means banks are on the spot to provide interactive experiences, on demand tailored and consistent with each individual’s unique needs. Most customers still depend on human interactions to solve their problems. Financial institutions that learn
TECHNOLOGY HAS CHANGED THE GLOBAL FINANCE SYSTEM, BLOCKCHAIN CAN BRING NEW TECHNOLOGY AND CAN ELIMINATE THE THREAT OR THE RISK OF FRAUD IN ALL AREAS OF BANKING, THIS COULD EQUALLY APPLY TO A TRADING PLATFORM. ALSO, BLOCKCHAIN SOLVES PROBLEMS RELATED TO BANKS SUCH AS OPERATIONAL RISK AND ADMINISTRATIVE COSTS CREATING TRANSPARENCY FOR ALL..
how to blend human touch with digital interactions can be successful in building trust and emotional connections with customers.
CONCLUSION: Over the last few years, traditional banking shifted to become more intelligent and experiential. Banks have to find new ways to satisfy their customer needs and emerging technologies support the financial institutions to survive in these critical times. Open platforms are becoming more popular and some banks are offering nonfinancial services to their customers. Banks can transform their product and services to gain new clients and retain them. More than ever, banks realise the importance of flexibility, adaptability, self-sufficiency and teamwork during the pandemic. Banks have to offer customised products and services to their customers while being innovative, that will be the most demanding trend in the future.
Organised by
Your One-Stop IT solutions Provider
in partnership with
Africa’s mobile money and the digital banking future:
Re-starting the journey “You said I didn’t need to wear
as is common with other payment
more acute in West Africa. Nigeria’s
a tie,” muttered Nelson, a tinge
methods.
estimated population of 206
of betrayal in his voice. Slightly apologetic in my body language, it is my lucky tie after all; I sat down for one of my increasinglyrare 2020 interviews. Nelson is part of the new generation of entrepreneurs in Africa who eschew traditional formality and are hyper-focused on optimised sales and customer streamlined experiences. I had first interacted with Nelson via his Social Media business page when he was selling mobile phone and laptop accessories. My purchase experience had been fully digital, right from negotiation to order payment and delivery. Although Nelson’s page offered links to an online payment gateway, he preferred to get paid via M-pesa, citing predictable transaction fees and instantaneous settlement. The delivery, dispatched via a trackable ride-sharing motorbike service took 2 hours and all price points were visible to me as the buyer. When I subsequently probed Nelson on his avoidance of online payment gateway providers, he merely pointed out that he can complete an almost frictionless sale using MPESA, without the need for training or re-assuring customers
In Kenya, a key African Fintech hub, the payment ecosystem has in large part been shaped by Safaricom’s M-pesa mobile money system. With 22 million mobile money accounts out of a population
million currently had about 15 million mobile money accounts in 2019 according to recent estimates by Statista. This is an almost doubling of the 2018 estimate, but still only accounts for less than 10%
of 47 million, M-pesa’s network effects are so significant that traditional banks have been left scrambling to play catch up. In 2017, Kenyan banks finally launched a mobilefriendly solution called PesaLink. This longoverdue innovation allowed bank customers to transfer money to both bank accounts and mobile
My purchase experience had been fully digital, right from negotiation to order payment and delivery. Although Nelson’s page offered links to an online payment gateway, he preferred to get paid via M-pesa, citing predictable transaction fees and instantaneous settlement.
money wallets within minutes. However, the M-pesa payment channel has remained the main option. Three years on, Nelson’s question, “What’s PesaLink?” When I first offered this as a payment option, reinforced my conviction of the uphill task facing traditional banks seeking to provide financial services to the average African consumer. This challenge for banks is even
of Nigeria’s 172 million active mobile
numbers. Kenya’s Telco-led
Based in Abuja, Chioma effusively
Both Chioma and Nelson have
approach has not taken root in
narrates how she established and
narrated the business shocks
many attractive digital money
grew her bakery business. She
that hit them with the onset of
growth markets, with one of the
received a co-investment in two
the COVID19 pandemic. With the
reasons being the decision by
tranches in 2018 from her aunt
characteristic optimism of Africa’s
regulators to only license bank-
based in Luton, England. She has
burgeoning entrepreneurial class,
led mobile money solutions.
recently formally hired her only
they both told of their unfolding
The Central Bank of Nigeria
sibling to help with bookkeeping
disbelief as international and
had indicated its intent to allow
and other administrative tasks.
local lock-downs brought their
non-bank financial players
Chioma was a beneficiary of
businesses to a grinding halt
into the mobile money space
Nigeria’s significant annual
by mid-2020. They have both
in 2018. However, this has not
diaspora inflows ($22 billion in
weathered the storm, but not
materialised in a meaningful way,
2017) and was fortunate enough
without significant income
leaving Nigeria’s 60% unbanked-
to establish a successful business
reductions. In some ways, however,
population dependent on cash
with the proceeds. Her aunt’s
the benefits of governmental drives
for handling payments. However,
initial 1,500,000 Naira investment
to eliminate physical cash, as well
numerous Fintech players have
supplemented her savings and,
as a consumer-driven dash to cash
built solutions that leverage their
with her new hire, will enable her
helped reduce transactional friction
own banking relationships and a
focus on product differentiation
for their businesses. In Nelson’s
60,000+ agent network to create a
and expansion beyond the pastries
case, client preferences shifted
mobile-money equivalent to their
(mainly bread) that she currently
almost overnight towards online
end users.
offers.
shopping; and a professional online presence supplemented the need to pay for expensive store space. Chioma, on the other hand, had to engage in protracted, but ultimately successful, rent negotiations. Fortunately, she managed to retain her core customer base and managed to eliminate the need for frequent cash agent or banking hall visits. During interviews, both Nelson and Chioma evidenced a low level of interest in any electronic payment channel alternatives. In particular, certain payment options such as contactless debit/credit card seemed to elicit little consumer or merchant enthusiasm. Perhaps most interestingly, both merchants seemed not to mind relatively high mobile money transaction costs, even when lower digital payment options were highlighted. Convenience and consumer
preference drove both of their
established Unemployment
channels, mobile money is bound
thought processes in terms of their
insurance fund, South Africa was
to lead the growth in both financial
preferred payment channels.
also able to disburse existing
inclusion and sophistication of
and enhanced social protection
financial products via digital
payments to over 17 million
channels. The GSMA’s 2018
recipients via a range of bank
listing of 3 sleeping mobile money
account and cash-based channels.
giants includes Ethiopia, Nigeria
Overall, ensuing studies on the
and Egypt, all countries with
benefits, and lessons to be learned
populations exceeding 100 million.
from various payment channels
However, latent demand and
should provide a rich source of
regulatory enablement may drive
information for organisations
faster growth in relatively smaller,
formulating their 2021 digital
but more nimble markets in 2021
strategies.
and beyond.
the existence of digital payment
Statista estimates that, close to
As for the likes of Nelson and
infrastructure aided social
300 million Africa’s 1.3 Billion
Chioma, the prospects of building
protection distribution. As a case
population held bank accounts in
back their own futures and those of
in point, Kenya’s government
2017. Although this number is likely
their compatriots and neighbouring
was able to create a temporary
to continue growing significantly,
countries remain as bright as they
employment drive and make weekly
the growth rate will pale in
ever were. Organisations with the
payments to approximately 130,000
comparison to that of the growth in
right focus on Africa’s digital future
recipients, as well as provide full
mobile money
reconciliation by close of business.
accounts. With
Separately, the United Kingdom,
countries such
in partnership with GiveDirectly,
as Ethiopia
was able to effect direct cash
now seeking
transfers to 50,000 participants.
to further
With a well-developed national
liberalise
identification system and an
digital payment
Like many of their counterparts across Africa the economic knock on effects from the COVID19 shutdown also led to a sharp rise in social fundraising requests from friends and relatives. Whether it was for medical expenses or to help the recently-unemployed meet basic living costs, the appeals kept coming. At a governmental and International donor level,
will be around long
The GSMA’s 2018 listing of 3 sleeping mobile money giants includes Ethiopia, Nigeria and Egypt, all countries with populations exceeding 100 million.
enough to support this growth journey and benefit from its outcomes.
COMMENTARY
PAYMENT TECHNOLOGY FROM
A REGULATORY AND COMPLIANCE PERSPECTIVE:
EXPERIENCE FROM NIGERIA
The mobile payment industry in Nigeria is expected to record a CAGR of 25.6% to reach US$ 73,871.9 million by 2025, understanding the regulatory demands in an ever growing sector will be key, Mohammed Kabiru shares his expertise and insight with Digital Banker Africa
The regulation of the payments
Fintechs scope of operations and
system and its participants
measures vary among companies. I
generally involves four (4) functions by the regulator: Development of regulations
Shuru M. Kabiru DM Payments System Compliance The Central Bank of Nigeria
Issuance of licences Oversight of the payments system; and Consumer protection Regulations define the rules and standards that govern the various payments system operations, including granting powers to the regulator to licence companies. The licence grants legitimacy to a company to play in the payments system space in a jurisdiction. Routine oversight of the payments system by the regulator ensures that participants play by the rules and consumers are protected against the failures of these licensed companies. There have been a lot of promotions for fintech and disruption as the panacea for financial exclusion and liberation of the consumer from the shackles of conventional banking, but little is highlighted about the enormity of the burden that comes with such disruption, particularly
have seen the implication of this in developing standards and licensing requirements in Nigeria. It is common to find 2 or more payment technology companies holding
from the perspective of regulation
similar licences but providing
and compliance. Without regulation
different payment services. It is
and compliance, the so-called
easy to group them as payment
disruption could do more harm than
system service providers (PSPs),
good to the banking and payments
but it is crucial for policy and
industry.
licensing to be clear about common
While global standards and best practices have since been achieved for the banking industry, with the Basel Committee for Banking Supervision, issuing Guidelines and Standards, such has not been for financial technology operations, leaving a lot of room for arbitrage and systemic risks. Let us look at 7 crucial areas of concern to the regulator on fintech operations.
Fintech is still a Buzzword Let us start with the term Fintech. The term is still a buzzword that is yet to have a meaning that is generally accepted and uniformly understood across jurisdictions.
expectations among holders of the same licences, to hold them to an equal standard.
Technological delimitation of fintech makes them defy regulatory boundaries As regulators, our greater interest is to ensure a safe, stable, sustainable, and reliable payment system that does not hurt financial system stability. One way of ensuring this is by setting boundaries for operations under a particular licence. But because the technology systems being used by fintech are often omnibus and scalable. it is easy to find a company licensed to provide gateway service, for example, doing card processing, acquiring, switching, issuing, or
COMMENTARY
wallets not approved for it. In the
captured under the regulatory
are not required by regulation to
interest of a safe and sustainable
deposit insurance scheme. Hence,
recognise depositor funds in their
payment system, the regulator is
customers risk losing their life-
balance sheet as a component of
concerned that a company, which
savings if a fintech goes bankrupt.
current liabilities, which is required
had been prequalified to offer a
The wider economic implication
of banks.
specified payment service would
of such an adverse event is usually
end up providing other critical
catastrophic. In Nigeria, the Nigeria
services for which the regulator had
Deposit Insurance Corporation
not assessed its capability to do.
(NDIC) has a pass-through deposit
Legal versus Regulatory Framework for the operations of fintech
insurance coverage for deposits
Banking regulations are issued on
What amount of capital is adequate for fintech operations Fintech business is highly risky. An ultimate concern to the regulator is the potential loss of customer’s
being held by mobile money operators (MMOs) only.
Absence of international standards for fintech regulation
the bedrock of banking laws, which grants power and strength to the application of the regulations made by appropriate authorities. Enabling laws, necessary to lay down the legal frameworks for fintech
funds and confidential data due to
Unlike banks that have the Basel
operations have not been enacted in
corporate failures or data breaches.
Accords, which provide a series
many countries. This has left room
Deposit liabilities need to be
of prudential guidance, fintech is
for arguing the legality of fintech
matched with capital adequacy so
not so guided. The Principles for
operations and the powers of the
that the business has sufficient
Financial Market Infrastructures
regulator to approve such or not, in
funds to withstand a financial
(PFMI) does not help, as it is
certain situations.
crisis. Payment companies also
focused on the wholesale aspect of
provide third-party services
the payments system, whereas the
to banks based on service level
fintech operations focus on retail
agreements with liability claims
payments. An important aspect
It’s harder to fight Money Laundering and counter the Financing of Terrorism
for losses that may arise due to
that I have concern about is the treatment of deposit liability in the
The KYC requirements for fintech
system failures. These liabilities are sometimes huge enough to sink a
balance sheet. In Nigeria, MMOs
fintech that does not have adequate capital if such risk crystallises.
The absence of deposit insurance on fintech customers’ funds is a key concern Bank deposits are insured by the deposit insurance authority of the government. This relieves the regulator of concerns around the fate of depositor funds when a bank goes bankrupt. In some jurisdictions, fintechs tend to also roll out products that require them to take deposits from customers in one form or the other, except that these deposits are not
customer’s sign-up are minimal, compared to banks. Wallet deposits
COMMENTARY
are normally held in a pool account
to the specific payment services
reconciled with the e-float balance
domiciled in a bank. A single pool
they intend to offer. Such
to verify the existence of the
account holds funds belonging
services should be captured from
depositor’s funds at all times.
to thousands of wallet holders,
incorporation into the objects of
which makes it challenging for the
the company.
A framework for deposit insurance
Operation licences should be
required of licensed deposit-
granted based on the company’s
taking fintech. Although MMO
incorporation documents, which
wallets do have coverage in Nigeria
specify its registered business
under the NDIC pass-through
money laundering.
activities. This marks the first
deposit insurance policy, there are
stage of legitimacy to operate as
payment companies other than
My take
a payment company. Payments
MMOs that offer certain services
services should be categorised,
involving deposit-taking, which
and licensed to companies
are not so covered. This is risky and
according to their lines of service.
dangerous for the customers.
bank to screen the funds against money laundering. The bank will not be able to trace deposited funds to an individual and determine its source, leaving an exploit for
The fintech phenomenon is a game-changer and a veritable tool for financial inclusion, poverty alleviation, and economic development. However, global implementation and adoption currently vary and therefore leave a lack of international best practices for guidance and regulation. Financial regulators have had to play catch-up to understand the system and determine what fairplay rules should be developed and applied. Where operation precedes regulation, the regulator tends to have problems dealing with unprecedented issues that do arise. It is high time that global stakeholders in general, and regulators in particular, formed an international working group on this fintech phenomenon and issue a white paper on what could be considered best practices with the view to: protecting customers funds mitigating systemic risks; and appropriating a definition for the term In essence, fintech operations need to be categorised according
This is important for developing regulations according to operations and will help to keep oversight and compliance functions of the regulator within scope per company. It also makes it easier for the regulator to determine and set the appropriate capital that should be required of a payment company based on its category of operation. This is the current licensing regime for Nigeria.
The fintech phenomenon is a game-changer and a veritable tool for financial inclusion, poverty alleviation, and economic development.
needs to be developed and
It is time to put the focus of AML/ CFT on fintech as done to banks across the globe. International remittances are fast-moving through fintech systems, making money laundering easier, faster, and more anonymous. Fintechs can move funds across borders, using technology without an appropriate licence from the regulator. It is common to see a remittance company operate in a jurisdiction without being present as a locally registered company. In such cases, local regulators become handicapped in ensuring that such a company plays by the rules. Appreciating payment technology from a regulatory and compliance perspective has best been
In this regard, the financial statements of a fintech need to factor-in and recognise banking elements such as deposit liabilities and cash reserves in arriving at the true and fair view of their financial position as at the reporting date. A special audit must be conducted on the pool account balances and
demonstrated recently with the events of the Wirecard demise which was largely blamed on accounting and regulatory laxity on the parts of EY and the German Federal Financial Supervisory Authority (BaFin), respectively.
COMMENTARY
DIGITAL BANKING IN AFRICA
A VENTURE CAPITAL’S PERSPECTIVE
Connectivity in Africa is becoming ubiquitous, with
A tale of low competitive intensity:
mobile and other technologies facilitating efficient
The use of cash is still considerably prevalent
and secure means of doing business. Furthermore, a
in most African economies as people and SMEs
rising smartphone penetration rate; a vibrant, youthful population and regulatory attempts at financial inclusion and a cashless society are creating a watershed moment for banking with many stepping up to develop improved propositions across the value chain. In Nigeria alone, the total number of FinTech companies and solutions (offered by banks and telcos) is over 200. Between Q1 and Q2 of 2020, The African FinTech scene raised over $250 million in funding, attracting 60% of the $480m million raised by African tech startups in 2020. This traction cannot come at a better time, as Africa needs its Digital banks.
grapple with access — to remittance, financing and other value-added banking services. Nigeria makes an immediate and compelling illustration, with a population of 200 million — A whopping 40% of Africa’s largest economy — is financially excluded. Looking past this “low hanging fruit” case in point, There are opportunities across multiple product ranges and user segments, to address known pain points of the banked, unbanked and underbanked. Consumer lending — and, all forms of insurance — are strong focal points for FinTech activity. Activity is also expanding into flexible savings, asset management and investments as users look for more profitable returns on investment, locally and internationally.
COMMENTARY
REALISING AFRICA’S DIGITAL BANKING POTENTIAL Drawing from global research, along with real-world examples from across Africa’s banking sector, increased FinTech activity has the potential to stimulate economic activity and drive progress towards development goals. This economic impact will fundamentally come from growing revenue pools and inviting foreign direct investment to the continent. The sector can also stimulate the
its 13 locations in Nigeria were
and payments
Olu Oyinsan
closed due to the lockdown. As a
on mobile. Creating new
MBA managing partner
result, the team
opportunities
Oui Capital
for collaboration
had to pivot into
in sub-Saharan
food deliveries to withstand the
Africa where FinTechs and Banks
lockdown.
can enter into value-added
To Legacy Banks : An uptick in FinTech activity and the COVID-19 pandemic is driving many legacy banks to embrace new tactics to remain competitive. At this time, banks should consider
partnerships with Telcos. Telcos can now provide regulated services like quick credit, money transfers, and banks/FinTechs can extend their reach to a broader market by offering their services on mobile phones.
not just competing in concentrated areas, but should leverage existing smaller, more agile players.
FUELLING DIGITAL BANKING IN AFRICA
African e-commerce industry.
Notably in new market areas, such
Traditionally, FinTech investments
This, however, is only possible if
digital loans at ‘point of sale’..
digital economy by providing business-to-consumer (B2C) marketplace tools and enabling the
all stakeholders work together, to
assets to collaborate with other
as agent banking, SME lending, and
have gone to FinTechs, but there are opportunities outside these
To serve these emerging revenue
prospects to be considered. Such
pools and compete effectively with
as a logistics company or any other
industry peers, legacy banks will
non-financial firm looking to add-
For FinTech Startups :
need to acquire new talent and
on financial services.
tools; and follow local and global
The vast majority of FinTechs have
examples of banks that adopted
Investors must also be willing to
existed for less than a decade,
the lean startup culture and the use
and only a few are profitable.
emerging technology to evolve and
This could either make them
remain relevant.
unhitch the full potential of Africa’s Digital Banking Economy.
vulnerable or serve to strengthen
look beyond capital injection at a broader landscape, at investments that facilitate infrastructure for FinTechs and the acceleration of
Leveraging trusted partnership:
the digital economy.
Startups with limited access to
FinTechs and banks are the
headwinds, to plan and adjust their
resources should always adjust
most common for a symbiotic
expectations and investments. This
their business models to account
relationship, through which they
ambidexterity will make it easier
for market dynamism. It requires
can provide banking services
to deliver smart capital, when
a focus on solutions, a clear path
without the hassle of meeting many
and where it’s needed to fuel the
towards revenue and certainty on
regulatory requirements.
FinTech space. Ultimately plugging
them depending on the strategy employed.
the goals and objectives that lead to results. For example micromobility platform Awabike was hard-hit during the pandemic. All
Open banking and APIs have made it so much easier to offer banking services like loans, remittances
Finally, investors need a practical outlook on the market
a gap and creating value that is notably greater than the sum of its parts.
COVER FEATURE | INTERVIEW
FIRST BANK OF NIGERIA: A BANK FOR TODAY AND TOMORROW Established in 1894 and offering a comprehensive range of services through more than 57,000 business outlets to over 17 million customers, First Bank of Nigeria’s impact is woven into the fabric of West African society. FirstBank’s adaptation to a digital economy has seen them lead the way in Nigeria as the first bank to issue over 10 million cards. FirstBank’s financial inclusion and cashless transaction drive has also resulted in some impressive figures with over 228 million users on its USSD banking service through the nationally acclaimed *894# banking service and over 3.4 million users on its Firstmobile platform
always been very deliberate in developing a
FirstBank’s management team is made up of seasonal professionals led by Dr Adesola Adeduntan, the Chief Executive Officer of First Bank of Nigeria Limited. Here Digital Banker Africa speaks with Dr Adesola Adeduntan about the importance of adapting to the changes in the banking industry with ever evolving technologies, along with what we can expect from First Bank of Nigeria in the future.
already reshaping the banking industry,
strategy that is focused on building a bank for today and tomorrow. As such, our investments in digital technologies have been with a strong emphasis on building a future-proof digital bank. As such, the bank’s strategy is anchored on a robust multi-year digital transformation programme. Over the last one year, in response to the impact of the Covid-19 pandemic on how we engage and interact with customers as well as collaborate internally to deliver services, the bank accelerated its responses to the various trends (particularly digitalisation) that were through rapid execution of initiatives that deliver world-class innovative digital capabilities. Specifically, the key strategy execution changes made by the bank include: •
capabilities that enable: end-to-end digital customer acquisition and on-
HOW HAS FIRSTBANK’S BUSINESS MODEL AND STRATEGY CHANGED TO ADAPT TO DIGITALISATION, AS WELL AS TO TAKE ADVANTAGE OF ITS BENEFITS?
F
boarding across different customer segments, virtual customer relationship management and interaction leveraging collaboration tools to improve customer
irstBank’s business model for the
experience, remote work model for
current strategic business cycle remains
employees, lean operating model through
the same as the bank has continued to
robotic process automation (RPA), and
play the role of a dynamic financial services
artificial intelligence (AI), digital and
provider with a strong focus on delivering unique value propositions and excellent customer experience. At FirstBank, we have 24
Accelerating the deployment of
virtual training delivery, amongst others. •
Significant investments to improve
COVER FEATURE | INTERVIEW
the resilience and capacity of the bank’s technology and cyber security infrastructure. The bank has continued to reap significant benefits from its deliberate investments in digital innovation. Specifically, over the last one year, we: •
Recorded significantly improved uptime and service availability on our digital channels, providing increased value to the bank and improved experience to our customers. This is evidenced in the fact that the bank has the highest volume and value of transactions on the digital platforms in the industry.
•
Reduced the overall cost of operations and increased the bank’s operational efficiency.
•
Recorded nearly zero successful cyberattacks on our IT infrastructure.
As a future-focused bank, we will continue to make the required investments that deliver innovative digital capabilities that will make us the most dominant and efficient digital bank in the markets where we operate.
HOW DID THESE CHANGES HELP TO BOOST FIRSTBANK’S BUSINESS PERFORMANCE IN 2019 AND 2020? The accelerated execution of various digital initiatives as well as the additional strategic investments in digital innovation has helped to enhance the bank’s digital capabilities, leading to an appreciable improvement in the performance of the bank across relevant indices. Specifically, the bank has recorded the following performance improvements over the last one year: •
Grew the most expansive digitallydriven Agent Banking Network in Nigeria to over 86,000 agents, the largest in the industry
•
Increased customer account base 25
COVER FEATURE | INTERVIEW
•
(including wallets) to over
Covid-19 pandemic, has had a
the underserved and unbanked
30 million
positive impact on the bank as
population segment comprising
we grew our customer numbers,
of micro-entrepreneurs, salaried
increased our market share of
workers, and farmers; and
customers’ businesses, increased
extend product offerings to
operational efficiency and
new geographies by leveraging
profitability.
technology-based service delivery
Maintained the dominant digital banking capability rating in Nigeria with over 20% market share of electronic banking transaction volumes;
channels, and decongesting the
over 11 million issued cards;
Access to financial services is
more than 11 million USSD
a major enabler in personal
banking platform users; and
and national economic growth,
I must say that this strategic
over 4 million mobile banking
especially in Africa’s biggest
move has had a very strong social
App users
economy. In a bid to enhance the
impact as well as set an enviable
The above achievements have had a positive impact on the bank’s overall profitability.
HOW HAS COVID -19 IMPACTED FIRSTBANK?
access of micro-entrepreneurs and low income households to financial services, financial sector stakeholders led by the Central Bank of Nigeria (CBN) in 2012 introduced the National Financial
Generally, the Covid-19 pandemic
Inclusion Strategy (NFIS) with
presented an opportunity for most
the overall target of reducing the
organisations, including banks, to
percentage of adult Nigerians
drive and accelerate the execution
that do not have access to formal
of disruptive digital initiatives –
financial services from 46% in 2010
forcing organisations to realign
to 20% in 2020. In 2019, the CBN
their strategies to navigate the
Governor announced a target of
challenges of the new ways of
95% financial inclusion rate to be
engaging and serving customers.
achieved in 2024.
For us at FirstBank, I would say
WITH THE PANDEMIC BRINGING FINANCIAL INCLUSION INCREASINGLY FURTHER UNDER THE SPOTLIGHT, PLEASE TELL US ABOUT FIRSTBANK’S FINANCIAL INCLUSION STRATEGIES.
that it has been generally positive. FirstBank’s strategy was developed from a forward-looking perspective with a strong digital focus. As such, the pandemic created opportunities for us to accelerate our responses to the many trends already reshaping the banking industry. Therefore, the pandemic has helped us to accelerate the implementation of digital and innovation initiatives in our strategic plan; ensuring that we quickly and seamlessly adapt to the
In the same vein, FirstBank recognised the need to provide affordable, accessible, and easy to use formal financial services to the bottom of the pyramid market segment and subsequently launched the revamped Firstmonie Agent Banking in 2018.
dynamic operating and competitive
Right from the beginning, we
environment.
were very clear and deliberate.
Overall, I would say that the implementation of the various changes, in response to the 26
We wanted an Agent Banking service that would expand reach to the mass market, mostly
branches in the process.
COVER FEATURE | INTERVIEW
pace in the industry. Through the
further amplified the need for
To further deepen the Financial
Firstmonie agents, we have offered
financial inclusion. Generally,
Inclusion drive, FirstBank also
banking services to our customers,
access to financial services through
developed another product called
other banks’ customers, and
the traditional banking system
the Firstmonie Wallet. It is a bank
even non-account holders. Such
was further reduced. However,
gnostic and telco agnostic product
services include Cash Deposit, Fund
we continued to provide financial
that provides opportunity for
Transfer, Cash Withdrawal, Airtime
services through our Firstmonie
those at the bottom of the pyramid
purchase, Bill Payments, Account
agents throughout the period, with
to access financial services with
opening and BVN enrollment. It is
over 295m transactions (96%YoY
minimum KYC requirements. By
still growing.
growth), worth over 6.6trn Naira
implication, such customers do not
(165% YoY growth) recorded in the
need to have a Bank Verification
course of the year.
Number (BVN) / existing bank
The recent negative impact of the pandemic on the global economy
account, nor a smartphone, to register / transact, and could easily register via multiple channels like USSD, Agent location, APP download and web.
WITH NEW PLAYERS LIKE FINTECH COMPANIES AND START-UPS ENTERING THE MARKET, CONSUMERS WILL HAVE MORE OPTIONS TO CHOOSE FROM. WHAT IS FIRSTBANK’S APPROACH TO FACING NEW DIGITAL COMPETITORS? I believe the emergence of fintech companies and start-ups in the financial services industry is an exciting occurrence. This is because it promotes a culture of innovation across the financial industry, and emphasises the need to put the customers first and satisfy their needs. For us at FirstBank, our customers remain the first in all that we do. In over the 126 years of our journey as a leading financial institution in Nigeria, this has been our approach which is why we keep re-inventing ourselves in a dynamic manner, irrespective of the demand of the times. In specific terms, our approach is to stay ahead by being the bank of first choice for whatever financial services our customers can think of. Innovation is at the core of what we 27
COVER FEATURE | INTERVIEW
do and that is why in 2017 FirstBank established the Digital Innovations Lab to serve as a hub for creativity and implementation of digital solutions that will greatly improve our customers’ experience on our digital platforms. Again, at FirstBank we believe in what I can call co-opetition. We understand the need for strategic partnerships within the financial services industry to foster the collective growth of the Nigerian Financial System. Like every other thing we do, we are equally deliberate about this. For example, in order to create the right ambience to drive these key strategic partnerships, FirstBank in 2016 commenced an annual convention of the finest and most innovative top-level experts in the digital innovations space called “The FirstBank Fintech Summit”. We have held four editions of this summit and several groundbreaking ideas, digital solutions and partnerships have emerged from there. Knowledge is the wheel of innovation and sharing knowledge can only magnify the benefits. The good thing is that leading Fintechs want to collaborate with FirstBank, both in the local and in the international space. We are currently responsible for about 20% of the industry’s interbank transactions nationwide, and over 25% of the card transactions. In 2020, our mobile banking App, FirstMobile, won the Best Mobile Banking App award in the Global Finance Best Digital Bank Awards and the BusinessDay Banks and Other Financial Institutions Awards respectively. 28
Overall, I would say that the
repose in big banks to keep their
implementation of the various
money safe.
changes, in response to the
THE BANK HAS STARTED 2021 ON A POSITIVE NOTE RELEASING THE FIRSTBANK VIRTUAL PAYMENT CARD, TELL US A LITTLE MORE ABOUT THIS.
Covid-19 pandemic, has had a positive impact on the bank as we grew our customer numbers, increased our market share of customers’ businesses, increased operational efficiency and profitability.
WHAT ADVICE WOULD YOU GIVE TO START-UPS WANTING TO PARTNER WITH BIG BANKS? Strategic partnership in most cases is beneficial to the parties involved. Start-ups need to realise this and pursue it. They are nimbler and don’t have to deal with legacy technology issues. There are benefits to glean from such partnerships; they get to leverage the wide market size of big banks which gives access to a huge customer base to drive their products and innovation and also stand tall on the trust customers
Yes, we are excited to serve our customers with this innovative product. The FirstBank Virtual Payment Card is a non-physical digital representation of the holder’s payment card, linked to either the customer’s operative account or wallet account. It is an innovation that allows our customers to create a Naira or Dollar denominated debit card from the comfort of their home using their FirstBank Mobile App or FirstMonie Wallet. This card can be created in less than a minute and customers can immediately begin to transact with the card without having to visit any physical FirstBank branch.
COVER FEATURE | INTERVIEW
ways of meeting our customers’
Facemask vybes shown over 10,000
dynamic lifestyle needs. It is widely
times in less than 12 hours. The
acknowledged that the Coronavirus
campaign generated over 41,000
can be better contained by adopting
Impressions and reached virtually
a minimum touch interaction
25,000 people that interacted with
approach, thus FirstBank
the post and took action within 12
Virtual Payment Card ensures
hours. On Twitter with 187 million
customer safety and an improved
users, #FirstBankMaskUp was
convenience in requesting and
trending on Twitter dashboard as
transacting with a card. The time
No 2 giving the brand top visibility,
spent in requesting a Physical Card
share of voice, positive sentiments
is eliminated, the risk of exposure
and youth appeal as a matter of
to the COVID-19 virus is reduced
course.
as well as providing a new and exciting user experience for our customers.
FirstBank Virtual Payment Card offers a convenient alternative to the use of cash and cheques by giving direct access to funds in customer operative or wallet accounts. It allows customers to perform seamless card not present (CNP) transactions on the Web. More so, through its contactless features, it will allow customers to carry out transactions on contactless acquiring devices such as POS and ATM via NFC-enabled mobile devices. This innovation is also one of our responses to the COVID-19 pandemic and a reassurance of our “You First” commitment to our esteemed customers by providing convenient and seamless
THE MASK UP, STAY SAFE DIGITAL CAMPAIGN PROVED TO BE VERY EFFECTIVE; IS SOCIAL MEDIA SEEN AS A KEY AREA WHERE FIRSTBANK CAN INTERACT WITH CURRENT AND FUTURE CUSTOMERS? That’s a very interesting question. The #MaskUpStaySafe was the first ever digital campaign using Instagram filter virtual facemask designed with FirstBank bespoke Ankara fabric. It was a 12-hour takeover campaign to drive advocacy in a fun way on the use of masks to stay safe from the COVID-19 pandemic. It was indeed a success having staff of FirstBank, family and friends join by uploading the IG virtual mask and uploading on their social media pages, as well as used as display pictures on WhatsApp and Telegram.
Social media is certainly a key platform where FirstBank interacts with current and future customers. This is one of the reasons we have a social media presence, which enables us to build relations. Besides, the effective management of these channels is an essential element of the brand’s success. Social media can positively influence sales and to a large extent brand loyalty and connection. With the development, improvement of functionalities and growing popularity, social media has become a valuable tool to build a community for the FirstBank brand. We use social media for customer service – to communicate our products, service and initiatives as well as manage customers to continually put them first in our business. The mutual benefits of easy brand accessibility via Twitter, Facebook, YouTube, and others allow easy customer contact and engaging social interaction,
Externally, we deployed the
providing brand building and wide
campaign on Instagram, Facebook,
scale contact through multiple
Twitter and LinkedIn. Facebook,
channels. Indeed, the use of social
reputed as one of the top social
networking sites enables FirstBank
media platforms in the world,
to reach a much wider group of
accorded FirstBank a new milestone
customers and prospects compared
global recognition of FirstBank
to traditional methods. 29
COMMENTARY
THE QUEST FOR
‘TRUE FINANCIAL INCLUSION’ Over the years, financial inclusion efforts in emerging economies have predominantly been about expanding the access and usage of formal financial services, to improve the quality of life of people in low-income segments. Sub-Saharan Africa has been a trailblazer in the use of technology to bring financial services to people who still have no financial accounts although also facing some challenges that may be hindering development in the region. According to the Global Findex database(1), 515 million adults worldwide opened an account (at a financial institution or through a mobile money provider) between 2014 and 2017. This means that 69% of adults now have an account, up from 62% in 2014. Account penetration is at 94% and 63% of adults in developed and emerging economies respectively. GSMA’s 2019 State of the Industry Report on Mobile Money(2) highlights that in Sub-Saharan Africa, there was an increase in 50 million new mobile money accounts in 2019, and that this region remains at the epicenter of the mobile money global movement, with digital transactions representing the majority - 57% of mobile money interactions and more value is circulating in the mobile money system than ever before. The report also forecasts that account adoption across Sub-Saharan Africa will remain strong and the region will surpass the
Although increased usage of accounts is important, account dormancy is not a problem to people in the low- income segments because living on very low-income levels forces them to opt-out from services that are perceived to be expensive and not suited to their needs
half-billion mark by the end of 2020. 1 2
30
The Global Findex Database 2017. Measuring Financial Inclusion and the Fintech Revolution State of the Industry Report on Mobile Money 2019
COMMENTARY
Adults without a financial intitution account reporting
Jacqueline Jumah
barrier as a reason for not having one(%), 2017 Religious reasonas
Head, Digital Financial Services EFInA (Enhancing Financial Innovation & Access)
Family Memener already has an account
So far this is impressive, but is it enough?
Lack of trust
Do not need an accout
From these figures, the progress in access
Luck of necessary documentaton
to finance seems remarkable, thanks
Financial institutions too far away
to digital financial services. However, active usage of financial services remains
Accounts too expensive
very low, and today’s leading financial
Not enough money
inclusion challenge. From the Global
0
Findex database, about one in five account owners has an account that is currently inactive, without any form of transactions within the past year, while about two-thirds of the global mobile money accounts are dormant. The implication here is that the commercial viability of digital financial services is questionable and many financial service providers may struggle to achieve scale, where profitability is attainable. This also means a struggle to improve the quality of life of people in low-income segments, considering the financial inclusion objectives. Although increased usage of accounts is important, account dormancy is not a problem to people in the low-income segments because living on very low income levels forces them to opt-out from services that are perceived to be expensive and not suited to their needs. A significant number of people in Sub-Saharan Africa (about 340 million adults) still have no accounts at financial institutions. 3 in 4 of these unbanked adults say they have too little money for account ownership according to the Global Findex study(3), and almost 30% cite lack of funds as the sole reason for not having an account. So, how can financial inclusion improve their quality of life? Does greater usage mean greater impact?
Cited as sole reason
20
40
60
80
Cited with other reasons
Source: Findex Note 1: SUB-SAHARAN AFRICA SERIES: MOBILE MONEY AND DIGITAL FINANCIAL INCLUSION
The impact of financial inclusion
commercially viable financial
is debatable, there have been
inclusion. So, to be successful
several studies that have
and impactful, the industry
shown how financial inclusion
needs to shift away from the
improves lives, however, these
product-focused approach
studies tended to focus on the
to consider other essential
impact of single use cases, e.g.
variables like building financial
microcredit, resulting in the
knowledge and aligning with
industry being product-focused.
behavior, robust infrastructure
Improved lives cannot directly
and ecosystems, etc. that enable
be achieved from only owning
the customers’ journeys to build
and using accounts, but through
resilience and financial health.
the ability to be resilient and financially healthy.
Building the resilience of people
Rethinking financial inclusion:
allow them to prepare and deal
From the linear narrative of
with shocks when they occur and
access, usage and impact, to
recover. Financial health refers
resilience and financial health
to opportunities for individuals
We all now have the understanding that the usage of financial services does not always equate to positive impact(4) , and that increasingly, customer needs are to be at the core of all efforts for driving
refers to how financial services
to improve their livelihoods through access and usage of relevant financial services. The resilience and financial health outcomes constitute the empowerment necessary for the impact of financial services.
Findex Note 1: SUB-SAHARAN AFRICA SERIES: MOBILE MONEY AND DIGITAL FINAN-
3
CIAL INCLUSION, World Bank, 2019 How Useful Is “Usage” in Measuring Financial Inclusion’s Impact? CGAP, 2019
4
31
COMMENTARY
This empowerment is fueled by
• Leveraging digital financial
• Government-led approaches to
financial resources (assets and
services to support the MSMEs
expanding the reach of WASH
liabilities), human capability (skills
for instance through exploring
services
and ability) and physical capability
innovative and alternative
(physical mobility and health.(5)
financing options
Finding the best approaches to improving the lives of people therefore involves the development of these three catalysts as in the
HUMAN CAPABILITY (SKILLS AND ABILITY) • The use of financial services/
below examples derived from
investments to improve access
the CGAP theory of change for
to skills development.
impact and evidence:
FINANCIAL RESOURCES (ASSETS AND LIABILITIES) • Fostering the growth of entrepreneurial ecosystems and
• Use of government subsidies to facilitate more innovation and risk-taking in financing education and skills development
through favourable policies that
PHYSICAL CAPABILITY (MOBILITY AND HEALTH)
encourage growth across all
• Facilitating financial access
income stability for example
industry sectors and improved
to health and WASH i.e. water,
access to credit leveraging digital
sanitation, and hygiene, etc.
Exploring ‘true financial inclusion’ There are immense opportunities to explore linkages between digital financial services and other sectors, spreading digitisation, and enabling usage through financial tools such as payments, beyond the financial services industry. This calls for collaborations across sectors and stakeholders to leverage technology for cost-friendly business models, exploring and expanding the use cases for the unbanked and underbanked. By so doing, a lot can be achieved in terms of achieving ‘true financial inclusion’ for improved lives
financial services
5
32
CGAP Theory of Change for Impact and Evidence
give yourself the power to be more
COMMENTARY
COVID KAIROS CREATES OPPORTUN IT Y FO R PWD D IGITAL ACCESS I BI L I TY I N KEN Y A
I
f the Coronavirus (COVID-19) pandemic has taught us anything, it is that we don’t know a lot about many things. Over the past 10 months, we have stretched our capabilities
and imaginations to adjust to this historic moment, which has put all governments to task while reshaping every sector, and every home. The COVID narrative has largely centered around the economy but the core issue is social wellbeing. This is the first time in over a century that a social crisis has sparked such widespread disruption. Typically, when we in the financial services sector speak of sustainability from a development perspective, we often focus more on the economic and environmental dimensions of sustainable finance; rarely do we factor in social aspects as output risks. But we have learned from COVID that we need to pay more attention to human beings -how they live, interact and create opportunities for others. They say every cloud has a silver lining; and the “COVID cloud” we are weathering has several, which is why I coined the phrase “COVID Kairos.” Kairos is a Greek word for opportune moment. As such, a window has opened up for the financial sector, leveraging on fintech, to better design human-centered solutions that ideally promote inclusivity while bridging the gaps that create social risks within an economy. The social risks unmasked by COVID that policymakers and the private sector need to address is transitioning a critical mass out of the informal economy — especially women and small business owners who typically operate informally— and the other, is financial inclusion of persons living with disabilities (PWDs).
Nuru Mugambi Kenya Bankers Association Sustainable finance expert and public affairs director
COMMENTARY
When stay safe, stay home
(CWDs). And if you are not a PWD,
and mobility impairment were also
protocols were announced and
or live with or know someone with a
surveyed and common financial
essential services were defined,
disability, chances are you may not
goals such as home ownership,
banks, insurers and other financial
relate with their lived experiences.
starting a business, and education
institutions came into focus
For example, we were all wearing
were their primary concerns.
due to the critical twin peak
surgical and fabric face masks
role of intermediation and risk
before plastic face shields came into
management they play in the
the market; and those who rely on
economy. As financial institutions
lipreading had the effect of their
worked closely with governments to
impairment exacerbated overnight.
cushion the impact, they found new
Promoting Digitally Inclusive Finance
ways to operate through digitalfirst business models that facilitate efficiency and continuity. Unfortunately, there has been paucity in financial sector discourse on COVID as it pertains to customers with disabilities
People living with a disability have just the same aspirations and require the same, if not more, from financial service providers. In a pilot project by the Kenya
When it came to general expectations from financial service providers, what came out clearly from user experience testing was CWDs expect independent, fast and frictionless digital transactions. Privacy of their data is particularly an area of interest within the branch and agent environment, as well as, customer call centers in the case for clients with speech and hearing impairments.
Bankers Association (KBA) together
From previous analysis, it takes
with inAble and Financial Sector
two to three years to get to the
Deepening (FSD) Kenya, seven
“next normal” after a pandemic.
banks volunteered to have their
Therefore, as much as vaccines
mobile banking systems (mobile
are making their way into health
application and USSD) and websites
systems, we still have to navigate
tested for accessibility according to
a complex and highly-dynamic
international best practices. More
environment. Financial institutions
than 130 clients with visual, hearing
have played a critical role, in partnership with the government, to support as many businesses and households as commercially possible. For the next two years, the actions these financial institutions invest in to bridge the digital inclusion gap will make a difference for 15 percent of the world’s population, which is living with either a temporary or permanent disability. In Africa, where financial inclusion has been demonstrated to directly contribute to economic growth, this translates to more than 180 million CWDs (or approximately the population of Nigeria) who can more actively participate in the formal economy and thus mitigate social risks.
COMMENTARY
IN THE KBA DIGITAL ACCESSIBILITY FOR CWDS STUDY, THE MAJORITY OF RESPONDENTS OPENED THEIR
technology-based organisational
Bank employees also indicated
culture will spur greater innovation
that they wanted to learn sign
as firms race to be the gold standard
language and be more sensitive
of fully automated, intuitive and
and inclusive, which indicates that
ACCOUNTS IN PERSON AND MORE
frictionless payments.
banks should engage and train
THAN 90 PERCENT INDICATED THAT
The second key learning is that
THEY VISIT THE BANK IN PERSON.
financial institutions should
THE BANK BRANCH WAS THE FIRST TRANSACTION POINT, FOLLOWED BY
partner with technology firms to leverage on artificial intelligence, and robotics to serve this segment.
AUTOMATED TELLER MACHINES, AND
To do so, it’s important to ensure
BANK PHONE CONTACT CENTERS.
customer relationship management
THERE WAS A MATERIAL GAP IN HOW CWDS UTILISE MOBILE BANKING APPLICATIONS AND WEBSITES, WHICH
systems are able to identify those with both permanent or temporary disabilities. Finally and most importantly, we learned that people
their staff and suppliers for better PWD user experiences. While it may not be practical to teach an entire workforce how to conduct their duties using sign, use of wearable technology, such as sign language gloves which are an invention of the 1980s but have yet to be mainstream, can be utilised to eliminate communication and access barriers for all clients.
make all the difference. In Kenya,
The good news from Kenya is that
security guards are the first point
banks recognise they have been
of contact for CWDs in the physical
blinkered in the area of digital
environment. However, they only
accessibility for PWDS and have
There are several learnings from
assist if they are able to decipher
agreed to develop roadmaps to be
the KBA project. One key lesson
that the customer needs help, which
fully disability inclusive. It’s a step
is that financial service providers
means those with not-so-obvious
in the right direction and we hope
should design products knowing
impairments often struggle. The
more follow suit.
that there certainly (not possibly)
bright spark in this scenario is that
will be clients with hearing, visual,
the PWDs interviewed recognised
speech, mobility or learning
alacrity in security and branch staff
impairments using those products.
once they recognised the clients’
Having an inclusive, assistive
limitations.
IS A CRITICAL AREA IN THIS FOURTH INDUSTRIAL REVOLUTION (4IR) ERA.
The writer is a sustainable finance expert and public affairs director at Kenya Bankers Association
COMMENTARY
HOW OPEN APIS CAN
SOLVE NIGERIA’S FINANCIAL INCLUSION PROBLEM Every time we use an app like Facebook, send an instant message, or check the weather on our phones, we’re using an API. Open APIs have great potential to advance financial inclusion across Africa. Adedeji Olowe from Open Banking Nigeria provides us with a fascinating insight.
1
Could Open APIs be the solution to Africa’s financial inclusion problems?
With an estimated 422M of its population living below the
Adedeji Olowe Trustee Open Banking Nigeria
global poverty line, proponents of financial inclusion in Africa need to engineer processes that do not
not have a bank account, and 2.5B
traction even though 1.2B adults
rely on the technology that has
people do not use formal financial
gained access to formal accounts
made banking the middle-class
services. Account ownership is
between 2011 and 2017.
easy. Since mobile, internet and
usually more ubiquitous in high-
social media banking are out of
income countries, therefore these
the question because this stratum
numbers are disproportionately
of Africans are unable to afford
based in developing countries.
smartphones, are often illiterate and expectedly poor, financial services providers are forced to innovate differently to ensure the specific commitments made at the Maya Declaration come to fruition.
suffered low use and dormancy as financial illiteracy remains prevalent in the developing world.
A 2018 survey by Enhancing
Nearly half of India’s 80% banked
Financial Innovation and Access
population are yet to perform a
(EFInA), revealed that nearly 40M
withdrawal or transaction and
Nigerians adults (39.7% of the
many of its payments banks are not
99.6M people surveyed) had bank
allowed to lend.
accounts, and 63.2% of Nigerian
Open APIs could be the catalyst that
adults were financially included.
makes this possible.
The World Bank in its Findex survey (2017) estimates this number for
2
Many of these accounts have also
The state of financial
the broader continent, putting
inclusion in Africa
financial inclusion in Sub-Saharan
3
Banks and fintechs have only scratched the surface
There is a consensus that financial inclusion processes are impossible without banks. It is for this reason
For financial inclusion to reach
Africa at 43%.
a group of people, most of
The Consultative Group to Assist
in rural areas. In many developing
its population, especially the
the Poor (CGAP) affirms that much
countries where mobile money isn’t
economically vulnerable, should
of the progress made in the last
prevalent, banks are expected to
have access to an affordable
decade has been broad but shallow.
build capacity to propel the growth
transaction account which serves
As most of the innovation around
of financial inclusion. This includes
as a gateway to broader financial
the Bottom of the Pyramid (BoP)
establishing offices, upskilling
services such as credit, insurance,
market has focused on payments
staff, and introducing financial
payments, and savings. But
and transactions, the core
products tailored to these rural
according to the World Bank, 75%
functionalities of savings, credit
areas.
of poor people in the world do
and insurance have barely gained
38
that banks facilitate these processes
COMMENTARY
4
Open APIs allow fintechs be
future for enhanced credit scoring
the last mile for financial
for the poor. The key ingredients
services
for this will be customers’ account
In Africa, fintechs have adopted the use of agents and super
Fintechs can also use open APIs
are untrusting of “outsiders”,
to help the financially excluded
these agents are usually owners
build and retain wealth. Since rural
of mom-and-pop shops who have
communities operate on a trust
deep ties in the community and are
system, building contributory thrift
authorised by financial institutions
savings products (locally termed
to carry out transactions on their
ajo and esusu) which allow them to
behalf.
save with friends, family and co-
to get these transaction accounts running. Typically, the fintechs will create and manage the agent
banks are not incentivised enough to bank those that are financially less fortunate. While it seems like there is an enormous market opportunity in serving people at the (BoP), the challenge remains how to combine low cost and good quality with sustainability and profitability. Because of this, banks have turned their focus to public sector/government-run organisations, large corporates, and middle-to-high income individuals, often prioritising margins over volume. Over the years, agency banking and BoP-focused fintechs like Kenya’s mPesa, Nigeria’s Paga, MTN and
histories.
agents. Since these communities
Fintechs and banks often partner
By itself, this model cannot scale as
transaction and loan repayment
and super agent networks and operations, acting as the last mile for customer delivery. Since banks are unenthusiastic about the grunt work, they act as the point of account domiciliation and hold customer balances as allowed by regulatory provisions. To achieve this, fintechs and banks have to
workers could help them achieve financial goals, potentially lifting them out of poverty.
It is faster and less painful for banks to aid the creation of a deeper financial inclusion network by adhering to a common standard than it is for them to work on changing their default monolithic standpoint.
seek each other out, complete months of grueling integrations
Across Africa, financial service
before launching at agent locations.
providers are starting to take up the
This process is then repeated for
initiative of adopting open APIs.
each bank or fintech partner.
Equity Bank in Kenya, for instance,
Adopting a common standard for open APIs eliminates this headache, translating to a faster time to market. When applied to a data analytics perspective, providers
has invested up to $10M in Finserve, one of its subsidiaries, to offer a suite of open transactional, Know Your Customer (KYC), and account APIs.
are able to get a more accurate
It is only a matter of time before
picture of a customer’s financials.
other African banks follow suit.
This allows them to provide better
To make this happen, the Central
loan offers that help the eligible
Banks would need to take on a
take care of their families and grow
three-pronged role of innovator,
their businesses. A clear pathway
enforcer and regulator. By doing
Banks need all the help they
to save and invest may then be
this, they will drive a common
can get.
created following further analysis
standard with traditional banks and
of the customer’s deposit and
simultaneously provide the guard
spending patterns. Uniformity in
rails to ensure that customers are
API standards also connote a better
adequately protected.
Orange South Africa’s co-venture Mowali, have risen to the challenge, chipping away at the financial inclusion gaps left by banks, and scaling significantly.
39
COMMENTARY
THE EMERGENCE AND RISE OF
OPEN BANKING Although no African country has implemented a clear regime or legislative framework for Open Banking, there are promising developments in a number of countries. Imran Sumra takes a closer look at the Open Banking journey and what it might mean for the future. Open banking emerged from the EU with the PSD2 regulation. The original intent was to spur innovation and competition in
Imran Sumra CEO FinSense Africa
the financial services sector. PSD2 forces banks to routinely and securely share their customers
of trade, but also helped boost
financial data for the purposes of
cashless business transactions.
account aggregation and payment
With its convenience, continuous
initiation via APIs.
innovation and reach of the agent
as one of the major trends shaping the future of banking. Although
network, it has made it a de facto means of trade currency with the SMEs and the unbanked market.
adoption rates have been sluggish
So, what can you do with open
over the last two years, 2020 has
banking? The opportunities are
exponentially fast-tracked digital
aplenty. Here’s touching on a few:
transformation and the push for open banking has come of age.
FINTECH
However, many countries have
Mobile smart phone and internet
their own maturity cycles. As much
access in Africa, enabled a new
as others are ahead of the curve in
breed of the younger population
adoption, there are some countries
to adopt technology. In Kenya,
which are not aware of the potential
75% of the population is under 35
open banking brings to the wider
years of age. Access to the internet
financial spectrum.
on an affordable smartphone
In Africa, the open banking regulation has not landed yet, however, should it appear, it will help bank the unbanked population. Telcos with their Mobile Money (Mpesa) offering have been the front runners in the race to open banking, open APIs and financial inclusion. With the introduction of Mobile Money, over 10 years ago, payment by mobile has not 40
institutions to revisit how their customers access their systems and has culminated in the buildup of various mobile-based app
only become a convenient means
Open banking has long been hailed
turn has led various industries and
introduced a new wave of technology enthusiasts who started solving problems for themselves or their communities; this created a new breed of technology-savvy individuals who were creating access rails to financial services for the unbanked in Africa. With the COVID19 pandemic came the avoidance of cash and the adoption of these digital services. This in
businesses.
COMMENTARY
API For businesses to thrive in the new age connected world, exchange of data in real-time was a key component for the success of various digital businesses. The challenge that emerged was how to access the financial information data being hoarded by various narrow-minded financial institutions. However, some digitally enlightened banks saw an opportunity to expose such data and enable secure payment channels via the API rails. This immediately made them the
Real-time was a key component for the success of various digital businesses. The challengethat emerged was how to access - the financial information data being hoarded by various narrow-minded financial institutions. favourite of the fintech players who wanted to connect their apps to the banks and businesses who wished to get real-time updates on their transactions and account data to make real-time decisions. This
DATA Today, banks hold an insurmountable amount of data, but it all sits somewhere catching dust either in files or disks in silos. The potential of that data has been realised by fintechs and big techs who wish to have the transactions passing through their app such that they could analyse the spending patterns of the customer and guide them on their next purchase or monetise their data to a willing buyer, who would then target relevant ads to the customer. Not surprisingly Google has partnered with a US bank to provide checking accounts to its clients in order to
opened up a new revenue model
understand their spending habits.
and acquisition of customers
SKILLSET
through fintechs which the banks could not have gotten through the
A major blocker for organisations
usual walk-in account opening
across Africa is the lack of
model.
institutions able to nurture
The success of this new API banking method by one of the largest banks in Kenya (Equity Bank), was immediately noticed by wider East African and West
specialised talent in our educational institutions. This will create a huge shortage for key capabilities especially in fintech security.
between different entities and
UNITED NATIONS CAPITAL DEVELOPMENT FUND - UNCDF
organisations.
International organisations
LEGACY
have seen great success and the
Many bricks and mortar banks
has profited customers in the
have had challenges and have
EU. The next step of that is now
been pushed to adopt digital
pushing for open banking in Africa
transformation. They have had
(Uganda for a start), to help reach
a huge and outdated stack of
the unbanked faster, improve their
technology that is not agile, thus
lifestyle and help spur economic
adapting fast to the changing
growth. This would be a win win
needs of the customer is a
for all sides involved.
African banks who started easing their thinking away from hoarding customers to sharing their customers, enabling collaboration
capability of how PSD2 regulation
painful journey. 41
COMMENTARY
INFRASTRUCTURE
IN CLOSING
Investment – Money flowing into African Fintechs has
When Covid hit China’s ground zero, banks were closed
been rather slow and selective in the African market.
for weeks and no one realised. This was a wake-up call
There is a huge opportunity for growth to support local
for many banks that had not adapted to the new ways
developers and solutions for the local governments
of the customer. Today you need to be relevant and
and private sectors to jump into this new technology
necessary as a company in your customers’ journey or
enabled world.
else you will be outdated.
Regulation – many countries in Africa have not yet
As a Microsoft boss said once, ‘banking is necessary,
understood the potential of startups, whereas most
but banks are not’. That was proved by the pandemic.
governments outside of Africa are creating and
It’s time financial institutions think of becoming
enabling environments and funding to help spur the
technology companies, be mobile first in all their
growth into becoming billion dollar ideas. Enabling
thinking and data first in all their actions.
regulation focused on the technology needed to adapt faster to help Africa be in the forefront of technology would be advantageous. Cyber Security – With digital transformation comes
HOPE FOR AFRICA: -
cyber security threats. You cannot escape them, you
With Africa opening its borders to its fellow
just need to plan for mitigating them. The constant
Africans and the world at large, this will be
adoption of new skills and tools is extremely important
a trillion-dollar opportunity for trade. This
now more than ever before. This is a huge area of
in turn will spur adoption of technology and
concern for many organisations in Africa, in both the
skill migration, helping countries which were
technology front as well as in regulation to help fight
previously devoid of such technology now
and prosecute cyber crime. Many industries lack the
being able to easily adapt and get support.
budget and vision to understand and invest in the
This will further open opportunities to a
future survival of their businesses.
huge market that currently remains widely
Internet – The cost of internet connectivity is still
untapped. Africa is home to the youngest
relatively high in Africa. If the price of internet connections can be made further affordable with a wider reach inside Africa, more economic growth will follow. We are now in an internet economy, the greater the connectivity and reach the more growth a country will have. This has been proven by various research, with the penetration of the internet. Open Source – Adoption of open source technology is still lacking across Africa. This is primarily due to a lack of awareness and knowledge of such revolutionary technology available in the market. The big techs have for a long while pushed the expensive, rigid software blinding the corporates from taking advantage of the open source solutions. If everyday people understood how to use such technology and be able to support it, there could be new tools and solutions coming out for the market affordably. A lot of big techs run on open source software.
42
population in the world and by 2050, Africa will have doubled its population to more than 2 billion people, most of whom will be young and hungry for technology. With an enabling environment, affordable infrastructure, investment in education, research and technology, this continent is a superpower awaiting takeoff!
FINSENSE AFRICA: Works with its customers to bring solutions that help bring about successful, technologydriven business transformation. We are the interface between the old IT and the new IT, simplifying the complexity of your infrastructure, bringing agile capabilities into your organisation.
www.finbankinnovation.com
Banking Transformation in a Smart Digital Africa Connect with over 500 financial executive leaders and learn about the latest technology in banking and financial industry in Africa 24th & 25th FEBRUARY 2021 – KIGALI,RWANDA 500 Delegates 30 Speakers 30 Exhibitors
FEATURE
Access Bank:
Helping customers
access more
From its headquarters in Nigeria’s largest city of Lagos, Access Bank has grown exceptionally, following on from the merger with Diamond Bank in 2019 it has become the largest retail bank in Africa. As one of the first banks in Africa to dedicate lines of credit to finance women-owned businesses, Access Bank has always prided itself on financial innovation. With the growth of digital banking it has been imperative that the traditional banks have been able to make the transition, as younger generations put their trust into tech, Herbert Wigwe explains how Access Bank have been able to deliver what’s expected while helping customers access even more. Globally, banking has moved from the traditional method of physical branches to performing banking transactions from the comfort of our living rooms. Payment methods are becoming more advanced as innovative payment methods such as contactless and biometric payments are on the rise. This transformation has increased financial inclusion, making it easier for customers to access banking services even during uncertain times like we are witnessing with the recent COVID-19 pandemic. The pandemic threw the global socioeconomic environment into turmoil. Social distancing and significant restrictions to movement have also hampered social and economic activities. It is now certain that the world, post COVID-19, will be significantly different. As such, one of the enduring responses to the pandemic is going digital. Access Bank has grown exceptionally, following on from the merger with 44
FEATURE
Diamond Bank in 2019, it has
industry. Over the years, Access
established innovation and digital
become the largest retail bank
Bank has embraced these changes
transformation at the core of its
in Africa, and cloud computing
and made the most out of them.
five-year strategy from 2018-2022.
enabled by super-fast mobile
The bank has been a leader in the We have seized and utilised
network and internet technologies.
external innovation through our These technologies reduce the investment threshold for banks and help to create new services. These services have lighter terminals, a
accelerator hub known as Africa
Herbert Wigwe
Fintech Foundry. The Foundry is a
CEO Access Bank PLC
Pan-African accelerator that finds and invests in start-ups with a
smarter network and the capacity
global outlook but with a focus on
for various intelligent sensors,
digitisation of banking and building
from 3D structured light cameras
technology-based strategies with
and NFC readers to fingerprint
a clear-cut vision for the future of
Our customers have chosen Access
scanners and GPS.
banking.
Bank on the basis of smooth and
Africa.
user-friendly digital experiences. The COVID-19 pandemic brought
The bank’s merger with Diamond
The one thing that is constantly
a drastic and dynamic change to
Bank PLC in 2019 birthed the
on our minds is our customers and
banking, introducing a rapid uptake
largest retail bank in Africa with
how we can ensure we give them
in digital banking according to the
over 40 million
World Economic Forum, as a result
customers. The
of the pandemic, user sign up on
majority of these
digital platforms increased by 70%,
customers were
usage of mobile pay applications
acquired through
went up by over 80%, and usage of
our digital
contactless payments went up by
platforms. We have
over 30%.
also delivered an omni-channel
Being a digital banker entails accepting and adapting
experience across all platforms to
to the changes
enhance customer
coming into
experience. Access
the banking
an unmatched
Access Bank has grown exceptionally, following on from the merger with Diamond Bank in 2019, it has become the largest retail bank in Africa
end-to-end digital experience. We are aware that a compromise in the quality of service will result in significant business loss. In line with our strategy to provide an all-inclusive
Bank has migrated
platform that
customers to
delivers value to
self-service channels on its digital
the smartphone users in Africa, we
platforms such as USSD (*901#),
launched a revamped super mobile
Chatbot (Tamada), Access More
banking application called Access
mobile application and Quick Bucks
More in March 2020. Access More is
amongst others.
focused on delivering experiences beyond traditional mobile banking
Access Bank has continued to
and this requires understanding
lead financial innovation in the
and integrating customers’ needs
banking industry from the rate of
and lifestyle to banking.
digitisation of banking products and channels, to the promotion
This next generation mobile app
of financial inclusion and
delivers an unparalleled mobile
technology. The bank has firmly
banking experience to our 45
??? FEATURE
40 million plus customers, with
value. This novel solution digitally
Also, there is PrimusPlus, a web-
deep integration to lifestyle
automates in-branch transactions
based enterprise suite of payment
features, advanced analytics and
and allows customers to carry out
and collection solutions that offers
future proof technologies. As
transactions within banking halls as
organisations a secure, simple
the name implies, the platform
a self-service function.
and cost-effective alternative to
provides ‘more’ than regular mobile banking services.
cash and cheque payments across As a digitally-led bank, we created
multiple banks. The platform grants
Africa’s Payment Gateway – Access
corporate users access to view
The features include but are not
Africa which is a funds transfer
and initiate transactions on their
limited to:
product designed to simplify global
account online real-time. Users
payments by Person-to-Person
also have access to customs duty
(P2P), Business-to-Business
payments, FX bidding, local and
(B2B), Person-to-Business (P2B),
foreign payments (both single and
Government-to-Person (G2P)
bulk), account statements, cheque
and any other payment activities/
services and payroll amongst
flows. Alongside instant transfer
others.
• Nearby payments (QR, FacePay and contactless). • Instant loans (no documentation, no collateral) • Access Africa - transfer to our African subsidiaries • Account services including instant account opening, bill payments, funds transfer, investments, cheque management, etc
Facepay is the first of its kind payment solution in Africa built by Access Bank With the aim of providing a contactless payment avenue, FacePay was created. It is the first of its kind face recognition payment solution in Africa. It leverages artificial intelligence and machine learning, to enable users consummate transactions across our branches. Facepay is the first of it’s kind payment solution in Africa built by Access Bank. As at the end of November, we have achieved over 5,000,000,000 naira in transaction
46
to countries where we have subsidiaries, we have leveraged
Lastly, our Artificial Intelligence
our extensive partner network to
Personal Banker ‘Tamada’ offers an
reach about 15 countries including
extended set of features, ranging
UK, France, Germany, China, Benin
from standard banking services
etc. This makes Africa look like a
(opening accounts, paying bills,
country by rapidly enabling instant
performing intra and inter-bank
Pan-African payments. Also inter-
transfers etc) to weather forecasts,
continent transfers can be made
sports updates, traffic updates,
using Access Africa.
investment advice, cash out services, news updates, live chat
PayDay Loan is a digital loan
with customer care etc.
product of the Bank that avails loans to employees that are
We constantly seek to build on our
Access Bank and non-Access
achievements of previous years, by
Bank customers for a maximum
providing world-class innovative
of 30 days or salary payment day
solutions to meet our customers’
(whichever comes first). Loan
dynamic needs. We consolidate
eligibility is based on a percentage
our winnings by expanding the
of the applicant’s average monthly
scale of our products and platforms
salary. The payday loan product
and heavily leveraging various
can be accessed through various
technologies such as Data Analytics,
digital channels such as USSD,
Cloud Computing, Artificial
mobile banking, internet banking,
Intelligence and Robotics Process
ATM and QuickBucks loan app. We
Automation, to deliver unparalleled
have also partnered with salary
value to our customers and
processors to extend the solution to
stakeholders.
over 2 million employees.
The
digital effect
In this age of innovation digital technologies are providing the solutions to our problems. Digital banking is bridging the gap between financial institutions and their customers. The banking sector has revolutionised its interactions with customers by allowing them to use social media for basic banking transactions or activities on the go. People can easily open new accounts, ask general queries, and request mini statements which result in boosting the efficiency of the firms. Digital apps are capable of keeping track of transferred money and complaints from customers, while people have access to their money 24/7 eliminating the need to wait in long queues at bank branches for small tasks.
EFFECT OF DIGITAL BANKING ON BANKING STAFF Although digital banking is proving to be greatly helpful for consumers, it has had an effect on employees at banks. Millions of workers are predicted to lose their jobs in the next decade as artificial intelligence takes over. According to a report by Citigroup, there is a prediction that banks will cut millions of jobs in the coming years as financial technology companies look for profitable growth. Due to the increase in usage of digital technologies around 37%
of jobs will change dramatically
opening up new opportunities
businesses and jobs, the unique
or become redundant. Around
for businesses. People have only
capabilities of humans will never
30% of the currently employed
focused on the problem that fintech
be lost and firms will need them to
staff at banks will lose their jobs.
disruption might lead to, including
adjust their talent strategies. These
According to the research of the
job cuts of banking staff. The
innovations will help the staff to
open university, almost 12 million
fact is that fintech is not going to
upgrade their skills and knowledge
workers will lose their jobs as a
remove the traditional financial
so that they can serve in a better
result of digital automation in the
firms completely from the industry.
way.
fintech industry.
The influence of this fintech could incumbents. Workers who are
LACK OF DIGITAL SKILLS CAUSING THE LOSS OF JOBS
ready to learn new skills can take
Lack of digitally skilled staff affects
their place in the industry with
the innovation process. It creates
Fintech is a term that covers a
their passion. Workers can thrive
a huge gap between demand
wide range of companies that are
in a disrupted world by adapting
and supply within the labour
providing financial services by
to new roles. Being proactive in
market. 88% of institutions are
using software and technology.
managing the change could help
claiming that this gap is affecting
It includes online banks, asset
banking staff to grow, as opposed to
the innovation and production
management firms, mobile
being passive participants. Before
processes. There are predictions
payment firms, online lenders, and
taking the advantage fintech offers,
that the gap between digitally
online remittance firms.
workers need to understand how it
skilled staff and innovation will
is going to affect them.
gradually increase with the increase
DIGITAL AUTOMATION / FINTECH INDUSTRY AND ITS CURRENT MARKET SHARE
Over the past decade, fintech has
bring a positive change for the
in technology adoption. Although
removed the lines between the finance industry and technology. Investment in fintech is increasing around the globe. According to research, the finance industry received an investment of 17.4 billion dollars in 2016. In 2017 it reached 31 billion dollars with the increase in several venture capital transactions and private equity deals. Fintech platforms are used by 64% of customers. 60% of consumers make transactions with banks who provide single platforms
digitisations have already disrupted
The World Economic Forum developed the framework for ‘Future of financial services”. It includes information about how disruptive digital innovations are reshaping the structure and consumption of financial services.
via social media or mobile banking
are continuously underestimating the importance of building digital skills. Staff must learn new digital skills to adapt to the change in the entire industry.
IN DEMAND SKILLS TO ELIMINATE THE THREAT OF JOB LOSSES Here are some in-demand skills which one should learn to become a professional to thrive in the Fintech industry. These skills
apps. Surprisingly, 96% of global consumers are already well aware of
With technological advancements,
fintech companies
traditional ways will be removed
DIGITAL AUTOMATION; A THREAT OR NEW OPPORTUNITY FOR INCUMBENTS?
the whole industry, organisations
but it will also open up new markets and opportunities to develop new potential gains. Banking staff can provide the consultancy services or answer queries from customers
Digital technologies have the
in less time by using social media.
potential to maintain and improve
Although new technology will
human skills rather than making
continue to emerge and give rise
jobs obsolete and as a result,
to different paths of managing
include blockchain and distributed ledger experts, programming skills, machine learning, and artificial intelligence, cybersecurity expertise, and soft skills. These are the skills for the professionals but banking staff should be able to adapt the following trends or techniques to survive in the industry.
• CONSUMER ENGAGEMENT
and upskilling of talent to meet
way, customers are able to feel their
Being able to engage with
the needs of the era. When digital
importance to the bank.
disruptors are offering better
customers in the most effective way is the key to success. With the increase in the adoption of mobile banking, consumers are seeking support on online platforms. According to Accenture, 66% of customers do their transactions on digital apps and 71% are
will lose their place. If someone
• WHAT SHOULD BE THE ROLE OF BANKS TO COPE WITH THE PROBLEM?
needs to remain competitive then
In a technology-driven world,
having an open mindset is the key.
technical talent is crucial for the
quality products and services, nonagile banks as well as employees
• RISK GOVERNANCE
success of the bank. There is a need to value human skills so that banks
Banks need to mitigate the risk of
can grow in the long run with the
fraudsters opening new accounts
help of their staff. Retraining and
with stolen data using digital
upskilling are key for banks to work
platforms. With the increase in
efficiently in a digital environment.
the utilisation of new technology,
According to research, 78% of
cyber risk has also been increasing.
banks believed that providing
Therefore, employees must be
training to the existing staff will
• DIGITAL AWARENESS
capable of understanding and
help to overcome the obstacle.
managing such kinds of risks in the
Many firms said that hiring the
Employees must have basic
digitisation process.
new digitally skilled staff was more
seeking automated support. They said that future-ready banks are incorporating the know your customer approach into their apps for continued engagement with customers.
knowledge about digital banking and its applications. In the modern world banking services are provided through digital marketing so an employee must know the basics of digital marketing.
• HUMAN-CENTERED DESIGN When banks design their products and services they should incorporate their customers into
• AGILE THINKING
it and those products will hold
Banking staff must have an
employees, it is necessary that they
adaptable mindset for the innovations in the industry. It will encourage the innovation
more value to the customer. For the can communicate with customers about their general queries. In this
effective and less costly. To cope with digital automation, banks started retraining their employees. This step increased the average training budget by 13 % over last year. In the future, all jobs will likely require some basic digital skills. Banks can help in building up the skills of their employees and become resilient and adaptable in the future.
MOBILE PAYMENTS ON THE RISE AS KENYANS
GO CASHLESS
O O
ver the years, the use of cash as a means of payment has been on a slow, steady decline in Kenya but it has managed to hold up, until recently. It is gradually becoming more common in Kenya to see shops with signs saying “No cash.” Previously, such shop
policies could only be found in European countries, and even there, it was very uncommon. Digital-only payment policies have emerged in Kenya since the outbreak of the pandemic and are gradually becoming very popular. Kenya has been at the forefront of digital transactions in Africa. Even during the Moi era in the past years, Visa and MasterCard were accepted for payment in many shops, supermarkets, upscale restaurants, and just about every hotel. During this same period, Ethiopia had just a single bank outlet in the entire country where cash withdrawals could be made with a credit card. When M-Pesa was introduced in 2007, Kenya became a global forerunner in mobile payments. This led to an overhaul of the dynamics of the country’s economy by eliminating the reliance on
physical cash and promoting
Kenya has left most other African
showing that usage rose from 3.6
financial inclusion. As a result
countries behind in the use of
billion dollars in June 2019 to 4.18
of the use of mobile money, the
digital payments. For instance,
billion dollars in July 2019, which is
percentage of the population with
Nigeria still strongly prefers the
the biggest month to month increase
access to financial services has
use of banknotes, so much so that
to date.
increased from 14% to over 80%
cash is the first choice even in some
between 2006 and today.
international hotels. It is almost impossible to pay bills with an international card in any restaurant in Lagos. To make things worse, the
The M-Pesa technology has also spread out into more than six countries in Africa, Asia, and Eastern Europe. Business schools all over the world use M-Pesa as a case study and mobile money has become the primary method of payment for smallscale transactions in Kenya. Many developed countries are yet to catch up with Kenya’s level in mobile money application. As of 2019, the total volume of mobile transactions was equal to nearly half of Kenya’s GDP.
dispensing limit of most ATMs is NGN 10,000 (USD 25) or NGN 20,000 (USD 50) per withdrawal. With the high prices of goods and services in Lagos, you will tend to spend a lot of time at the ATMs and move around with huge amounts of cash. Even though mobile money has been in existence in Nigeria since 2009, its impact has been insignificant until the last few months. With the implementation of updated policies towards the end of 2019, mobile money is now finally seeing some growth in Africa’s biggest economy. However, the use of physical cash still remains widespread unlike Kenya. As a matter of fact, coins and banknotes are an oddity in modern society, with hand to hand payment seen by some as unhygienic. Cash payments pose a serious health risk amidst the Covid-19 pandemic. Making payments with the use of physical tokens that will change hands often should be avoided by all means at this time. Since the beginning of the pandemic, the Kenyan government has encouraged citizens to make use of digital transactions instead of cash. Mobile operators have been spurred on by the government’s support and have increased transaction limits for money payments, while temporarily removing most transaction fees. The Central Bank of Kenya released data
Banks also followed suit by removing their transaction fees on bankto-mobile account payments. Though these fees will definitely be introduced again after the pandemic, people who have abandoned the use of cash due to the pandemic are unlikely to take it up again. In Kenya, cash as a payment method is now so rare that cashiers express displeasure when a customer tries to make payments with cash. It appears that we are now in a time where handling cash may not be part of the new normal. In 2019, a new, contemporary, and visually pleasing set of the Kenyan Shilling was introduced by the Central Bank of Kenya. This set is likely to be the last of the Kenyan banknotes and coins, and by all indications could be in circulation for just a short time. Cash leaves room for crime and is a potential security risk because it is easy to steal. Not only that, it is expensive at bank and merchant levels due to the cost of keeping cash secure in transit. It would be of great benefit to everyone if Kenya does go into digital payments fully, and it appears that the coronavirus pandemic may be the trigger for a complete transition. As the world gradually recovers from the effects of the pandemic, certain new habits will be hard to let go of. There are speculations about the fate of video conferences and home offices, but cash seems to be ending up as one major casualty of the Covid-19 crisis in Kenya.
FEATURE
FBC Transformation
DELIVERS RESULTS
I
t was the year 2018 and the FBC Group had just ended their annual strategy conference FBC. The team was excited about the journey ahead, having resolved
to begin a transformation process that would take the Group to a new position in the global marketplace. Having initially commenced operations in 1997 as First Banking Corporation Limited, the entity has evolved from being one of the first locally owned commercial banks in Zimbabwe to becoming FBC Bank- one of the leading financial institutions in the country to-date. The bank is part of FBC Holdings, which also incorporates FBC Building Society, FBC Insurance, FBC Reinsurance, FBC Securities and Microplan which is a microfinance entity. The world as we know it is changing at such a rapid pace and large established corporate entities are faced with the reality of stiff competition emanating from new and smaller start-ups, which possess a vastly different, energy-infused, agile mind set. In addition to this dynamism in the operating environment, the COVID 19 pandemic erupted towards the end of 2019, galvanising companies into either quickly adapting to the “New Normal” or risking extinction. Many companies fell into the latter category 54
FEATURE
and were forced to contract
value adding relationships,
collaboratively develops products
their operations abruptly and
simplified processes and relevant
in an iterative fashion, with speed,
indefinitely. Fortunately for
technologies.
ahead of competition.
transforming the organisation had
III Our Promise
FBC has launched a digital
already commenced in the previous
You Matter Most
insurance and account opening app
year, thus giving it the platform to
Employees, customers and other
the FBC group, the process of
have the desired impact. FBC Group has long understood that to survive in the new world order of digitalisation and innovation, it was imperative that they take the necessary steps to “future-fit” the organisation. Strategic initiatives were put in place to begin the transformation process. In line with the new digital thrust of the Group, FBC created a new Vision/ Mission/ Promise and a set of Business Principles. This venture was a key driver in beginning the communication exercise in positioning the brand of the” FBC of the Future”. The new Vision and Mission statements are as follows:
I. Vision Statement Nurture sustainable solutions that enable the financial wellbeing of the communities we serve
II. Mission Statement Deliver a unique customer experience through
stakeholders were involved in the co-creation of the transformation and accompanying artefacts, an approach which has instilled a sense of ownership and palpable involvement. For a digital business to become well established and to truly embrace “digital”, the new Vision/Mission statement is underpinned by a set of business principles which are the guardrails for effective decision making within the “FBC of the Future”. The principles ensure that the digital DNA pervades the entire business’ decision-making process and way of working, such as being ‘insights-driven’, ‘customerobsessed’, ‘lowering the cost to serve’, ‘driving simplicity’ and consistently disrupting the status quo. More importantly we cocreated these principles and are now making a consistent effort to ingrain it into our way of working. FBC embarked on a radical shift in
that allows customers to digitally insure and license vehicles as well as open different types of bank accounts instantly using one application. This single app allows access to different products and services, from banking to insurance, from one touch point, consistent with the “Product of One” business principle. The application enables end-toend full KYC account opening in less than 5 minutes after autonomously doing an APIbased background check process, including identity, in real time. At the same time, the bank has launched a digital assistant named Noku, which supports and interacts with clients using the Whatsapp platform. So in essence, FBC has enabled digital account opening through 3 different platforms:
Service Data(USSD) for KYC-
its project management approach by adopting the agile methodology in line with modern global trends. Projects are now implemented through collaborative, crossfunctional project teams whilst ensuring consistent alignment to the new FBC principles. FBC applies design outside-in thinking in the design of its products and services, involving customers to ensure ‘product of one’ and ‘customer obsession’ principles are fulfilled amongst others. With
Unstructured Supplementary lite wallet and account
Whatsapp banking for KYClite wallet and account
IOS and Google Playstore – for full KYC account
By enabling customers to open accounts on the different platforms, FBC Bank has enabled all segments, including the base of the pyramid, to access financial services easily, thereby accelerating financial inclusion.
an internal fintech capability, FBC 55
FEATURE
FBC has brought within its leadership and management structures, digitally competent
FBC’s indirect monetisation frontier as competitive pressure on traditional business escalates.
team members to drive the
To ensure end to end support for all clients that on-board virtually
digitisation agenda. It has
FBC has established “FBC Virtual” which is among other things, also
established a fintech company,
responsible for the following:
Operational and risk management
digitalisation and innovation drive
Anti-Money Laundering(AML)
within the FBC Group. This fintech
Know-Your-Customer(KYC)
Xarani, to spearhead the
team houses capabilities which cover technology and development; innovation; change management; and scrum teams. Innovation and entrepreneurship are now integral parts of the transformation journey that will enable FBC Bank to compete in a world characterised by vulnerability, uncertainty, complexity and ambiguity. The bank is now geared to embrace and implement new ideas with agility, speed and scale. FBC has adopted an ecosystem approach to improve value creation through internal and external synergies.’ Co-opetition aptly describes its nuance to competition which also includes cooperation where value can be created with competitors. A data and insights function has been established and it is entrenching a data and analytics culture in decisionmaking ahead of hierarchy and other non-scientific factors. Critically, data lies on Managing Director of FBC BANK
FEATURE
Business development - Cross
benchmark of 0.15% whilst their
African economy where 70% of
and Upselling to the digital
click to conversion ratio for 2020
the population is rural and low-
customer
has been 2.14% versus the world
income, there is much work which
Relationship Management
average of 1%. FBC participated in
is required to uplift the lives of the
the worldwide lockdown-inspired
majority.
Product & Client Support for clients utilising our digital platforms. Distribution of physical products to clients who opt for delivery (e.g cards delivery & PIN issuance through POS)
#JerusalemaChallenge which incorporated elements of its repositioning and digitalisation. Some of the digital marketing initiatives that have been used include the
Zimbabwe. Zimbabwe has extensive
increasing interaction with the
mobile network coverage and the
brand on social media through
feature phone penetration is high,
paid social media strategies to shift
covering previously marginalised
customer awareness and
sections of society in remote rural
in a competitive digital landscape.
successfully on-boarded, they
b) Google Display Advertising –
receive on-going service support
The bank has leveraged the Google
from the Customer Experience and
ads platform to reach contextually
24-hour Contact Centre.
relevant customers using key words
Department by establishing a fully-fledged Digital Marketing
to increase top of mind awareness of FBC’s digital products and resultantly, increasing our share of voice compared to competitors.
wing within the Group’s Marketing
c) Google Search - The bank
division. The marketing investment
implemented a Google paid search
is now strongly metrics-based
strategy to outrank competitors
in line with their ‘insights
for keywords searches relevant to
driven’ business principle. They
digital banking search terms and
strongly believe in engagement
appears on top of search results
and building an interactive community of customers and other stakeholders. FBC’s engagement metrics have grown exponentially across all digital channels, with its digital advert engagement ratio being 0.66% against the global
Zimbabwean with a basic feature
a) A Brand Lift strategy aimed at
adoption of their banking products
push to enhance the Marketing
USSD platform which allows every phone to open a bank account
increasing conversions and
The bank has made a concerted
KYC account bank account on the
following:
perception of the brand, thus
Once a customer has been
FBC has enabled a wallet and low-
for queries relevant to their digital banking products. FBC’s financial inclusion strategy is encapsulated in the new vision statement which aspires to ‘nurture sustainable solutions that enable the financial wellbeing of the communities we serve’. Operating in a developing
remotely from anywhere within
communities. Their USSD account opening platform allows previously excluded communities to open a formal bank account and transact easily and instantly without having to travel to urban centres. FBC has a deliberate solutionist and data-driven strategy that is geared towards financially including the base-of-the pyramid beyond payments in support of the United Nations’ sustainable development goals (SDGs). A collaborative ecosystem approach underlies FBC’s approach in working with banks, fintechs, vendors and other regulators in creating value. John Mushayavanhu, the FBC Group CE summed it up perfectly. “Winning the Digital Banker Africa 2021 Awards is a fitting testimony to the transformation journey that FBC has embarked on. Having won numerous other awards in the past year, FBC Bank and other business units are poised to become true trailblazers in the digitalisation and innovation space.”
HOW BANKS ARE TURNING TO
SOCIAL MEDIA TO ATTRACT CUSTOMERS IN AFRICA n the current century, there has been economic changes, technological developments, increased market competition, and changes in the buying behavior of consumers. Social media has proved to be very effective in catering to all these challenges faced by financial institutions. Studies have found that the usage of social media in South Africa is growing with a rapid increase of 6.8 million to 9.4 million Facebook users between 2013 and 2014. Internet penetration in Africa stands out at a population of 1.3b which is 36% of the total population. People using social media through mobile phones are 216 million which covers 17 % of the population. About 40% of Africans prefer social media for their banking transactions. The use of social media has increased prominently among the young generation. Social media has changed the structure of information along with its availability.
The importance of social media
sectors of the economy including
ROLE OF SOCIAL MEDIA TO ATTRACT YOUNG CUSTOMERS IN AFRICA
banking. The role of social media
Social media is offering many
has also been increased due to Covid 19 which affected all
has also increased more due to this pandemic leading customers to find online solutions for their financial needs. Financial institutions understand the power of digital banking to attract younger customers. Banks are communicating with their customers through social media channels hence building credibility while providing several products and services. Africa has become the second-fastest-growing market for electronic payments in the world. More than 50% of the adult population in Africa has access to mobile phones. Banks are recognising that by using mobile banking they can reach millions of potential customers, especially in the rural areas. Digital banking helps in bridging the gap between financial institutions and their prospective customers. Tailoring customer’s needs and providing efficient solutions can be done efficiently by digital banking within Africa. An analysis by Mckinsey suggested that between 2019 and 2021, African banking revenue could fall by 23 to 33 percent. While the return on equity of the bank could fall driven by the increasing risk cost and decreasing margins. It is expected that 30% of the African consumers
functional benefits to financial institutions. With advancement in technology, firms are trying to adjust and adapt new techniques so that they can attain a competitive advantage over their competitors. In order to improve their performance firms are improving their strategies to capture the major share in the market. Involvement in social media usage is one of the strategies that could be used by the banking sector in Africa to attract young customers for their rapid growth. Social media is providing the following functional benefits to the banking industry allowing them to increase their number of customers.
CONSUMER ENGAGEMENT Banks are using social media to connect with their customers in the easiest way. In this way, they can communicate and reach a greater number of customers in less time and cost. Building a relationship with customers through social media, enables the banks to respond to customer’s queries in less time. With this method, banks are able to manage a large number of consumers while maintaining accuracy of information at the same time.
post-crisis. This ratio means that
RELATIONSHIP BANKING
increasing social media usage for
Banks are also forming different
financial services can help the
types of bonds with their customers
banks to reach a larger and
by using social media. These
younger audience.
include financial bonds and
will use online banking more than
relational bonds. A well-structured
older age groups
campaign by banks on social media
is subjected to
contributes towards the growth
the investigation
of banker customer relationships.
about lifetime
Financial bonds could be made
saving plans.
by showing the customers how
While youngsters
they can get benefit from a long
may need good
term deposit. Likewise, gaining an
deals related to
understanding of the customer’s
their educational
requirements and providing
and entertainment
adequate solutions can help to make
purposes.
relational bonds stronger. African
Customers looking
banks are using this relationship
for a vehicle or
banking to attract more customers.
home loan need
CREATING A BRAND IDENTITY FOR THE BANKS
information about
Banks are using social media to
identifying and tailoring the needs
reflect their firm as a thoughtful
reduced monthly installments. Well designed strategies are helping in of the targeted audience
show off their performance in the banking sector. Showing the revenue reports and history of the bank’s performance helps in
aspects which are differentiating
CUSTOMER ACQUISITION THROUGH ADVERTISING
them from their competitors can
Banks are getting customer
financing. Many online platforms
help in the generation of a loyal
acquisition by showing the positive
like Facebook, Twitter, Instagram,
consumer base. Building trust
attributes of their financial
etc can be used by the banks to
among young customers by using
products and services. Customers
attract young customers. Using
social media is helping the banking
are persuaded to open new accounts
these tools is creating excellent new
sector of Africa.
with the banks by advertising
opportunities for the banking sector
CUSTOMER’S CONFIDENCE
through different channels of
to communicate more effectively
social media.
with their clientele. By using social
CUSTOMER INTERACTION, CO-CREATION, AND RETENTION
media, banks can offer direct
and caring entity that can help consumers to achieve their goals. Highlighting their functional
Well, structured social media campaigns about banking products and policies are helping to better position the banks. A better strategy can help in enhancing the customer’s confidence in the bank’s
The banking sector is using social media in the most effective way
building trust among the young customers. Banks can provide different loans for educational purposes as well as micro-
value to the customers looking for a financial solution online. Social media allows the banks to target their posts and ads more specifically. This will result in better engagement with young customers
ability to provide financial support.
for the interaction and retention of
SEGMENTATION AND TARGETING
their customers. When a customer is using different products from a
Digital banking is the key to
Social media is being used as
bank it tends to prevent them from
financial inclusion within Africa.
wanting to switch to another bank.
Broadening the usage and
Consumers are divided into
BUILDING TRUST AMONG YOUNG CUSTOMERS
penetration of the products and
different groups depending upon
Banks are using social media to
banking.
a marketing tool by the banks in Africa to create customer satisfaction.
their financial needs. Content for
by saving their time in searching.
services by the banks in Africa through social media in real time becomes possible with digital
INTERVIEW
FINBANK INNOVATION CONFERENCE: WHERE BANKING
MEETS TECHNOLOGY 2020 saw an abrupt
FinBank Innovation Conference &
Sure. Fintech startups are
interruption of the hospitality
Expo is taking place in February
redefining banking, there are still
in Kigali, we are hosting financial
unbanked and non-accessible
institution executives from
banking markets in Africa where
industry due to Covid 19. This created new ways for
fintech companies are offering
people to get together for conferences and events,
Gustave Sugira
with virtual meetings
Commercial Director FinBank Innovation Conference & Expo
becoming the new normal. Stepping into 2021 with the
the best solutions and modes of access to such markets. Technical examples include providing biometrics solutions in the regions where customers don’t have access to the internet. Fintech
emergence of vaccines and
Africa and those from financial
companies are helping banks
new methods of controlling
technology companies. Attendees
escape traditional banking and
the Coronavirus, there is
can expect to meet new clients
move towards digital banking
as well as discover new trends
where clients have access to
and technologies in the financial
their own accounts on their own
industry. Financial intermediaries
smartphones, tablets and PC’s
can adopt new solutions to
and transact without queuing at
and events. Digital Banker
help them improve their digital
branches etc.
Africa caught up with Gustave
operations and transformations
an expectation that we will once again be able to attend our favourite conferences
Sugira to discuss the up and coming Finbank Innovation Conference & Expo taking place in Rwanda.
while fintech companies in
What can regulators, supervisors and
attendance have opportunities to
legislators do to facilitate the adoption
launch their new solutions to the
of fintech in Africa?
African market. Fintech startups are now redefining
FinBank Innovation Conference & Expo
banking. What opportunities are created
2021 takes place in February, give us
by fintech in terms of developing a truly
some detail on what can be expected by
digital financial service market across
those that attend?
Africa?
62
Regulators, supervisors and legislators should work together to identify top quality solutions in fintech to adopt, as there are technologies which don’t work well or don’t work at all. By testing and evaluating those new solutions,
INTERVIEW
we understand their impacts to financial institutions and what those solutions really solve. Providing a license or certificate of good quality also should be key, it will help financial institutions to select nice solutions for their customers or employees who will use the technologies
Africa’s banks will benefit from financial technologies even more than other continents because African economy is improving on all sides and regulators are passionate to build a cashless economy.
adopted at the end. How can Africa’s banks benefit from financial technologies compared to other markets such as America or Asia?
We’ve seen many events
technologies. What can companies
go virtual due to this
expect from the event?
pandemic, how did you adapt to this situation?
new technologies on the African
magic on the ground,
Market to work with us. We will
however due to the
provide launching time where
pandemic they were not
financial executives will attend
possible to make. So
and assist with the event. We
far with collaboration
believe this will be of value to both
with governments,
fintech companies and financial
venues and other
institutions as there will be time
partners, we are coming
for networking, arranged meetings
back live. There are
and discussions on partnerships.
still participants interested in
A simple demo and presentation
participating but not yet ready to
should be available to help
travel, that’s why we prepared the
participants quickly understand the
FinBank Innovation Conference
product.
& Expo 2021 in a hybrid format. It
financial technologies even more
means it will be
than other continents because
live with virtual
African economy is improving
participation
on all sides and regulators are
options.
passionate to build a cashless economy. While citizens keep
FinBank Innovation
their money in the banks they will
Conference & Expo
also need to make transactions,
reaches out to tech
payments and access their accounts
companies to come
seamlessly. As now Africa’s banks
and launch their
operate traditionally by having
new
branches, there are also branchless solutions which are being adopted in other markets on the other side of the continent which is not yet adopted here in Africa. This will reduce cost on branches for banks and other financial institutions as well. There are still lots to do here and there is still a long way to go to digitise the financial industry in Africa. Africa’s banks need financial technologies now more than ever before.
companies willing to launch their
Physical events make
Africa’s banks will benefit from
their customers come into the
Yes, we are calling up all fintech
FinBank Innovation Conference & Expo 2021 takes place at Kigali Convention Centre, Kigali, Rwanda on February 24th to 25th 2021. Tickets will be available from www. finbankinnovation.com
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Regional KYC Utilities: The Start of Global Partnerships on
a Common Compliance Platform The protocols surrounding KYC (Know Your Customer) involves multiple repetitive documentation, rigorous managerial undertakings and heavy costs to abide by industry regulations. The bureaucratic process for
singular reserve for KYC data and
the launch of CordaKYC through a
offered their services to interested
consolidation of five of its banks
financial institutions as well.
on a unified platform. During the
Clarient Entity Hub was meant to offer her services to a variety of customer segment over a vast
period, 21 corporate organisations opted to work with CordaKYC and operations have been positive.
business landscape. This left a
For the Baltic States, the rising
disjointed KYC terrain with several
suspicion of the complicity of its
exploitable gaps.
financial institutions in money laundering, expressly violation
harmonising customer data
National KYC Initiatives
for KYC is fragmented and
Today countries are beginning to
lacking uniformity for financial
geared towards developing national
tow the same line to homogenise
and regional KYC registries.
institutions.
customer data and optimise
Lithuania started to move in this
collation processes for efficient
direction in November 2018. Latvia
There have been continuous
KYC operations in financial
and Estonia will have to collaborate
institutions, but the very first of
with Lithuania to dispel current
such efforts was done by India in
scepticism about the Baltics by
2016. They planned to condense
developing KYC protocols that
documentation and verification
observe world-class standards.
deliberations amidst industry players in the financial sector. The constraints of creating and maintaining databases to keep track of customers have been a top the agenda. KYC protocols are expensive and especially tasking for financial organisations, so there have been attempts to leverage cooperation to reduce the monetary and time costs involved. One of such alliances was forged in 2014. It was entered into by five organisations: Depository Trust and Clearing Corporation, Markit/ Genpact KYC Services, Swift KYC Registry and Accelus Org ID, a service run by Thomas Reuters. The alliance birthed Clarient Entity Hub. It was focused on running a
regulations in place, have been the major driver of conversations
processes for all regulated financial industry players in the country.
It is expected that many more
This they did by inaugurating a KYC
countries will learn from those
registry to centralise all of these
who have adopted a centralised
data.
KYC registry and improve on their implementation processes, as very
Benefits of the central registry
recently we have seen Australia and
include eradication of multiple
Hong Kong approaching the final
data collection for customers
stages for adoption.
and a reduction in data collection costs due to shared responsibility. Notably, India did not achieve total homogeneity of KYC collaborations as a few organisations remained isolated from the system. As recently as 2018, France saw
The Advent of Regional KYC Partnerships The benefits of operating KYC registries have seen interests of various governments rise in the last couple of years in Africa. The
evolution of these collaborations took a different trajectory when corporate and financial institutions began to examine the prospects of partnering to share customer data and other forms of vital
With the launch of “Mansa”, African organisations had finally surmounted the major hindrance to attracting funding from some of world’s largest financial institutions.
information. In Africa, sharing a KYC registry on a singular platform has not advanced without its challenges.
meeting the
institutions to give credence
demands for
to customer verification and
risk-based
reputable assessment of risk on the
compliance
Continent.
from global financial institutions in the face of limitations to accessing cheap finance
for trade. This was how Mansa, Africa’s first KYC platform was born in July 2018.
Known for its difficult business
This first platform came into
terrain and high risk of doing
existence largely as a result of
business, the odds were more or
the efforts of the Africa Export
less stacked against her. Interested
Import Bank, Afreximbank,
organisations grappled with
collaborating with other willing
With the launch of “Mansa”, African organisations had finally surmounted the major hindrance to attracting funding from some of the world’s largest financial institutions. Elsewhere, countries in Northern Europe and around the North Atlantic saw six of their banks get approval by the European Commission to run Nordic KYC Utility, a novel KYC registry. After gaining approval which was just in July 2019, plans were fixed to
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launch fully in 2020. Willing banks
would improve
can now take advantage of the
efficiency and
platform to unify customer due-
save cost for
diligence protocols and maintain
participating
uniform KYC standards in the
banks, it must
region.
protect customer
Are We Ready For Global KYC Platforms? We have seen national KYC collaborations; we have seen regional partnerships but the jury is out on whether a Global KYC platform is in the offing. The contradistinctions that dote the governing landscape for KYC compliance pose serious challenges for any Global KYC initiatives though. Yes, a few KYC protocols share similarities across the globe, but where disparities exist in risk categorisation, documentation, customer data collection and other procedures, there needs to be harmonisation for any major uniformity to be attained in KYC collection globally. Stakeholders believe collaborations between financial institutions across continents will bode well for the development of global KYC utilities. One of the often ignored bottlenecks to global KYC adoption is the breakdown of the juxtaposition between the cost/benefit of powering a functional KYC platform and the advantages for participating banks respectively. Setting up the right infrastructure across the different financial institutions to enhance efficiency in managing the massive data proportions involved is another serious challenge that requires pragmatic solutions for the financial institutions involved. Whilst ensuring that the platform
data as the platform will be a target for hackers and other criminals. These risks for
the often ignored bottlenecks to global KYC adoption is the breakdown of the juxtaposition between the cost/benefit of powering a functional KYC platform and the advantages for participating banks respectively.
each country’s citizen’s data mean that they will play hardball, especially in allowing such data go beyond their borders except if they are assured of the highest standards in safeguarding
blockchain. Blockchain technology is secure, built from the outside in, to create no avenue for cybercriminals to work around any backdoors into the system. This has made
its currency, Bitcoin to be fairly adopted as a legal virtual tender for goods and services around the world. With its verified processes and transparent documentation
their data.
system for every transaction,
One cannot deny, however, that if
contemplating taking advantage of
we are to see a global collaboration,
blockchain technology for secure
we must learn our lessons from
and transparent documenting and
challenges encountered in
sharing of customer data amongst
running regional KYC platforms
would-be collaborators.
and maintain the standards that have made regional collaboration so successful in recent times. Although the data management for any global partnerships will be on an unprecedented scale, interested participants will also be excited by the margins of cost savings, realising that with the right technology, we will realise
financial institutions are
The use of blockchain’s secure database will provide the financial industry with the same standards of durability that Bitcoin has enjoyed, and improve operational efficiency for participators. This is why some stakeholders believe that blockchain may play a pivotal role in the setting up of global KYC
interesting results.
platforms in the future.
Technology comes with its own
As industry players continue to
evolved solutions and unexpected disruptions for the world’s problems. This is exemplified by the proliferation of blockchain technology in the world of financial transactions today. There are discussions about using blockchain to facilitate a global KYC platform, and CordaKYC, France’s first KYC platform has adopted the use of
leverage partnerships to cut cost and meet constantly evolving financial regulations, and secure customers from data and fund theft, it might only be a matter of time before business circumstances line up for a global KYC platform to be created.
CRYPTOCURRENCY SIGNALS
A NEW DAWN IN
AFRICAN FINANCE Africa is going through an economic reformation that
About cryptocurrency
is independent of the banking industry or government.
Cryptocurrency is simply virtual money that
Mobile money has been accepted across the continent
individuals can make transactions with in the same
already and virtual currency provides more opportunities
way they do with real money. Complex cryptography
for young, tech-savvy Africans. Consequently, Africa is
is used to create the currency and record transactions.
witnessing an increase in the volume of cryptocurrency
It’s much more than money on the internet.
dealings.
Cryptocurrency takes the value of money and makes it
From less than $10,000, the monthly transfer of cryptocurrencies to and from Africa increased by 55% last year, reaching its climax in June at $316 million. These figures are sourced from the US Blockchain research firm Chainalysis and are projected to rise. Cryptocurrency is used mainly for commerce in Africa especially in Nigeria, Kenya, and South Africa.
more transparent and centralised through technology so that everyone has a say in the prospects of finance. Cryptocurrencies leave out middlemen like banks to make transactions cheaper and are independent of any central body or government. Africa is the new territory for development and global economic growth and crypto is being widely accepted like mobile money services such as M-Pesa. In 2008, Bitcoin, the first and most popular cryptocurrency, was created by an unidentified person(s) under the pseudonym Satoshi Nakamoto. Over 6000 other cryptocurrencies have been created since that time, like widely held options such as Litecoin and Ethereum.
68
A perfect environment for virtual currencies to thrive The unemployment situation in many African countries leaves the population of young people in search of new money-making
remittance company BitPesa
complex crypto is actually simple if
performs international money
you spend time studying it well.
transfers using Bitcoin. This eliminates both bank fees and the
What lies ahead?
cost of changing money to different
Nigeria, Africa’s biggest economy,
currencies.
is at the forefront of countries working on new regulations
ventures.
A gamble?
Consequently, digital money has
Africa’s delving into Bitcoin does
based future. This is happening
come with some dangers. By
through the recent legalisation of
nature, cryptocurrency prices are
cryptocurrency and new regulatory
volatile. Since virtual currencies are
guidelines for virtual currencies and
unchecked and have no legal status
crypto-based firms or startups.
gotten the attention of young people due to a lack of jobs. Cryptocurrency provides people with the opportunity to start their own businesses and gain patronage from outside their home country. Cryptocurrency works just like mobile money so Africans should be able to understand and benefit from it better than people in the West who were never exposed to systems other than their banking systems.
Avoiding currency volatility Cryptocurrency is seen as an alternative to the unreliable government-controlled currencies. It is set to develop economies eventually because the competition with government currencies will make the economies more resilient.
in many African countries, there is a high risk of loss of funds, especially for short-term investors.
in preparation for a crypto-
The major financial regulators in South Africa published a policy paper in April advocating for the
Anyone thinking about trading
regulation of cryptocurrency. Kenya
cryptocurrency should be
is also testing the waters with a
discerning and seek information
digital tax from January 2021.
first. People with no information fall into schemes that disguise as crypto.
Though it is too soon to measure the future rate of acceptance of cryptocurrency in Africa, it is worth
People with little exposure to new
the attention of young Africans
technologies tend to fall victim
because that is where finance
to the rising number of crypto
is headed. Cryptocurrency has
scams or misguided investments.
previously been dismissed as a flash
Educated people will understand
in the pan, however, more than ten
cryptocurrency and blockchain
years later, it has continued
technology more easily than older
to grow.
or unexposed people. The seemingly
The cryptocurrency boom has been boosted in a way by inconsistent local currencies and hyperinflation like when the Zimbabwean dollar rose sharply in 2015.
A boon for remittances Africa’s growing diaspora is also taking advantage of cryptocurrency as a cheap way to send remittances abroad. The cost of bank transfers across borders is extremely high but with cryptocurrency, it can be free. For instance, the Kenyan 69
CAN AI PROVE TO BE
THE PERFECT FRAUD DETECTOR? The banking industry has come a long way from the time of the manual filling system and ledger cards to the current computer age. Our standard of living has changed over the past 3 decades with the invention of computers. Adopting information and communication technology (ICT) has enhanced our way of life and human interaction. As a result of the implication of technology in business, the world has become a global village. Electronic commerce has proved to be very helpful for people around the globe, but it does give rise to different legal and socio-economic issues. The development of the internet converted the traditional banking system into digital banking. The adoption of digital banking is growing at a greater speed. With the help of digital banking, millions of transactions are processed every year resulting in an inflow of digital currency and electronic data. Due to the access to sensitive information that helps consumers to withdraw their money, the payments infrastructure has become a target for hackers.
Digital banking fraud In the 1970s, computerisation was introduced in the African banking industry for the first time by Society General Bank Limited. With time, banks not only adopted computerisation but also converted their basic banking transactions like cash withdrawal and deposits into sophisticated products. Due to increased customer demand, innovation and modernisation in the banking system, time has been needed to ensure convenience as well as improved service delivery. Digital banking proved to be a convenient way to manage finances and carry out different types of transactions. The dependence on technology in the present time increased the ease of access to digital banking but it also has given rise to the increased number of cases of fraud and other exploitations in the African banking industry.
Types of fraud
Online fraud:
The following are different types
information, fraudsters make
Employees at the bank can attach
of fraud that have been on the
online purchases by showing
a mobile number to the account
increase in the African banking
someone else’s identity.
holders who do not use mobile
With the help of stolen card
industry Whenever any hacker obtains
Different kinds of hackers get
personal information about a
unauthorised access to the digital
legitimate account holder and takes
platforms of banking systems for
control of the account, it is called
money laundering and as a result,
an account takeover fraud.
many customers lose their moneymaking the bank liable for the losses.
incorrect mobile number:
banking and as a result, the account Account takeover fraud:
Hacking:
Mobile banking application against
is compromised by the associate’s number. Creating fake and non-existent users on a mobile platform: Banks appoint web developers to develop a mobile application for
Money laundering: Money can be easily debited or credited from a mobile wallet. Transacting the amount from one individual account to another individual’s account could be a source of laundering unaccounted
them. The designer can create two unauthorised users with rights to verify the transactions and transfer of funds.
Major channels
money.
for electronic
Unauthorised text messages/
frauds
emails
Most fraud cases recorded in banks
This type of fraud arises when
are related to computers. Due to
a customer is asked about their
increased electronic fund transfers
account information by fraudulent
and computer manipulation in
messages and emails. Details
the banking industry, there has
of customers are then used by
been an increase in the number of
fraudsters for misappropriating
cases of fraud. These are the major
funds.
channels through which frauds are
Lost/stolen card If an account holder loses their
committed in most of the African banks.
card and hasn’t informed the bank
Smart Card:
about the stolen card, then any
Cards issued by the banks are
unauthorised person can make a
provided to the customers to
transaction with the help of that
provide aid in their financial
stolen card.
transactions. These smart cards
Debit card skimming: This is a type of fraud that is done by installing a machine or camera at the ATMs to pick up PINs and account information of the account holder.
become a major channel for fraud whenever any unauthorised person makes transactions in case of theft or loss.
Electronic Fund Transfer (EFT) EFT is an electronic payment mechanism classified into basic elements of the clearing network, remote point of sales, etc. EFT allows accounts to be credited
Fintech companies helping banks in
Exploration-Exploitation It is an approach in reinforcement learning in which the algorithm keeps exploring new methods through which fraud could be done.
the detection of
After the detection of fraud, the
within 24 hours electronically. Automated Teller Machine (ATM)
fraud
validation. Based on the expert’s
These are the electronic machines
Banks are joining hands with
which cases are true and which are
installed countrywide to facilitate
fintech companies to find
false positives. This continuous
banking customers providing them
solutions for the timely detection
learning method helps in making
the ease of accessing money 24/7.
of fraud. Here are some key points
fraud detection systems robust
These ATMs have also become
in this regard.
and updated for future fraudulent
algorithm sends it to experts for response algorithms categorise
activities.
a major channel of fraud when targeted by hackers using methods
Fraud Detection is a continuous
to breach into the bank’s electronic
learning process
Artificial intelligence
data.
With the advancements in
Artificial intelligence is being used
technology, fraudsters also
by banks for the detection of digital
find new ways to fool the fraud
banking fraud. It could prove to
detection systems created by the
be a perfect fraud detector for
banks. Banks have joined hands
institutions, by helping the experts
with Fintech companies to solve
to counter different kinds of fraud.
this problem. Fintech companies
Thus keeping their platform
need to create better algorithms
safe for users making financial
that can help in the identification
transactions.
of new methods of fraud in the
The traditional rule-based
Fraud cases in the past few years According to South African banking risk information center statistics, there has been a 75% increase in bank app fraud cases within African banking. It was reported that there were 4790 cases reported in 2017 costing R57.5m. while 7445 fraud cases costing R104.8 were recorded in 2018. There was a total loss of R250.5m because of fraud cases in digital banking in 2017. SABRIC reported that there R262.8m was lost due to the digital frauds in 2018. They reported that there has been a huge increase of 18% in fraud cases every year. The operational effects and magnitude of losses, result in a decline in an investor or depositor’s confidence in the operational activities of the banking industry
digital banking industry. These Fintech companies use machine learning and reinforcement learning to make collaboration and take feedback from humans constantly.
approach is being converted to MLbased fraud detection, as banks and Fintech companies collaborate to resolve the issues being faced.