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Explore the technological innovations poised to disrupt banking technology in Africa. Uncover the transformative power that’ll redefine traditional financial services and foster greater inclusion and efficiency.
The traditional banking sector has long been resistant to innovation, ceasing to give in to its consumers' ever-evolving and rapidly changing needs. As more and more people seek faster service, more accessibility, and convenience, banks have been lethargic to adapt and utilise web development and software engineering to be at the forefront of solutions to those issues. Strict regulation that governs the traditional banks also plays a significant role in their often languid pace of innovation.
Barriers to entry for someone trying to get a bank account on the continent have long been very high. As such, the alienation has resulted in as many as 45% of adults living in Sub-Saharan Africa being unbanked. That means hundreds of millions don’t have access to the traditional economy or its services. Thankfully, new products and service offerings have looked to bridge the gap that the banks haven’t. We’ll take a look at some companies looking to bank the unbanked.
Approximately 144 mobile money providers are servicing people in Sub-Saharan Africa. With nearly two-thirds of the population with a cellphone, it's no wonder that companies like M-PESA (Kenya) and Paga (Nigeria) have taken advantage and engineered sophisticated mobile apps and software to cater to the rapid growth of mobile banking. Contactless payments in the form of peer-to-peer (P2P) payments with the use of a virtual wallet means the underbanked finally have financial inclusion. There are now hundreds of millions of registered mobile accounts with hundreds of billions of dollars transacted last year. And with the incumbent's high barriers to entry, mobile payments look set to grow well year on year.
While most of the unbanked and unserved population don’t have bank accounts or even a form of identification, they do have a phone which uses one of the many telecommunication services available. Nowadays, sending and receiving money, making purchases, and paying bills only require a phone number. Additionally, with internet penetration growing even in the remote areas of the continent, this puts the likes of Vodafone and MTN in a prime position to give the incumbents competition. With over 57 million mobile money users, MTN stands to make significant headway with their newly granted license as a Mobile Money Payment Service Bank in Nigeria. Not to be outdone, Vodacom’s M-PESA has already gained a huge market share in the mobile payments sector.
The traditional banking sector is centralised with only a few big banks servicing most of those who are banked, leaving little room for competition and thus innovation or disruption. Conversely, blockchain technology provides the solution of being a decentralised ledger that can record transactions in an immutable and transparent way.
Since it’s open-sourced and decentralised, there’s no need for intermediaries which is what banks and other platforms that offer banking services are. Blockchain has the potential to reduce transaction costs and increase the speed and efficiency of financial transactions. Not only that but it gives people the autonomy to do with their money what they want because as we know, if your money isn’t in your possession, it’s not your money. An example of a company using blockchain technology to disrupt the banking sector is Pyypl. A Nairobi-based fintech platform founded in 2017 that offers financial services and allows smartphone users to make digital payments.
Connectivity is what the internet provides and as we become more connected to our devices, so too does the expectation of our devices doing more. The Internet of Things is a grand network of devices connected and communicating with one another around the world. These devices communicate through different sensors and banks are integrating this innovative tech into their software and systems. Examples of IoT technology aren’t new. In fact, ATMs are considered part of IoT. But in order to become more consumer-centric and cost-effective, banks need to integrate this technology into more devices. Wearable devices such as smartwatches could be used to access clients more conveniently than before. Mobile wallets have become the norm since everyone has a smartphone but not everyone carries a wallet. Being able to communicate along different channels, blockchain technology is no exception. All of this means that banking services can be more secure, efficient, and convenient than ever before. With faster and better access to their clients and their needs. Albeit this is dependent on the platform's IoT software development and app development being up-to-date and programmed well.
These are a few prime examples of technologically innovative companies disrupting the traditional banking industry. As the continent becomes more digitised and people become more connected, incumbents will have to innovate or risk losing their stake. The tech industry in Africa is prioritising financial inclusion and technology is providing the right opportunities to do just that.
