Money finds new paths
Africa may be slowest to embrace fintech, but the continent is ripe for disruption
Disruption of the banking sector is well on its way, as slower and more traditional forms of banking fall victim to new technology. African banks may be slower to catch up to this international trend, but the industry has not been resting on its laurels.
An analysis by research firm Frost & Sullivan shows that financial technology (fintech) in Africa can expect exponential and rapid growth that will challenge existing financial services providers. This is despite the fact that it is in the early stages of adoption relative to the rest of the world.
Frost & Sullivan looked to Australia’s progress (where financial services development is similar to SA’s) as a benchmark for Africa.
The financial sector in Australia is expected to take $10bn in revenues away from big Australian banks and contribute $3bn of new revenue from 2015 to 2020.
“Existing SA financial services providers are beginning to appreciate the threat and the opportunity fintechs pose. Some have embraced open innovation as a way to explore these types of opportunities and understand how to make them relevant for the local market,” says Wayne Houghton, director of growth implementation solutions for Africa at Frost & Sullivan.
Banks are also adopting mobile and other technologies to make banking easier and accessible remotely. In addition they are partnering with technology companies.
Standard Bank has partnered with instant messaging platform WeChat to launch WeChat Wallet, which can be used to make payments. It is also in partnership with SnapScan, which was formed in 2013 and enables users to make a purchase by scanning a quick response (QR) code displayed on the receipt or point of sale.
An example of a financial services innovation is Rainfin, partly owned by Barclays Africa. It is an online lending marketplace which connects borrowers seeking cost-effective loans with lenders. In theory, a product like this could bypass banks.
Global predictions suggest that Apple Pay and Android Pay will be the next revolution in banking.
And Houghton says bets are now being placed on the emergence of a “Facebook bank”.
In Africa the biggest and most successful fintech operation is M-Pesa, which is widely used in East African countries such as Kenya and Tanzania. It failed in SA, partly because SA’s banking sector is more developed than it is elsewhere on the continent.
With at least 60% of the adult population on the continent still without a bank account, Africa offers a big opportunity for the industry.
“Africa’s underdeveloped banking infrastructure means that the fintech industry will more likely be an enabler of financial inclusion than the typical disruption seen in more developed markets,” Houghton says.
Peter Alkema, FNB chief information officer for business, says a new way of thinking is needed to demystify banking within the financial services industry. Fintech helps grow, educate and enrich the market.
“We find that businesses are incorporating innovation in their business models, which encourages us to think and act differently,” he says.
“The fintech revolution has presented challenges and opportunities for businesses worldwide. The financial services sector is under increasing pressure to become more agile, relevant to ever-changing customer needs and responsive to a growing number of disrupters,” he says.
Fintech has the potential to level the playing fields, especial-