Tech­nol­ogy drives new part­ner­ship mod­els in Africa’s fi­nan­cial sec­tor

As the fi­nan­cial in­dus­try evolves, there is mas­sive po­ten­tial for the forg­ing of myr­iad part­ner­ships be­tween African fi­nan­cial in­sti­tu­tions and other rel­e­vant stake­hold­ers across the globe.

Finweek English Edition - - Contents - By Rob Cleasby Rob Cleasby

tech­nol­ogy is trans­form­ing the way fi­nan­cial in­sti­tu­tions serve clients in Africa at a rapid rate. How­ever, less ob­vi­ous, yet equally pro­found, is how tech­no­log­i­cal deep­en­ing – and the new part­ner­ships that this in­spires – is trans­form­ing the or­gan­i­sa­tional struc­ture and strate­gies of fi­nan­cial in­sti­tu­tions on the con­ti­nent. The new hy­brids of part­ner­ship that African fi­nan­cial in­sti­tu­tions are de­vel­op­ing pro­vide a key to un­der­stand­ing the or­gan­i­sa­tional and strate­gic im­pact that rapid tech­no­log­i­cal change is hav­ing on the con­ti­nent’s fi­nan­cial sec­tor.

Re­gard­less of how one looks at it, the im­pact of tech­nol­ogy on Africa is over­whelm­ingly trans­for­ma­tive. Tech­nol­ogy is part of Africa’s devel­op­ment land­scape, driv­ing fi­nan­cial in­clu­sion by in­creas­ing ac­cess to cap­i­tal and the abil­ity to trans­act at a faster rate than ever be­fore.

The ab­sence of legacy in­vest­ments among African fi­nan­cial in­sti­tu­tions means that tech­nol­ogy em­pow­ers these in­sti­tu­tions to leapfrog ex­pen­sive phys­i­cal in­fra­struc­ture – di­rectly to mo­bile. The ubiq­uity of M-Pesa in Kenya demon­strates how fi­nan­cial tech­nolo­gies have been taken up on the con­ti­nent, en­abling African fi­nan­cial in­sti­tu­tions to ser­vice the pre­vi­ously un­banked – of­ten us­ing the most cut­ting-edge tech­nolo­gies. That said, in­vest­ments are re­quired to cater for cy­ber­crime man­age­ment, know your cus­tomer (KYC), anti-money laun­der­ing (AML), ter­ror­ist fi­nanc­ing de­tec­tion, big data man­age­ment and ro­bot­ics.

His­tor­i­cally, as fi­nan­cial in­sti­tu­tions in the de­vel­oped world evolved, they de­vel­oped new tech­nolo­gies that en­hanced cus­tomer ser­vic­ing and op­er­a­tional ef­fi­cien­cies. Adopt­ing many of these cut­ting-edge tech­nolo­gies re­quires African fi­nan­cial in­sti­tu­tions to part­ner with these in­ter­na­tional firms.

De­vel­oped world fi­nan­cial in­sti­tu­tions are ad­mit­tedly un­der in­creas­ing leg­isla­tive and com­pli­ance pres­sures to re­duce cor­re­spon­dent risk, yet if they are to con­tinue to ser­vice their core global multi­na­tional client base, they need to ser­vice them in

Africa too. This means part­ner­ing with African fi­nan­cial in­sti­tu­tions that are present, in­formed and ag­ile in lo­cal leg­isla­tive and risk en­vi­ron­ments – as well as fully in­sti­tu­tion­alised to man­age US dol­lar clear­ance across the con­ti­nent.

In­creased KYC re­quire­ments, es­pe­cially among de­vel­oped world fi­nan­cial in­sti­tu­tions, re­quire that African sub­sidiaries are able to list their com­pli­ance doc­u­men­ta­tion on the So­ci­ety for World­wide In­ter­bank Fi­nan­cial Telecom­mu­ni­ca­tion (SWIFT) re­pos­i­tory. Pro­vid­ing uni­form client doc­u­men­ta­tion that meets global com­pli­ance stan­dards across coun­tries in Africa – each with dif­fer­ent leg­isla­tive and risk en­vi­ron­ments – is a com­plex and ex­pen­sive process that can more ef­fi­ciently be de­liv­ered by fi­nan­cial in­sti­tu­tions present and op­er­a­tional within these ter­ri­to­ries.

This is some­thing that de­vel­oped world in­sti­tu­tions are pre­pared to pay for – or share tech­nol­ogy, sys­tems and pro­cesses with – through mu­tu­ally ben­e­fi­cial part­ner­ships. As Africa con­tin­ues to de­liver an­nual av­er­age GDP growth rates of 4% to 4.5%, mak­ing it the sec­ond­fastest-grow­ing re­gion af­ter Asia, part­ner­ships with Asian banks are in­creas­ingly im­por­tant. Tech­nol­ogy and how peo­ple trans­act in Asia is evolv­ing along its own path. Mak­ing WeChat, China’s most wide­lyused busi­ness and trans­ac­tion plat­form avail­able and ac­ces­si­ble in Africa, for ex­am­ple, is crit­i­cal to link­ing African op­por­tu­nity with Chi­nese in­vest­ment and ca­pa­bil­ity.

Link­ing Asian skills, cap­i­tal and know-how with Africa re­quires that the con­ti­nent’s fi­nan­cial in­sti­tu­tions reimag­ine not only their choice of tech­nolo­gies but also their cor­po­rate struc­tures – in­clud­ing part­ner­ships with Asian fi­nan­cial in­sti­tu­tions – if they are to build ac­ces­si­ble bridges be­tween the world’s two fastest-grow­ing re­gions.

As Africa’s econ­omy grows, the con­ti­nent also presents op­por­tu­nity for short- and long-term in­sur­ance as well as the man­age­ment of state and pri­vate pen­sions. In turn, as global pen­sion and in­vest­ment funds look to ac­cess African yield, part­ner­ships with es­tab­lished, glob­ally com­pli­ant African fi­nan­cial in­sti­tu­tions will in­crease. Look­ing to the fu­ture, this is likely to see hy­brid re­la­tion­ships be­tween a range of tech­nol­ogy ser­vice providers back­ing up es­tab­lished fi­nan­cial in­sti­tu­tions to de­liver via new plat­for­mag­nos­tic mo­bile tech­nol­ogy.

In­creas­ingly too, the so­phis­ti­ca­tion of what global clients are look­ing to ac­com­plish on the ground in Africa re­quires that fi­nan­cial in­sti­tu­tions on the con­ti­nent con­sider a broader set of part­ner­ships.

Mozam­bique, for ex­am­ple, is now in what is be­ing called its sec­ond wave of growth. The first wave was char­ac­terised by the bar­ter­ing of re­sources for ba­sic in­fra­struc­ture at a govern­ment-to-govern­ment level.

The sec­ond wave is see­ing global cor­po­rates in­vest­ing in so­phis­ti­cated sec­ondary in­fra­struc­ture ac­cess­ing oil and gas op­por­tu­ni­ties for sale on global mar­kets. This re­quires a fi­nan­cial ca­pa­bil­ity able to man­age com­plex for­eign in­vest­ment. It also means man­ag­ing daily trans­ac­tions, on the ground, be­tween Africa and new client mar­kets glob­ally.

While tech­nol­ogy is driv­ing this evo­lu­tion, an in­te­grated lo­cal and global ca­pa­bil­ity – de­liv­ered through key part­ner­ships with both fi­nan­cial in­sti­tu­tions and new tech­nol­ogy start-ups, plat­forms and providers – will see fi­nan­cial in­sti­tu­tions en­ter into en­tirely new types of part­ner­ships across the con­ti­nent. ■ ed­i­to­rial@fin­week.co.za

is head of fi­nan­cial in­sti­tu­tions client cover­age at Stan­dard Bank.

Cell­phone-based M-Pesa, which of­fers money trans­fers, fi­nanc­ing and mi­cro­fi­nanc­ing, has en­abled mil­lions of un­banked Africans to ac­cess fi­nan­cial ser­vices.

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