Africa presents the ideal environment in which to evolve a new cash and payments services architecture – by linking rapidly changing customer expectations with new technologies. This puts banks squarely at the centre of mediating the creative clash of trends and technology, as Africa’s financial institutions harness disruption for innovation and growth.
Kent Marais, head of product management, transactional products and services for Standard Bank, says: “From a cash management perspective, Africa’s ongoing growth – in a rapidly changing technology and client expectation environment – presents an opportunity for industry-leading disruption.”
This is especially so as Africa returns to growth.
Even without a convincing commodities price rebound the African Development Bank is predicting GDP growth figures of 3.4% for the continent in 2017 – and 4.3% in 2018. Lead by increasingly diversified and integrated economies, especially in East Africa, the continent is expected to remain the world’s second fastest growing region after Asia.
While growth rates and opportunities vary and factors, like interest rate volatility, can often cut into what looked like great profits on paper, “Africa’s overall numbers speak to the sustainability of the continent’s growth narrative, especially as key economies increase their trade – and integration – with emerging Asia,” says Marais.
“In this rapidly growing – and changing – frontier environment, traditional views of cash and payments are being fundamentally disrupted, driving rapid innovation in Africa, “often ahead of the rest of the world,” he adds.
Disruptive technology transforms Africa
Today, retailers in Africa increasingly offer payment and money transfer services. Mobile operators offer mobile payments with scaled agency networks. Aggregators bundle client groups to negotiate better rates from established players. New fintech products like distributed ledger technology, data and prediction analytics, robotics, and digital identity solutions challenge – and deliver more quickly and easily – the kind of services and insight that used to be the preserve of banks.
“While, these developments hold great potential to transform the efficiency, cost and speed of Africa’s payments landscape, many – in their raw form – cannot be of immediate benefit to customers and clients,” says Marais. Without a strong use and business case, adoption by existing customer bases, or proper integration into system that deliver to customers and clients, disruptive technology will not improve services, change lives or transform economies. Instead of viewing these disruptive elements as a challenge, “banks are the ideal partners to bring disruptive technology to market – in a way that usefully and positively transforms the lives of Africans,” says Marais.
As African banks collaborate with different disruptive technologies and start-ups they will explore and evolve new revenue and service opportunities – as they test and adapt technologies to meet increasingly complex customer needs.
Disruptive technology meets new customer and market needs
Marais believes that key areas in which disruption is helping meet customer and market needs across Africa include:
- Creating inclusive and open banking platforms
Clients in Africa often operate across multiple jurisdictions and currencies, using suppliers who do the same. The result is that clients deal with multiple banks, even on single payment transactions. Since SWIFT, for example, can to some extent provide a unified view of all the elements of a payment transaction, “banks in Africa are increasingly challenged to develop non-proprietary platforms allowing non-traditional banking players to interact with bank and client data,” says Marais.
The move to an open banking environment and the evolution of Application Programme Interfaces (APIs) will significantly impact the payment environment. Banks will use APIs to access third party services, allow third parties to access their services and co-create new products and services with third parties.
- Ongoing compliance agenda
As African domestic legislation dovetails with global compliance legislation the continent’s payments environment is set to modernise, including Africa’s electronic collections capability.
While local, regional and global compliance pressures are often viewed as a burden and a cost by banks, their combined pressure to increasingly track payments or provide visibility across complex transactions, “is driving cooperation with fintechs as banks seek to innovate tracking mechanisms in environments without developed banking architecture,” says Marais.
- Time and cost pressures
While providing wider access and deeper financial inclusion requires more investment – usually at more cost – this comes at a time when customers are pushing for cheaper products and services. These competing pressures in what is an increasingly commoditised payment product space, “is likely to drive even closer convergence, partnerships and cooperation between banks, technology, fintechs and legislators,” says Marais.
Equally, while one often hears that cash is still king in Africa, “today, outdated and rigid paper-based processes come at a cost to clients on the continent – in time and money,” says Marais. Becoming more cost competitive and efficient requires investment in new technology. While this comes at a cost to traditional institutions like banks’ it is critical that banks and their systems become more agile if they are to be truly client-centric.
- Increasing dissonance between corporate and retail payment experiences
With many businesses in Africa either in start-up mode or still small, individual entrepreneurs who started businesses, “expect the same kind of service from their business banking partner as they experience as individual mobile account holders,” says Marais. Right now, the corporate banking experience is not as developed as that of individual account holders. This is forcing banks to develop, by providing the same kind of capability – available electronically 24/7 – to businesses and corporates that individual retail clients have grown accustomed to on their mobile managed bank accounts.
- Cross border visibility
Once payments cross a border in Africa clients usually lose sight of when the correspondent receives the payment, which institutions are handling the payment, and how many deductions have been made. “Banks, today, need to be able to provide visibility in real time across the whole length of the transaction,” says Marais.
In a growth environment where ever-more Africans are involved in cross-border and international trade, Africa’s varied exchange control and currency jurisdictions, “present rich opportunity for the evolution of instant electronic currency conversion and payments systems that meet the legislative requirements of multiple currency and exchange control environments,” explains Marais.
Banks have increasingly had to react to fintech disruption – so far either through partnership or outright absorption. More recently, participating in industry-wide collaborative efforts – like the SWIFT GPI initiative – is providing banks a platform to collectively explore more efficient ways of managing and refining new payment technologies and systems. “Ultimately this kind of collective collaboration will benefit the clients of all banks,” says Marais.
Present in 20 markets across the continent Standard Bank is playing a key role in driving the adoption of disruptive technology to meet the rapidly changing transaction needs of African clients. This is being achieved by placing digitisation at the heart of the bank’s overall strategy.
“It is both exciting and rewarding to be a part of Africa’s banking industry as it moves to creatively evolve and integrate new technologies to meet African’s payment challenges – measurably and visibly, driving growth and transforming lives in Africa,” says Marais.