In Africa, traditional banks are now reaching out to fintech startups on the continent to be able connect their services to more consumers. Banks have, in a way, admitted their own failure in building sufficient and accessible infrastructure by leaving the rollout of mobile money services mostly to mobile network operators. These mobile network operators offer mobile wallets that function as bank accounts.
Mobile financial services offered by Mobile network operators now offer better services at lower cost and a means to enable variety of transactions to happen between consumers and producers. This is trending a scenario where some users never see the inside of a bank, nor engage directly with banks anymore. As this trend begins to permeate across many markets, banks are feeling the pinch as costs with providing financial services spiral with new regulations and need for improved customer experience and access.
For Africans, adopting a platform that offered little by way of costs is also facilitating a new sense of acceptance of digital payments and thus lending a hand to the drive towards a cashless societies. Products and services from traditional finical institutes have still kep the same old brick and mortar model, doing very little to offer creative solutions that invite the common man. The mass of Africans across all markets this see the offer of alternative means an opportunity to get engaged and as well engage new forms of business models that inself is adding to GDPs of many African countries – case in question Kenya.
Growing examples of new groundbreaking and innovative options with fintech are now surging on the continent. MFS Africa, which has managed to connect 80 million mobile wallets across Africa is enabling cross-currency, cross-border, cross-network payments through entirely new infrastructure. Another example is Nomanini, which is rolling out a payments platform for informal merchants across the continent. As the excitement spirals, a fintech revolution is shaping up on the continent with positive ramifications on digitalizing transactions betweeen businesses, consumers and across both.
As Africa continues to take interest in infrastructure buildout, fin tech presents a fantastic opportunity to include a better part of the masses in the revenue collection and thus grow development funds. Regulators and governments are now putting pressure on banks to step up their game as they begin to see the picture they’ve failed to catch for a long time. Traditional banks are now reaching out to fintech startups on the continent, with initiatives such as the recent Barclays Africa Accelerator which took place in Cape Town, South Africa. Banks know that they have failed when it comes to reaching lower income consumers in informal markets, and they are therefore turning to more innovative, younger companies to help them connect with these consumers and businesses.
Providing financial services to lower income groups must be done carefully. There are opportunities for those that do not care about the end-user as much as there are for those that do. In a market where financial services infrastructure exists only for the affordable, irresponsible digital lenders and other consumer finance providers could cause great damage, creating a new credit bubble and a digital credibility shake to the mass market. A balance in regulations and facilitation must be struck. The GSMA Mobile Money Code of Conduct, the SMART Campaign and the UN Principles for Responsible Investment are already providing a useful set of guidelines, but all of us involved in fintech in Africa as operators or investors must do more to ensure the consumers of mobile financial services is protected.
There are a few places on earth in these times that fintech is not disrupting the existing financial service providers that massively yet. But then and again the the traditional monetary system have gained a foothold that means it will take time for that massive disruption to happen. As places like South Asia, Sub-Saharan Africa, Latin America etc., continue to have large unbanked or underserved populace, swathes of low and lower mid-income segments are an opportunity for financial institutions to apply finitech innovation to help ignite forms of formal financial services.