Digital revolution is inflicting a disruptive blow on traditional banks and financial institutions in Africa, putting these perennial institutions on the defense foot perhaps for the first time in modern history. The proliferation of fintechs across the continent has made Africa a hotbed of financial innovation and arguable the most interesting market on the globe. Expectedly, the technology driven invasion of fintechs into the sacred fortress of Banking, Insurance and Finance was met with bitter competition and furious rebuttals from the later.
Over a decade from the inception of this supremacy tussle, it is safe to say that the time has come for both sides to embrace a more sustainable approach which will require everyone to sheath their swords and take a seat at the table of brotherhood. As Denise Leonhard of Paypal noted “[Nobody] is going to be able to do it alone. To get to the next evolution of payments, it’s going to be really partnership driven. To put it in the words of Ade Bajoma the Executive Director, IT and operations, Access Bank “82% of the existing BIF companies on the continent will need to collaborate with fintechs, if they must survive and participate in the all-inclusive tech economy of the future, where Africans will be solving Africa’s challenges.
Of the continent’s estimated 1.1 billion population, almost 300 million Africans are banked, which McKinsey estimates could rise to 450 million in the next three years. Even at the 450 million mark we still have a deficit of over 500 million Africans who needs to access to real-time, multi-channel highly personalised and contextual financial services. Serving these people and ensuring that they get access to financial services and products require synergy across platforms and networks. A good example is Kenya’s Safaricom that reached an agreement with M-Pesa in 2019 to use its mobile payment service for online shopping on an Alibaba platform thereby giving customers an easier and more accessible payment considering that M-Pesa has been able to reach many of the unbanked Kenyan population.
Collaboration between banks and fintechs is the linchpin for the development of new products, growth of investment opportunities and infrastructural development for Africa. An excellent case in point is the partnership between United Bank for Africa (UBA) and US fintech Ovamba Solutions. In what was deemed the first of a kind partnership, UBA collaborated with Ovamba to provide her customers with new techtrade solutions such as capital, supply chain and management software, e-commerce support, logistics and on demand warehousing all driven by Ovamba’s Growth-as-A-Service product. In Nigeria SystemSpecs is working with commercial banks and other financial institutions to fast track lending and recovery process. In South Africa Barclays Bank entered into a partnership with WizzPass to ensure they are able to offer their customers swift access to the best parking solutions. Other iconic brands like Citibank Union Bank are running accelerators, signing proof of concept (PoC) agreements, to make direct investments with other fintechs across the continent.
“There are very few markets any more where the customer offerings are stagnant. Everyone is innovating more, creating better products and services, and the customer is benefiting from that” says Paul Mitchell, Fintech and Blockchain Lead at PwC South Africa. The continued evolution of the market and the development of novel solutions can only be made possible by diversity and a wider industry collaboration. That is why established banks need to be more adaptive and willing to make relevant cultural shift where necessary in a bid to work with new players. On the part of the fintechs and new startups, pragmatism and objectivity is essential to foster seamless alliance with the established banks.
“Unless banks and fintechs get better at working together, neither will reap the full benefits of innovation”.
To share more insight and strategies on how banks and fintechs can get better at working together, Leopold Armah, Divisional Head Digital Banking & Alliances Guaranty Trust Bank (Ghana) Limited will be addressing the subject – The Way Forward: Achieving Financial Inclusion Through Collaboration and Diversity at the Payment Innovation Forum from June 16-17, 2020 in Nairobi, Kenya.