On LinkedIn, I recently uploaded a post that had a graphic recording themed on the discussion of mobile banking unpacking challenges, opportunities, the pillars of the ecosystems and the key stakeholders in the markets. It was a piece of art and knowledge that was created about 4- 5 years ago, and however powerful the discussions in the room, the micro-themes still echo the non-silver bullet industry that’s catapulted Africa’s invitation to the global seat of innovation, and particularly financially inclusion. Although the hotbed of the financial inclusion conversation is mobile money in Africa, in this article we’ll explore and propose ways to continue enhancing the distribution mechanism of mobile to employ an economically inclusive society.
Exploring Mobile Money Mission
It was not so long ago when MPESA launched in Kenya, and successfully so that not only did it grant Africa the opportunity to drive the mobile money conversation and allow the unbanked to access financial products but, for some, create and enhance digital footprint, and a chance to be economically active.
Traditional banks notoriously have, for a long time created financial products that were only accessible to the middle class and above, those who were already economically empowered. In the exclusivity of these financial products, the role of startups, data (open or big) and technology became important in leapfrogging the traditional banking industry and getting credit right. The rise of the living standard in emerging markets also created an opportunity for the mobile economy to continue to thrive, whether with an Android phone or if you’re living in the townships.
Who Gets to Participate?
According to research by the PEW Research Center, in emerging economies, the population in some of the poorest communities do have access to a mobile phone, even though the ownership is not of a smartphone. What this does, is that it gives rise to Opening Demand so that the non-digitally savvy citizens may participate, and Supply Inclusion for manufactures, such as now, the new smartphone manufacturer in Africa with the Mara Phone Project.
Mobile money products bank on the vision of a society where the individuals are economically active and visible, from women owned businesses who in some economies didn’t have access to credit to spaza shop owners and the super paranoid cashless user. And in doing this, it is also giving them a digital footprint, and an identity that is tailored for edifying their lifestyles as well as their businesses and financial products.
However, the cost of this inclusion also comes with its own price for the service providers, which includes finding ways to enhance the user and experience centric for the customer.
The Cost of Digitisation, for the Supplier
The high level of customisation to operate in data-lite countries, where data is not enriched and infrastructure is needed to augment results is quite costly. At this moment, this is where the call to government to participate in the market is quite loud in knowledge sharing spaces like conferences and roundtable discussions – an opportunity to serve its citizens better, create more competitive markets and empower lessening the digital divide.
Looking at creating cheaper solutions will cost spend of engineering and predictions analytics, investing in more talent, having the processes to refine the data in order to have more value, the urgency to transform through infrastructure and the list goes on to be an enabler. The return on investment in this cost is not in just the adoption of more products, but also in customers being better informed and better buying customers.
What’s In It For Me, the Consumer?
For a customer like myself, I’m constantly looking for ways to continue leaving my credit and debit cards at home and having my own money market on my phone. The question of “What’s In It For Me?” is what’s constantly at the back of a consumer’s head, whether one has a mobile phone that’s a smart or feature phone – all phones matter.
For the smartphone user, products like Whatsapp, Google Suite, UBER, Booking.Com and BiNu or Facebook which states that 94% of its 170 million African users access the platform via mobile, and with even 100% of the Nigeria population accessing it through mobile. And for feature phone users, products like Mobile Banking, Bwenzi Lathu, JUMO, Kopah Doh or Telecommunications Services are also what make this particular phone a market of the present and future.
While we wait on the digital divide to close and for an all inclusive society, let’s be mobile and invite stakeholders to continue creating enabling ecosystems and environments to innovate for a thriving present and future mobile market.
One of the most archaic, traditional systems in the world is getting a facelift, it’s being disrupted from the outside in at a pace that is necessary for the sector to grow. Banking is being turned on its head through the agility and prowess of fintech startups across the globe, and interesting to me is the revolution of partnerships with startups that’s making the threat a sweetened growth hack opportunity.
More and more, we’re beginning to see the quite intentional innovation through large corporates, particularly banks with the agenda of strategic partnering with fintech startups to not only tell a good story but innovating with the intent of incrementally and radically transforming products within the bank’s objectives.
In Africa, we’ve seen successful partnerships like ABSA through their RISE signing POC deal with Peach Payments to test their product and Nigeria’s GT Bank investment in Accounteer with live integration to enable the bank’s financial services are prime examples of how the fintech dream team has mutual benefits for both entities.
Leverage the Open Innovation Agenda (Data, Infrastructure and Technology)
Innovation is expensive, and as disruptive as the process is and as sexy of a story it is to tell, the selling of innovation is nothing compared to the sweat equity involved to successfully take a product to market from ideation. One of the most heartbreaking cycles is witnessing a startup working with an entity, be it an accelerator or a bank with the intention to scale or prove a concept, and the innovation agendas are not aligned. Once the alignment is recognised and relevant, for the bank be it to incrementally or radically innovate their products which has an impact on their systems, or a growth hack opportunity for revenue and having more customers, and adding value to their data and technology. Whereas, the opportunity for startups usually comes in at acceleration of proof of concepts, going to market faster through capital investments and other capabilities and the chance to build on top of the infratrsucture of the bank through open integration.
Access to Capital, Network and Domain Expertise
As I mentioned in the previous paragraph, the opportunity to support startups from the bank’s perspective comes in at monetary investment capital, access to the network that of the bank and the knowledge sharing through domain expertise. In 2017, Merrill Lynch South Africa and Royal Bafokeng Holdings in partnership with Rand Merchant Bank’s Alphacode invested over R4 million in 4 fintech startups for the development of these high impact startups. Through Alphacode, fintech startups like Bankymoon, Livestock Wealth, Slide and Commuscore to name a few have to had access to resources such as an advisory network and a co-working space available.
The Opportunity to be a (First) Customer and The Acquisition
One of the most celebrated bank(able) fintech dream team partnerships is between startup Firepay and Africa’s biggest bank, Standard Bank to launch Snapscan. This partnership worked because of the aligned innovation agendas, and provided Standard Bank the opportunity to provide a solution to and grow their customers and supported the bank’s emerging payments strategy, and for Firepay, to have Africa’s biggest bank not only as a customer but now also as an investor in the business, and the opportunity for their product to scale beyond borders.
The dream team partnership doesn’t not come with its challenges, it’s not all rosy, after all, financial innovation and startups are competing with an archaic system with inertia to change from the security policy to the production management process. Partnering with banks is no walk in the park – especially given the early stages of these kind of collaborations.
As the ecosystem embarks on the journey, it’s key for both banks and startups to recognise that the bankable partnerships are not innovating not against legacy, but with legacy systems because of the valuable intelligence of failure’s patterns and the combination of new models, science and data through which both entities have the capabilities to impact.
And as a final word, ensure that your core values, and not just your technology and data talks to each other.