Africa has shown a tendency towards the adoption of new technology, particularly in the field of financial services. With about eight out of ten people on the continent possessing mobile phones and more than 570 million people expected to be online in 2022, a 470% increase from 2010, it is now much simpler to access information and services.
It is more likely than ever before that people in Africa will be able to access financial services online. Nevertheless, we need to find solutions to the problems with the infrastructure, increase our level of collaboration, and fortify our institutional links.
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How African banks can stay updated
Banks and central banks need to evolve to accept and adopt the opportunities given by new technologies such as blockchain, mobile money, and cloud computing if they are to continue to play a significant role in the global economy. However, new opportunities also come with new risks, which necessitates the need for updated laws that are effective but do not stifle innovation, particularly those that are being driven by start-ups in the fintech industry.
Fintech companies shouldn’t be viewed as competitors to banks but rather as potential partners who may assist traditional players in better satisfying the requirements of their clients.
Adoption of mobile money
There is a big chance to apply the lessons learned from the adoption of mobile money on a continent where physical cash still accounts for more than 70% of transactions. This presents an opportunity to bring more people into the financial industry in a way that is both safe and accessible.
Mobile money is one of the payment systems in Africa that is expanding at one of the highest rates, and we can make the next exponential stride forward by leveraging it in areas other than payments or peer-to-peer transactions. Africa’s population is young, born into the digital age, and urbanising at a rapid rate.
The continent is a hive of activity for start-ups and fintech companies that are helping to address financial problems, and many countries and territories on the continent are relaxing rules to speed up the adoption of electronic banking.
In order to provide our clients with the most effective solutions for their needs in the modern era, we need to continue to be early adopters of technology while also gleaning knowledge from those who came before us. There is a significant opportunity for mobile money solutions to develop into more comprehensive banking products, such as lending, saving, and investing; banks must take the initiative to realise this potential.
It is arguable that there is no other market in which the expansion of more inclusive and accessible financial services is more common than it is in Africa. Over the course of the last decade, our tremendous commercial growth and increasing globalisation have made it even more vital to provide financial services that are accessible to more people.
Make trading easier
The expansion of small and medium-sized businesses (SMEs) and entrepreneurial endeavours, along with the associated innovation in financial technology (fintech), particularly in the field of blockchain technology, has the potential to propel the general improvement of financial infrastructure.
In order to ease trade both within and outside of Africa, an additional essential area that requires growth is one in which cross-border payments must be made more effectively and at lower costs. The pan-African payment and settlement system, often known as PAPSS, is one solution that strives to solve the demand that exists within Africa. PAPSS makes it possible for instant cross-border payments to be made between African countries, eliminating the need for the complexity, time, and money that are required to conduct these payments via standard banking techniques.
When making a payment to a participant in another African nation using PAPSS, participants do not need to first convert their local currency to a hard currency such as the US dollar as an expensive and time-consuming intermediary step like they would have to do without the system.
The widespread implementation of PAPSS across the continent will usher in a new era of payment that will contribute to the expansion of the economy. As a result of this, Standard Bank South Africa has agreed to offer settlement for certain types of transactions by signing a memorandum of agreement. Additionally, it seeks to establish itself as a participating bank in the majority of the markets that it works in.
During this time, a number of countries in Africa have witnessed rapid adoption of cryptocurrencies as a means to gain access to more efficient payment rails provided by blockchain networks and to generate returns on income with assets such as bitcoin and stablecoins, which are designed to maintain a stable value by being pegged to an asset such as the US dollar.
Because of the high degree of volatility associated with cryptocurrencies, the real opportunity for expanded financial inclusion in Africa rests not in the cryptocurrencies themselves but rather in the blockchain infrastructure that underpins them; stablecoins are an exception to this rule.
The distributed ledger system has the potential to instantaneously eradicate fraud as well as human mistakes in transactions while also fostering openness in financial records. This has the potential to make it possible to create welfare systems that are highly reliable and resistant to corruption.
In addition to this, it has the potential to provide mechanisms for microfinancing that are both fair and transparent, as well as enhanced purchasing power, in order to encourage the establishment and expansion of small businesses that serve local communities.
The technology of blockchain can kickstart new trade opportunities between nation-states, giving Africans the option to participate in a technological revolution and become a part of a decentralised economy. Blockchain technology can also provide Africans the opportunity to start their own businesses.
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What this means for the conventional banking system
It is very evident that the solution is not to compete with fintechs; rather, it is to make use of new technology by engaging in our own right and through partnerships.
The digital banking solutions that will matter now and in the future are those that were not only built by leveraging emerging technology but also through collaboration between traditional incumbent banks, central bank regulators, and fintechs in the process of resolving the challenges that inhibit access to financial services in and outside of Africa at true scale.
In the end, the goal is to contribute towards sustainable economic growth and development in Africa, and we are likely to make faster progress towards this goal through collaborations with fintech start-ups and mobile network carriers that are typically more innovative and agile in the solution delivery.
We have the ability to ignite Africa’s true potential if we build a culture that encourages adaptability and the taking of calculated risks on top of a foundation of solutions that are technologically innovative and of high quality.
