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With a distant society now being created, how can African Banks reimagine their business models, adopt new technologies and solidify their role amongst their communities to create shared value? In this time of crisis, speed to market and choosing the right approach to technology are critical to meet the needs of consumers' digital expectations.
Facing low margins and increased competition, African banking revenue is expected to fall by 23 to 33 percent between 2019 and 20211. Despite the current climate, African Banks continue to play a pivotal role during the pandemic, weathering the storm by filling the credit gap, preparing for recovery, and addressing long-term economic growth. In the short run, a vast majority of Banking groups are in organic expansion mode, looking to reach beyond their countries of origin or bring their presence and services closer to people2.
To continue the digital momentum we believe that African Banks should focus on the following themes to compete and grow on the continent:
Growth through Digital Platforms
A digital banking platform strategy has become a competitive necessity and core to Banks’ business strategies3. In our experience, platforms foster innovation by helping create value by providing Banks the opportunity to accelerate application development, meaning quicker time to market to meet the needs of customers and staying ahead of their competition.
We have seen that digital banking platforms give banks the ability to connect different ecosystem partners and to leverage reusable building blocks, such as self-onboarding, loan origination that are easy to scale thanks to microservices and API capabilities.
Platforms continue to reduce IT costs, modernise legacy Banking architecture and create great customer experiences. Banks can build their platform ecosystem or leverage partners like Software Group to provide the solution. Choosing a ready, mature and flexible platform reduces the total cost of ownership significantly and enables agility and quick time to market.
Growth through Omni-channel Onboarding & Origination
A key part of a Bank's platform strategy should focus on how to reach, acquire, retain and delight customers through an omni-channel onboarding, origination, and service. An omni-channel solution approach is essential with physical location presence being limited however still a critical component in customer onboarding and servicing in Africa. According to Capgemini, customers want their banking platforms to provide the same experience they enjoy from digital lifestyle applications offered by big tech players4. Banking platform ecosystems allow for the integration of different types of applications to provide the customer a unified experience and who knows in the future it will incorporate lifestyle applications too!
A great example that continues to remain relevant in the African market for a blended physical and digital experience, is the Agency Banking platform which provides essential financial services to communities especially to those in remote locations, keeping Banks agile and accessible to their people. It allows Banks to implement cost-efficient, branchless operations in remote areas through a network of local agents and merchants. Advancements in Agency Banking include a platform as a service with plug-and-play capabilities, allowing for services to be managed through the cloud. This type of innovation helps banks to scale along with providing the necessary omni-channel touchpoints required by the market.
We found that how Banks onboard their customers will determine the tone of their ongoing relationship which can reduce churn and create greater loyalty if done well. Digital self-service onboarding solutions allow customers the convenience and ease to apply through an app to access banking services through self-registration. Such solutions should easily integrate into core banking systems, process workflows, and ID verification services to name a few, lowering operational costs while increasing conversion. Omni-channel onboarding & origination also provides business continuity, reaching communities to access Banking services, and apply for loans, with secure KYC, and intuitive user experience capabilities.
A key channel, often used by Banks to onboard new customers with lower KYC with the goal to upsell them more services later, are Mobile Wallets. They provide a first-class customer-centric user experience, quick self-onboarding, advanced KYC & biometric ID verification, and efficient contactless payment modes.
With the increase in demand for omni-channel digital onboarding and origination to support the customer journey Banks need to ensure that this is matched with effective capabilities to future-proof themselves for growth.
Growth through Transacting
The payment ecosystem had to adapt quite quickly to pandemic-driven changes. Globally, the overall payment ecosystem has also experienced a 25 percent increase in its efficiency, hence optimized profit margins, increased client satisfaction rating, and ultimately a greater client base attracted5. Payment ecosystems operate in a complex environment with many actors in this ecosystem ranging from cardholders, merchants, merchant services providers, gateways, and card networks. Therefore, digitising both merchant and consumer payments in the banking ecosystem remains vital to drive a cashless society.
In Africa, mobile money has dominated the industry, by the end of 2021, there were 548 million registered accounts in the region, over 150 million of which were active on a monthly basis6. Even though cashless systems such as mobile wallets and mobile money continue to show effectiveness during these times, Banks need to look beyond the current capabilities to develop new and robust interoperable payment ecosystems through strategic partnerships.
Such advancements come in the form of SaaS models providing scalability and flexibility, integration with third-party VAS services & partners, and advanced analytics platforms to tailor products and services. New monetized business models are also emerging through payment ecosystems from API-based platforms which include revenue share with platform partners and fee-based banking-as-a-service model.
Another industry innovation that Banks need to pay attention to is the creation of new financial service frameworks such as Open Banking. This is set to become the blueprint on which the entire digital banking ecosystem is being built7. Europe is one of the pioneers in Open Banking, establishing one of the first regulatory frameworks for it. So why is it important for Africa? The shift towards digital channels will allow banks to share customer data through APIs with relevant third-party providers, increasing further customization and personalization for financial services and products.
African Banks need to continuously evaluate their agility and embrace partnerships with new technology providers to understand the needs, motivation of their value chain, and customer lifecycle for future relevance and growth.
Lead in the Digital era with Software Group's DigiWave Digital Banking platform
With decades of experience driving digital transformation in the financial sector in 70+ countries and used by more than 200 financial service providers, our DigiWave platform is the foundation for your digitalisation journey. Contact us today to learn more!
Sources:
2 EIB.COM
