Due to the high growth rates, consumption, and progress in creating the African Free Trade Area, Africa is transforming into a fertile terrain for banks and Fintechs competing for clients. While traditional retail banks seek to modernize their transactions – and reduce their overhead so they can achieve more clients – Fintechs provide simple, quick, and intelligent solutions as alternatives for banking services.
Traditional banks are modernizing
The Banque du Caire has 2.9 million clients in Egypt and a network of 225 agencies, and it announced a partnership with Temenos, a Swiss company, to modernize its transactions. This partnership will enable the bank will employ cloud-computing services serving its clients. “This will make it possible to hasten changes, simplify complexity, and drastically cut down on our property asset costs,” assures Amr El Shafei, executive vice-president of the bank.
Temenos is specialized in banking software. It has over 50 clients in eastern Africa and has been operating in that region for two decades. “Egypt is embracing the digital revolution, and one can see all sizes of banks embarking on digital transformation projects,” tells Jean-Paul Mergeai, Temenos general director of the Middle East and Africa. “We believe that financial institutions can only become truly digital when they transform their operations into point-to-point.”
This case is similar to the Bank of Kigali, the largest commercial bank in Rwanda that includes a network of 68 agencies, 99 ATMs, 1,427 bank agents, and over 1,200 employees. The bank was established in 1966 and has been a client of Temenos for three years. This bank seeks to reach the 1 million-client milestone by 2021. To achieve this, it needs to gain young people as clients and those without bank account through betting on digital banking services.
“The new open-digital bank platform will allow us to get a deeper understanding of the needs and provide the means to offer an enhanced experience to our clients,” shares Diane Karusisi, CEO of the Bank of Kigali.
The Ecobank home office is in Lomé, the capital Togo, and it operates in 36 African countries. One of its cutting-edge differences is its mobile phone apps. It features a checking/current account focused on users without Internet access and an online platform, making it possible to send cross-border shipments to Africa at a minimum cost or even free-of-charge. All this was essential so that Ecobank was elected as the best retail bank in Africa in 2019. “The traditional banking model is changing, and Ecobank will continue playing a pioneering role in serving the needs of millions of Africans,” reveals Ade Ayeyemi, CEO of Grupo Ecobank.
European Fintechs are focusing on Africa
Companies from other continents are also eying the digital transformation of Africa, and this is the case of the English company WorldRemit. A leader in the field of online money transfers, the company launched the WorldRemit for Business in June. The new service will allow owners of small and medium-sized businesses to pay their employees and contracted parties quickly and easily in 140 countries around the world, including Nigeria, Ghana, Kenya, and South Africa in the African markets.
According to the company, the United Kingdom annually imports US$ 2 billion dollars in goods and services from Nigeria. Small and medium-sized businesses make up 96% of all companies and 84% of jobs in the Nigerian territory. It was necessary to create partnership relations with some local banks, such as the First Bank of Nigeria, the Access Bank Plc, and Fidelity Bank Plc to operate in this African country.
“As more people are transacting and establishing business relations across borders, the nature of businesses is becoming more and more globalized. Thus, this new portfolio of products to meet the needs of those who need digital services to solve a series of problematic points faced by SMBs. They hire employees and contracted services from international sources”, believes Shane Lennox, senior product manager of business relations for WorldRemit.
Another European company favorably watching the African growing opportunities is the Dutch PayU service that has decided to launch operations in Kenya, and they already have plans to expand to Rwanda and Tanzania.
Specialized in payment remittance services, PayU began its operations in Nairobi in February 2019. “Kenya is a robust and expanding market,” says Corrie Bakker, the boss of business strategy and development of PayU in Africa.
The company chose Kenya for several reasons, according to her. Not only is there the perspective of strong economic growth and an expanding middle class, but mobile transactions also dominate the payment remittance market in the country, as over 80% of payments are transacted by digital wallets. Besides that, the region of Eastern Africa should increase by 5.9% in 2019, a significantly larger percentage than northern Africa (4.9%) and southern Africa (1.2%), according to estimates from the African Development Bank.
Bancos versus fintechs
It refers to the merging of the words financial and technology to create the term Fintech, and it mostly designates startups that are attempting to innovate the financial system. These companies operate on a much smaller budget compared to traditional institutions in the sector. “There is no doubt, Fintechs represent the most dynamic sector regarding investments in high-tech, and we are going to truly see the transforming impact that this sector can have on this segment”, comments Omar Ben Yedder, editor of the African Business magazine that annually hosts the African Banker Awards, recognizing the best banking institutions.
+ The second edition of the Digital Transformation Congress (#DTC2019) will take place on July 30, 2019, at the Sandton Convention Centre, in Johannesburg. For further information visit the event website: (www.DigitalTransformationCongress.com)