James Scott, Chief Digital Officer of Absa Corporate and Investment Bank, writes on how digital revolution is fast-tracking growth on African continent.
IF there was ever a time to watch progress in Africa, it would be now. As we have seen so many times before, the continent has the ability to leapfrog technological trends and with the rapid scaling of digital technologies we believe there are huge opportunities awaiting to be exploited. The explosion of digital continues to gain momentum and digital, data, design and the emergence of the Fintech sector are all fast becoming the driving force behind this.
All organizations across segments and sectors need to evaluate their strategies and their response to these trends. As a result, new business models are emerging, partnerships forming, innovation is scaling and the time is now to harness these trends to create more opportunities. Africa is in a unique position to take advantage of the digital trends that are emerging at present. As a continent, it remains the leader in mobile money with over $22 billion moved annually and that trend is likely to continue. With the underlying improvements in technological capabilities, connectivity and the proliferation of mobile devices he anticipates exciting times ahead for the digital transformation of the continent.
The growing use of big data, mobile, cloud computing and artificial intelligence gives organisations the ability to re-imagine client experiences, deliver products & services instantly to large numbers of clients at a lower cost. The other big trends that cannot be ignored are blockchain technology as well as the much talked about cryptocurrencies. These shift the way we think about international payments, trade finance, identity as well as the future of money itself. Over time Blockchain will bring transparency, cost reduction and efficiencies that organizations haven’t been able to offer before.
Thriving Fintech Ecosystem
But it’s not just emerging technologies that are changing the way Africa does business. The significantly lower barriers to entry technology has provided small businesses, has seen a thriving FinTech ecosystem emerge. In 2016 there was a 33% growth in investments into start-ups, that saw $367m flow into the sector. While there is a concentration of the Fintech’s around South Africa, Kenya and Nigeria this trend actually continues across the continent. Fintech companies on the continent are looking to go after African problems and opportunities, and many of these companies look into payments, remittances, identity, financial inclusion and leveraging data to improve credit scoring and access to basic financial products. These companies not only offer job creation, new revenue opportunities and cheaper methods of delivery but also improve financial inclusion. As of 2014 over 60% of the adults in Sub-Saharan Africa didn’t have bank accounts so by embracing the FinTech revolution, we will significantly improve basic access to financial services.
Partnerships and evolving business models
The World Economic Forum believes that partnerships with Fintech’s is one of the biggest business trends to watch this year, particularly in the technology space. It was initially feared that FinTech’s would disrupt the big players in the various fields however these previous ‘enemies’ are coming together to use one another’s strengths for mutual benefit.
Through these partnerships and start-ups, business models are starting to evolve and move into new and sometimes unexpected places. From this new digital perspective, the payments landscape is changing and becoming more competitive as young companies look to reduce the cost of transacting as well as bringing speed and agility to companies operating in the African corridor.
According to the 2017 PwC Global FinTech Report, 82% of the Financial Institutions interviewed expect to increase their FinTech partnerships in the next three to five years. This will most probably be met with quite a bit of internal resistance as bigger organisations grapple with the new ways of working required to partner effectively with more agile and quick acting start-ups. However, the key to making this a success is to choose the right people to partner with.
We cannot ignore the digital growth on the continent – as it opens up a wealth of opportunities to bring banking to the previously unbanked. With financial inclusion high on our list of priorities for Africa, we are excited about accelerating our digital growth in Africa.