Three Fintech Trends for Financial Inclusion in Sub Saharan Africa
This blog was originally published on the CFI website.
Key fintech trends include publishing open APIs, which helps to expand customer bases and improve services offerings
The following post is part of a blog series spotlighting perspectives and experiences from the Africa Board Fellowship.
Access to financial services in Africa is on the increase, up 19.4 percent from 2011 to 2017, according to the 2017 Global Findex report*. This change can largely be credited to digital financial services. New entrants to the financial sector such as telcos, fintechs, and in the near future bigtechs like Facebook and Google are all offering technology-centered financial services that are changing the landscape and posing a competitive threat to traditional financial services providers (FSPs). At the same time, new technologies can allow traditional FSPs to expand their outreach and radically improve operational efficiency.
Considering both challenges and opportunities, now, more than ever, financial institutions of all stripes have to accept that technology and innovation are integral to their business strategy. These changes require a shift in culture throughout the institution and among the leadership. Board members, for example, have to embrace this change, understanding the current industry trends, experiencing these financial innovations firsthand, and taking concrete actions.
Through our work with board members of financial service providers in the Africa Board Fellowship program, we have identified three key fintech trends especially relevant for institutions in Africa focused on financial inclusion.
Data, Data and More Data. In this digital age, we generate and consume more data than ever before, and for many successful fintechs, such as Tala, Branch, and Jumo, data is key to their success. Alternative data, such as how a person uses social media, including their social network, how they use their mobile, and, in some cases, psychometric data are used for loan underwriting and targeting potential customers for instant digital loans. For more traditional financial institutions, business intelligence and data mining is critical to understanding customer behavior and coming up with the right product and services. Those players that collect and use data wisely are setting the new standard for financial services.
Digitization of Workflows and Systems. With the recent increases in affordability and capabilities of mobile devices, financial service providers are looking to automate and digitize with the use of digital field applications (DFAs) and digital workflow systems. Such technologies can eliminate time consuming manual processes while they help improve customer service. Examples include customer onboarding and loan origination via DFA solutions that eliminate paper forms and shift to digital data encoding. VisionFund, for instance, equips its agricultural loan officers with a tablet application that has an integrated credit-decision algorithm specific for agricultural loans. Such solutions offer the ability to easily capture GPS, documents, photos, and signatures. These can be instrumental as part of a branchless banking or branch-light strategy and have been proven to radically increase efficiencies of key processes.
Open Systems, Integrations and Interoperability. The era of going it alone with monolithic systems is gone. Today we need systems that can be seamlessly integrated with other systems to build flexible and scalable financial ecosystems. Evidence of this shift is seen with the trend of publishing open APIs (Application Programming Interfaces) such as those of Mastercard, Visa, M-Pesa, and Android Pay. These open APIs allow institutions such as financial providers, e-commerce platforms, and remittance companies to integrate into these systems, often in real time. By allowing more integrations into their systems, they increase their customer base and, at the same time, provide better services to their existing customers.
Another component of open systems is interoperability. Some countries such as Tanzania and Nigeria have enforced interoperability amongst mobile wallets which allows customers to exchange mobile money from different providers. For example, a person should be able to send Tigo Money to a person with an Airtel Money wallet. Partnerships and openness are key drivers of change.
Taken together, these three fintech trends provide core elements needed for financial providers to reach more customers, with better products, while strengthening the broader financial ecosystem.
These are just a few of the trends in financial technology that are revolutionizing the inclusive finance landscape in Africa.
For more on this topic, check out insights shared during discussions of the Africa Board Fellowship.
* Data has been updated with the latest Global Findex Report (2017)
About the Author
Geraldine O'Keeffe is currently Co-Founder and Chief Innovations Officer at Software Group, a global technology company that is specialized in delivery channels and integration solutions for institutions that provide financial services. Geraldine is passionate about financial inclusion and is inspired to help institutions leverage technology to achieve efficiency, scale and increase outreach. In the last 14 years, Geraldine has completed over 50 consultancy assignments and 40 successful software implementation projects for a range of different financial institutions and players within the financial inclusion space. She has a proven ability to discover customer needs and design sustainable, holistic solutions that carefully consider the interactions between people, process and technology.