By Brian Richardson – Mobile banking in Ghana and other African countries is a golden egg waiting to be seized by the quickest innovator – and African banks are close within its reach. But with the proliferation of mobile banking services offered by Mobile Network Operators (MNOs), banks are running the risk of being beaten at their own game.
The banking sector’s reactive approach to mobile banking means they’re missing out on a gargantuan growth opportunity and find themselves sleeping through the mobile banking revolution on the continent.
MNOs on the move
The motivation for MNOs to become involved with mobile banking is because of what they call the ‘stickiness’ factor – if your customer can send money and make payments, as well as sending Whatsapps and making phone calls, they’re less likely to change service providers. There have been some successes, particularly in East Africa, with an MNO-powered mobile money offering – and there have been many expensive failures.
A marriage made in hell
The problem is that MNOs have greatly underestimated the cost of compliance and regulation, as well as the power of the financial regulator. The strength of MNOs lies in distribution, marketing, billing and handling a mass-market customer base. Conversely, the strength of banks is in compliance, regulation, and process. What MNOs do is simply not in the DNA of a bank, and vice-versa. In theory, if you took the innovation of an MNO and matched it with the capabilities of a bank, it should be the perfect partnership.
But, as time and experience have proven, it’s a marriage made in hell. Who owns the customer? When a bank utilises the mobile banking platform provided by the MNO, they have little control over the look and functionality of the mobile banking platform, as well as the pricing of the services. When changes need to be made to suit the bank, the lag time can be many months. The product actually belongs to the MNO – not the bank.
Poached from the inside
Because of their reactive approach to mobile banking, African banks are under threat of being usurped by MNOs themselves. Where the MNO was once the supplier of technology to the bank, they’re increasingly becoming a direct competitor. Orange, as an example, recently acquired a majority share of the French Groupama Banque. They’ve stated unequivocally that they’re going to compete aggressively in the financial services space.
Mobile banking has made it
So what’s a bank to do? Ten years ago, senior executives from local banks thought mobile banking was a fad – that no one would ever realistically do financial transactions on mobile. Now, they’re being outrun in a race they should be leading. Mobile banking is here to stay and it’s growing faster than any other service banks can offer.
As a result, African banks are losing their hold in the payment space from 100% to 75% in 2014 – and it’s predicted to fall as low as 50% by the end of 2016. They’re losing out to the most unsuspecting players: PayPal, Alibaba, Amazon, MNOs and soon, to Google. It’s said when Google launches their payment platform; it will be the most powerful payment processor in the world.
Adapt (quickly) or die
The solution for African banks is simple and achievable: embrace mobile banking. To achieve this, there are a number of options. Firstly, they can partner with an MNO, which strategically isn’t a viable option. They can do it themselves, but this takes time and diverts scarce internal IT resources form other critical projects. They can partner with a technology provider with a proven and credible track record. Or lastly, they can do nothing – probably the most expensive option of all.
Africa is home to 700 million underserved potential customers – and they want more than just the ability to send money and buy airtime. They want to be financially included and counted as economic citizens. They want the ability to save, borrow, transact, access micro-insurance products and services, and build a financial track record.
Banks can provide this – and more – but first they need to access the untapped market with affordable, accessible, available and relevant entry-level products and services – all made possible by mobile banking. The bottom line is that African banks need an agile partner to develop their own mobile banking model – and they need to do it quickly It’s critical for banks to act now, before it’s too late and find a viable partner who understands the needs of the market – to make real mobile banking work.
