twitter Facebook Linkedin acp Contact Us

The role of messaging in driving banking services forward in Africa

Despite the ubiquity of the mobile platform in today’s connected world, banking is an area which has traditionally lagged behind most markets.

There are signs that this is changing on a global scale, with Berg Insight recently forecasting that the number of mobile banking users worldwide will grow from 55mn in 2009, to 894mn in 2015.
Africa has traditionally led the way in mobile banking. Due to a largely dispersed population and a limited retail bank presence, the majority of the people are ‘unbanked’ (i.e. without a bank account). Research from Gallup (2010) shows that across the entire continent, only 19 per cent of individuals have bank accounts, with the number falling to as low as one per cent in countries such as Niger and the Democratic Republic of Congo. As traditional banking remains out of reach for the majority, mobile phones are fast becoming the best way to extend financial services to the unbanked. Mobile is the platform with the highest reach of the African population and can provide the infrastructure for transactions and payments across the region. Statistics from Wireless Intelligence recently indicated that the African continent actually surpassed Western Europe during the last quarter of 2010 in terms of mobile connections (547.5mn connections for the former compared to 523.6mn for the latter). Bearing in mind this high mobile penetration and the role of the mobile thus far in the continent’s wider banking industry, it is perhaps unsurprising that Juniper Research has predicted mobile banking will grow into a $22bn industry across Africa by 2015.

The rise of smartphones and apps
In more developed markets, the advent of smartphones and the growth of app stores means that mobile banking is increasingly being touted as a convenient form of online banking. Banks are using mobile as an additional communication channel to reach the consumer and popular banking apps are increasingly becoming linked to Customer Relationship Management (CRM’s) to provide services on the go. As mobile banking apps become ever-more sophisticated, this trend is only set to continue.
While these developments are undoubtedly positive, it is important to remember that mobile banking apps are only accessible to people who own smartphones or who have bank accounts. Across Africa, where neither bank accounts nor smartphones are mass-market, apps are often of little use. According to Informa Telecoms and Media, smartphone penetration in Africa will reach 15 per cent in 2015, compared with three per cent in 2011. Though this signifies a considerable increase, smartphones alone will not serve as the key driver of mobile banking in the region. To effectively make the unbanked ‘banked’, a more wide-reaching and accessible method is required.

 

The appeal of SMS
Traditional banking remains out of reach for most Africans due to factors such as cost, logistics and a lack of financial literacy. Bank accounts are often expensive to maintain and most Africans live in rural or semi-urban areas where access to a bank is very limited or even non-existent. Africans often cannot go to the bank, so the bank must reach out to them.
SMS is an excellent medium for achieving this, being virtually as ubiquitous as mobile phones themselves. According to Mobi Thinking, over 6.2 trillion text messages were sent in 2010, compared with 10.9 billion mobile apps downloaded (IDC). Unlike apps, SMS is available to all types of mobile subscribers, regardless of whether they have a smartphone or are on prepaid or post-paid contracts. SMS-enabled mobile banking uses the existing mobile communications infrastructure which already reaches the unbanked, removing the need for a bank to invest in an application or infrastructure such as ATMs. A further limiting factor of apps-based mobile banking services is the lack of standardisation across mobile platforms. Currently, if a bank wishes to offer an app-based mobile money service, in order to maximise reach, they need to tailor their offerings to ensure compatibility with the iOS, Android and BlackBerry platforms. SMS does not present this same challenge. Its availability across even the most basic devices means that banks and their partners can engineer one solution to cover their entire mobile-phone owning customer base.

 

Realising the opportunity
The critical question around mobile banking centres on who controls the relationship with the customer: the bank, the solution provider, the handset manufacturer or the operator? The traditional model requires banks to hand over at least some control of the customer relationship to a partner. Unsurprisingly, banks are somewhat reluctant to do this, preferring instead to retain complete control of the customer relationship.
Banks can overcome this issue by outsourcing this complexity to a global messaging specialist such as MACH. With such a model, instead of having multiple relationships with multiple operators, they have just one relationship to manage with a partner that can immediately provide connections to all of their customers in one go. As well as reducing costs, this frees banks up to concentrate on their core business without having to worry about the management of multiple operator relationships.
The universality of SMS makes it an effective and accessible platform for banking in Africa. The ability to access basic financial services such as deposits and transfers from any mobile phone offers the opportunity to deliver banking services to those who have been until now unbanked. While the rise of apps-based approaches to mobile is to be welcomed, with its ubiquity and simplicity, SMS will continue to play a crucial role in the country’s banking landscape for some time to come.

 

Karol Nita, product marketer at MACH

The Bell team in Richards Bay consists of more than 800 machinists, welders, and assemblers. (Image source: Bell)

GFE Power Product’s extensive range covers generators from 10 kVA up to 3,000 kVA. (Image source: GFE Power Products)

The funding is the largest-ever equity raise in the minigrid industry according to Husk. (Image source: Adobe Stock)

The initiative will help African contractors participate in annual infrastructure investments. (Image source: Afreximbank)

ITS has evolved into a sophisticated systems approach, providing numerous opportunities to revolutionise road networks. (Image source: Adobe Stock)

Invest International’s Lara Muller; Ivory Coast Minister of Finance and Economy, Adam Coulibaly; and Ambassador Designate to Ivory Coast, Jeroen Kelderhuis. (Image source: Invest International)

The Yellow Metal Machine Rental team with some Wacker Neuson equipment. (Image source: Wacker Neuson)

Although displaying resilience, the report warns that African banks remain exposed to physical climate risks due to both sovereign and industry lending. (Image source: Adobe Stock)

WAA and VCMI will seek to establish regulatory frameworks to enable access to high integrity and fair voluntary carbon markets for WAA member countries. (Image source: Adobe Stock)

The parties will also promote the mutual exchange of information and expertise in the field of export credit policies and practices. (Image source: TBD Group)

Inside Condra’s Johannesburg factory: an overhead crane positions an electric motor during assembly of hoist and crab. (Image source: Condra)

IVECO is renewing its entire product range, all at once. (Image source: IVECO)

The MoU was signed alongside the Africa Health Business Symposium. (Image source: Africa CDC)

Both the IMF and EIU expect SSA to rank as the world’s second fastest growing economy in 2024. (Image source: Adobe Stock)

There has been a focus on the sugar industry. (Image source: Adobe Stock)

Evolving concept of energy security must address energy demand, system flexibility, technology access and infrastructure development, says IRENA. (Image source: IRENA)

World Bank & African Development Bank partner to provide electricity access to 300 million Africans by 2030, leveraging public-private investments. (Image source: Adobe Stock)

At WFES, Gotion High-tech will showcase its latest products and leading green energy solutions at its booth. (Image source: Gotion High-tech)

The new Perkins 5012 is a full-authority electronic engine optimised and purpose-built for power generation applications. (Image source: Perkins)

SSAB will begin deliveries of the new products in 2026.

The key issues restricting sub-Saharan Africa’s manufacturing sector will be unpacked at Manufacturing Indaba later this year. (Image source: Adobe Stock)

Hyphen is developing sub-Saharan Africa’s largest, most advanced and only fully-vertical integrated green hydrogen project. (Image source: Hyphen)

According to Liebherr, the Used Equipment Marketplace is extremely user-friendly. (Image source: Liebherr)

Electricity storage will be pivotal in unlocking renewable projects and meeting energy demand. (Image source: Adobe Stock)

Africa Data Centres and DPA SA have broken ground on their solar farm in the Free State. (Image source: Africa Data Centres)

A Cat PM310 Cold Planer in action. (Image source: Caterpillar)

A larger stockholding of WEG products facilitates ready access for customers. (Image source: WEG Africa)

African nations have turned to the concept of power pools to address the continent's energy deficit and foster regional cooperation. (Image source: Synergy Consulting)

Dietmar Siersdorfer is expanding his role as Middle East managing director at Siemens Energy to include Africa. (Image source: Siemens Energy)

The Msikaba Bridge has anchor blocks 17 m wide which contain around 21,000 tons of concrete. (Image source: Sanral)