More than 700mn Africans lack access to a bank or mobile money account and only 41 per cent of Africans are financially included, according to the report Cloud Banking in Africa: The Regulatory Opportunity by Genesis Analytics and Orange Business Services
The report has focused on how the application of cloud computing in financial services can help financial services providers reach and serve the poor.
Part of the cost problem is that financial institutions in Africa are so much smaller than elsewhere – the biggest bank in Africa (SBSA with assets of US$148bn) ranks 296th globally; most banks in Africa have assets of less than US$5bn. African consumers are increasingly expecting these banks to provide the same range of digital services as banks in other countries. This is why consumers have been turning to mobile banking in such numbers. The telecommunications companies have been much more successful at delivering affordable financial services than banks are, but also need to find new ways to reduce costs if they are to reach out to even poorer customers.
Cloud computing creates an opportunity for providers of financial services to rethink their technology spend and significantly reduce costs. Cloud computing involves using internet technologies to provide virtual infrastructure that is scalable and delivered as a service.
Fixed costs can be converted into a subscription-based approach and upfront capital investments are converted into operational costs. Cloud computing allows banks to pay less for ICT infrastructure and services and achieve higher utilisation on ICT spend. Particularly for small banks in small markets where specialised ICT skills are in short supply, cloud computing can ease a critical operational constraint.
The most compelling reason to move to the cloud is undoubtedly cost savings, but there are other business reasons too. The flexibility of cloud-based operational models allows financial institutions to experience shorter development cycles for new products, which supports a faster and more efficient response to the needs of customers.
Cloud computing provides the computer power necessary to deliver analytical insights in real time, which enables financial institutions to move towards a customer-centric model where the financial needs of customers are fully understood. Financial institutions can also gain a higher level of data security, resilience, fault tolerance and disaster recovery from cloud computing.
Before financial service providers can adopt cloud banking, regulators need to support and approve the use of cloud technology within the financial sector. Some international regulators are already allowing the use of cloud banking in the financial sector.
The European Union has been at the forefront of defining an enabling regulatory environment for cloud banking services, which has involved both the regulation on the use of data and privacy and protection of data. Under the regulations, financial institutions have to ensure that consumer personal data is gathered legally and under strict conditions and that consumer data is fully protected. Other developing markets like Turkey and Argentina have adopted similar legal and regulatory environments, which has enabled the use of cloud banking in their financial sectors.
