Toward a deep digital transformation for local banks

Brian RugambaKigali  –  A few days ago I shared lunch with some friends in an upscale restaurant in Kigali. Our custom is that one of us takes us out for lunch once in a while, and this it was my turn to pick the bill.

As I reached out for my wallet to pay,  a delicious meal, I found out that I had left it in office.

I remembered that I could easily transfer money from my bank account to my mobile phone and pay through mobile money. In less than three minutes, the waiter had already confirmed reception of the funds.

These cases (of people finding out that they don’t have cash on them or have forgotten their cards somewhere after consuming goods or services) are common among many consumers.  And it leads to various inconveniences. 

However, with technological advancement, today, most banking services in Rwanda are delivered over the internet. People are able to access a host of financial services ranging from account opening, paying of taxes, water bills to funds transfers you name it… all being done at the comfort of one’s mobile phone or computer.

Rwanda’s banking industry is composed of commercial banks, development banks, cooperative banks, and microfinance banks.

As of July 2018, the Rwandan economy was boasting of 11 commercial banks, three micro-finance banks, one development bank, and one cooperative bank, according to central bank data.

There are also 439 Savings Credit and Co-operatives (SACCOs) and 20 limited liability microfinance institutions.

Their shift from traditional to digital banking has been gradual and remains ongoing, and is constituted by differing degrees of banking service digitisation.

Of late we have witnessed different local players within the banking sector stepping up to partner with fintech companies to power their digital transformation journeys.

The local banking sector has gone through a series of metamorphoses, from the use of booklets, transacting through non-automated branches, lack of digitised payment tools to non-automated inter and intra bank processes and so on.

One can’t jilt the strong forces behind these transformations;

Regulatory innovation

Mandated to ensure price stability and a sound financial system, the central bank has also made strides in crafting policies and strategies through various innovations and initiatives.

Initiatives such as the Rwanda National Payment System (RNPS) have improves the infrastructure for electronic transactions.

The bank has raised awareness and education of e-payments among Rwandans and encouraged innovative business models that offer a strong value proposition for merchants and consumers to use digital payments.

They have also leveraged on government initiated digital reforms to promote growth and innovation within retail payment infrastructure, which has continued to contribute to the country’s efforts to become a cashless economy.

Technological innovation

The almost universal use of mobile phones has offered enormous opportunities for by bankers.

According Rwanda Utilities Regulatory Authority (RURA), in the first quarter of 2018, the rate of mobile telephone penetration in Rwanda climbed to 76.6 per cent while 4G LTE Technology has been rolled out countrywide with a 92.5 per cent geographic coverage – reaching 95.1 per cent of the population.

Internet penetration was at 47.8 per cent with 5,642,574 subscribers, a rise from 5,252,996 subscriber in the fourth quarter of 2017.

With these impressive figures there is a lot of potential for banks to leverage and keep growing.

In practice, however, banks still face particularly heavy ICT constraints, which can be explained by the entrenchment of several decades of internal developments that makes it almost impossible for the banks to design and market products and services that match the expectations consumers.

Faced with these challenges, second generation Core Banking Systems are emerging.

That said, many of us have been receiving service disruption messages from our different banking institutions citing service delivery improvement.

It is evident that there are upgrades being done to the core banking systems of most of the banks and some of the banking software being elevated to latest versions.

Some players have even gone forward to switch vendors to give them an upper hand in gaining business agility, dramatically lower the costs and place digital at the heart of their mode of operation to allow a complete democratisation of basic banking services.

Today’s technology offers financial institutions in Africa and Rwanda in particular countless opportunities to improve their business.

In Rwanda, technology has boosted the country’s financial inclusion from 48 per cent in 2008, to 72 per cent in 2012, to 89 per cent in 2016.

 If the local banks are to keep thriving they need to embrace the use of technology and continue adopting digital platforms to enhance their interactions with their customers.

This will not only make them more efficient and profitable but will help the country meet its ambition of universal financial inclusion for all adults in the formal financial system by 2020.

The writer is a Marketing, Communications and Public Relations specialist based in Kigali.

The views expressed in this article are of the author.

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