Financial inclusion is a critical engine of economic development at both macro and micro levels. Technology – and access to mobile phones – could make financial services accessible and available to nearly 4 billion people who are ignored or underserved, without access to formal financial systems – thus depriving people of economic citizenship. It’s very sad that in 2016, the majority of the world’s population still has no access to formal financial services, despite the known and documented advantages of having banked citizens.
Why accounts count
What’s interesting – and often goes unstated and unrecognised – is that 97 percent of the 3.2 billion account holders keep their accounts with financial institutions – not Mobile Network Operators. According to the World Bank’s Global Findex database, 90 percent of the 721 million new accounts opened between 2011 and 2014 were opened at financial institutions (Centre for Financial Inclusion, July 2016).
Compare this with the 54 million mobile money accounts opened with Mobile Network Operators (MNOs) over the same period – also not a number to scoff at. Yet banks are ignored when credit is given for efforts at financial inclusion.
The reality is, banks can and do play a leading role in financial inclusion. It’s time they were recognised for their efforts. The Centre for Financial Inclusion report goes on to say banks can “harness innovative technologies to transform banking services for their existing customers and more importantly to reach new ones at scale. There’s a sizeable market opportunity among low-income customers and the ‘missing middle’ of SMEs.”
Why, then, despite what’s happening in other parts of the world, is West Africa lagging behind in the financial inclusion challenge – particularly where the banks are concerned?
In Ghana, for example, the last five years have seen mobile money accounts triple to 22 percent, whilst bank accounts have grown by a dismal 2 percent to 36 percent over the same period (CGAP blog, December 2015). Based on interactions with banks in Ghana, perhaps the technology deployed is too complex. This is an easily fixable factor. Banks today can easily, seamlessly and cost-effectively replace platforms that aren’t meeting expectations. The critical factor for success is top management support and commitment, as well as decision-making skills and prioritisation.
The latest PWC 2016 Ghana Banking Survey, ‘How to Win in an Era of Mobile Money’, confirms that banking executives in West Africa are feeling the impact of mobile money on their business. It goes on to relay that the major threats emanate from the potential for telecommunication companies to inject themselves into the consumer banking space. According to the survey, mobile money is threatening payment solutions offered by West African banks – a threat that applies to both bill payment services and point of sale (POS) payment offerings.
Serve or be served
It remains to be seen which bank is going to proactively grab the opportunity. Or are they going to wait for someone else to seize it? And the most significant question remains: why isn’t there greater success with traditional banks offering mobile money in West Africa?
Banks have to realise mobile is the future. It’s here now, today. It has to be top priority. Or, as has happened in East Africa, MNOs will become the dominant player in financial inclusion and payments – traditionally the domain of the banks. MNO’s today have extended their service offering beyond payments and money transfers to offering savings and loans products.
Once customers are serviced with new offerings from MNOs, it’s going to be horrendously expensive for banks to ever get them back. In fact, no amount of money may be enough to reclaim lost customers. There’s an urgent need for strategic review to ensure mobile is at the top of the banks’ strategic agenda. All too often, the reason given by banks as to why they haven’t capitalised on the opportunity is that they have other priorities. What can be more important than protecting and growing your customer base and market?
Banks in other parts of Africa are successfully and profitably reaching the unbanked and under-banked segments and benefitting from cost reductions and efficiencies in technology – particularly where mobile is concerned. It’s widely recognised that regulation favours financial inclusion in Ghana, and that it’s one of the most ‘ready’ for digital financial services: 92 percent of the population has the required IDs for KYC purposes; 95 percent have basic numeracy skills; 91percent own a phone; and there’s 99 percent awareness of mobile banking. Very few countries are as fortunate as Ghana to have all these basic ingredients in place for success.
Despite this, penetration rates are nowhere close to what they are in other parts of East and Southern Africa. Of all financial activity in Ghana, 98 percent is still in cash – costing the economy, individuals and banks millions each year. A recent article in Ghana Business News explained how Stephen Abban, Group Head of Personal Banking at Access Bank, has gone as far as to call on stakeholders at banks to develop a national ‘cashless’ strategic plan because of the benefits it yields. In spite of these prophetic plans, it seems to be all talk and very little action.
The dangers of dawdling
With all the ingredients in place – what could be holding banks back? In the last 12 years, WIZZIT International has partnered with banks in 14 countries (primarily in Africa) and proved that every one of these partner banks is profitable with their mobile banking channel. So the business case is proven and in place. Regulation is supportive, the market is ready, skills and technology are available – and there’s awareness. All that’s required is an innovative bank with a committed management team.
Banks cannot and should not go it alone in this space. Banks that are successful in financial inclusion recognise the value of partnerships in expanding access to new customers, making a wider range of products available, and sharing costs and risk. WIZZIT International has supported this view and sees banks as key drivers in this space.
Banks play a crucial role in enabling growth and progress in the economies in which they operate. At the heart of it all, banks must do real things for real people and work to fuel inclusive economies from the centre, to enrich lives and transform societies.
Brian is the co-founder and group CEO of WIZZIT International.