African economies are well positioned to benefit from rapidly accelerating technological change if they can harness the current open landscape for innovation.
East Africa is already a global leader in mobile payments, while mobile money accounts in sub-Saharan Africa are on an upward charge. Apart from being able to leapfrog the limitations and costs of physical infrastructure, the continent stands to benefit from having the youngest, tech-savvy workforce in the world in the next decade.
Africa’s working age population is expected to grow by 450 million people by 2035, according to the World Bank and the continent is projected to have the largest working population of 1.1 billion by 2034, notes the World Economic Forum on Africa. Recent GSMA data shows that mobile money accounts in sub-Saharan Africa are up 18.4% between 2016-17 to 33.8m registered accounts.
However, we cannot wait 12-15 years before adequate job creating initiatives and policies are unlocked. The answer lies in harnessing the power of the digital economy today to create African solutions for African problems. An important part of this will require promoting and partnering with African innovators to unlock sustainable growth.
We are already witnessing the significant potential of digital innovation in the remittance and mobile wallet space. Penetration of smart phones is expected to hit at least the 50% mark in 2020 from only 2% in 2010, according to the World Economic Forum, offering the continent a clean canvas for tech-based innovation. It is an opportunity we must not miss. These are exciting times and are forcing us to think differently to come up with true Pan African innovation and development.
MFS Africa is a good example of how carefully harnessed and supported technological innovation can have ripple effects through the continent. It now operates the largest digital payments network in Africa and connects over 170m mobile wallets through 100+ partners, including Airtel, Ecobank, MTN, Orange and Vodafone across 55 markets. It has about 15% of the African population connected to a platform.
M-Pesa, launched in Kenya in 2007, is an often-touted example of African technology making waves even outside its own borders. After capturing the local market for cash transfers it has spread to three continents and 10 countries.
MicroEnsure, meanwhile continues on the path of developing pioneering insurance solutions for low-income people like micro-health, crop and mobile insurance. These are solutions directly aimed at emerging customers and it is little surprise the company continues new customers by cleverly partnering with telcos.
Access.mobile is another major success story, testing and growing its health innovation offerings for seven years in East Africa. The company works with health systems to hone their communications with patients in lower-income but also in growing areas and it hopped the pond in the opposite direction from most smaller startups and landed one of its first American clients. Adventist Health White Memorial Hospital, a Los Angeles facility that works largely with lower-income Hispanics, was looking for ways to use health data to achieve better outcomes within its population.
These are examples of the role models that will inspire our next generation of innovators. We need more and tech-savvy banks need to continue supporting them as they grasp future opportunities.
Just consider that Findex data shows that sub-Saharan Africa is home to all eight economies where 20 percent or more of adults use only a mobile money account: Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Senegal, Tanzania, Uganda, and Zimbabwe. Opportunities therefore abound to increase account ownership: up to 95 million unbanked adults in the region receive cash payments for agricultural products, and roughly 65 million save using semiformal methods.
Standard Bank, as Africa’s largest bank by assets, hopes to support even more start-up and tech initiatives across the continent to ensure these opportunities are not lost. We are therefore innovating ourselves at a rapid pace to harness the benefits of the digital age to drive financial services inclusion. Mobile payment solutions like Snapscan is now available at over 25,000 merchants and a vast user network across South Africa. We are setting a new standard in digital payments with the launch of Africa’s first prepaid virtual cards ecosystem, among many other digital innovations.
The future will be about solving genuine customer problems rather than putting a band aid on them. One area in urgent need of change, for instance, is remittances, where Africa is still one of the costliest places in the world to remit payments – fees as high as 10% to 20% are still endured. We need to harness technology to genuinely solve this problem.
Sometimes when we talk about banking in cashless society we look too far out – but we don’t have luxury of time. Knowing your customer (KYC) is about understanding what they need today based on their culture and context and then unlocking the already available data to provide the solution.
Technology, for instance, can solve the unbanked problem on the continent. However, this does not mean you can “plug and play” by taking something that works in one country and expecting it to work in another. Success will increasingly be centered on having a Pan African view of the problem, but local implementation.
The future is certainly bright for Africa as exponential innovation continues to drive change across the continent we call home, disrupts industries and replace legacy technology. It is now time to grasp this opportunity with both hands before the innovation wave passes us by.
By Nnamdi Oranye, Fintech Author and International Remittances Lead at Standard Bank Group