Leveraging mobile technology
We previously discussed challenges such as lack of physical infrastructure, low internet penetration, unrealistic pricing regimes given the economic realities of most African markets, and the challenge of financial inclusion. Perhaps the world’s greatest success story in leveraging mobile technology to overcome these challenges can be found, close to home, in Kenya. According to the Communications Commission of Kenya, by June 2012 Kenya boasted more than 19.5 million subscribers in mobile money subscriptions, more than 66% of the total mobile subscriber base.
The M-Pesa platform by, Safaricom (a Kenyan mobile network operator) is the undisputed leader with 70% market share and is considered the most developed mobile payment system in the world. What most countries can learn from the Kenyan success story is the great collaboration between the telecommunications industry, banks, and other players in the ecosystem. The M-Pesa platform is currently being used by 10 Kenyan banks to provide mobile banking services to their customers.
Mobile banking services
These synergies enable the financial inclusion agenda to converge with other social imperatives where, for instance, social grants can be disbursed on mobile platforms, through which people can pay for public transport, food, and other social needs. Governments and banks can also leverage mobile phones to run financial literacy and customer education campaigns. African countries will need to endeavour to replicate their own versions of the Kenyan success story.
It will however not be an easy feat as a number of regulatory issues will need to be addressed. The main hurdles in the mobile payments/banking landscape revolve around security, interoperability of technologies, and standardisation of issues like consumer data storage. Our global survey in 2012 showed that consumers believed that mobile payment systems must be accessible and functional across a wide range of mobile devices, meaning that banks will need to develop and deploy ‘device-agnostic’ platforms if they expect to maximize their reach and capability.
To this extent regulators need to not only engage with industries but to also have dialogues amongst themselves with a view of developing Pan African frameworks so as to enable M-Commerce activities across the continent. For banks, in particular, mobile banking provides an opportunity to develop value propositions that are consummate with the needs of the previously unbanked segments and to develop business processes that reflect the nuances of field based banking. Mobile devices do not only provide a low cost platform for acquiring and servicing customers but also provide a platform for innovation and therefore differentiation in the market.
Future business model for banking
This makes mobile channels an integral part of any bank’s future business model and operating model. Three major factors are driving banks globally to review their operating models. These are the economic environment; the changing customers, and the march of technology.
Among the key business imperatives underpinning the future operating models is cost reduction. Banks globally have responded in many ways but the there is no doubt that Straight Through Processing (STP), greater use of self service channels, and an increase in First Contact Resolution of service requests are increasingly gaining prominence. An added benefit to this strategy is that apart from decreasing the cost-to-serve, they also enhance customer experience.
Mobile banking and mobile payment certainly have a key role to play in the future of banking in the continent because it supports the social imperatives while at the same time presenting a commercially viable business model for banking institutions. The opportunity for banks is to use mobile banking as a lever for transaction-led customer acquisitions by taking banking to communities. This strategy will support impending regulatory requirements around liquidity as increasing the number of transaction accounts will the strengthen banks’ liability bases.
About David Okwara
African markets, banking institutions, business model, cost reduction, future of banking, internet penetration, Kenya, m-commerce, m-pesa, market share, mobile banking, mobile banking services, mobile devices, mobile money, mobile network, mobile payment, mobile payment system, mobile phones, mobile platforms, mobile subscriber base, mobile technology, regulatory requirements, social grants, telecommunications industry