Mobile money can serve as a gateway to financial inclusion, it enhances the impact of international remittances on development. Digital platforms enable a significantly lower cost to serve and increased cross-selling of products in emerging markets while smartphone adoption and internet penetration are fuelling the expansion of e-commerce.
According to GSMA, mobile money has become the leading payment platform for a digital economy in emerging markets. In Africa, the spread of mobile money beyond is happening within Sub-Saharan Africa. In 2017, Western and Middle Africa were the fastest growing areas of Sub-Saharan Africa, led by tremendous growth in registered accounts in countries like Ghana, Côte d’Ivoire and Cameroon.
Earlier this year, Standard Chartered Bank launched a digital bank in Côte d’Ivoire. The bank plans to duplicate this strategy in other African markets
IT News Africa interviewed Jaydeep Gupta, Regional Head Retail Banking, Africa and the Middle East, from Standard Chartered Bank and he shared his thoughts on how digitalization is changing the African banking industry.
1. What is the potential of online banking in delivering seamless services?
We have already seen the banking landscape evolve due to more and more users adopting online and mobile banking into their daily financial activities. In fact, according to a report by fintech analysts, Jupiter Research, this year digital banking users worldwide are expected to hit the 2 billion mark, with no signs of slowing down. It is set to continue this growth at an estimated rate of ten percent per year.
This is indicative of how digital is becoming the new norm: the way we transact with each other and with brands is becoming more digital, and our industry is no exception. Offering an exceptional digital experience is undoubtedly a key differentiator in our market where customer satisfaction experience is critical. We are all striving to meet customer expectations and to exceed them.
A great example of this is the Bank’s recently launched digital retail bank in Côte d’Ivoire. For the first time in the market, customers can now execute all their banking activities right from their mobile device, starting with opening their bank account in less than 15 minutes.
Through seamless, online and mobile platforms like this, we aim to provide as much freedom and accessibility to our services, and above all, we want to ensure our customers’ banking journey is a memorable one.
2. How can digital banking impact Africa’s reliance on cash?
Digital banking has the ability to have a huge impact on Africa’s reliance on cash. Despite significant strides in financial technology in the Sub-Saharan continent, a large majority of Africans still rely heavily on cash transactions. A good example of this is remittances – over one million Africans visit a physical location every month to make a cash-to-cash transfer and pay an expensive transaction fee in the process. In fact, the cost of sending money in Africa is so high that if senders opted for digital services instead, they could easily save over US$125 million a year in total fees. This is according to a new report from the government-funded non-profit Financial Sector Deepening Africa (FSDA).
Digital remittances can help resolve these issues by significantly reducing the costs associated with moving money around through traditional channels. The widespread use of e-wallets and tie-ups with telecommunication companies are beginning to pave the way to less reliance on cash in Africa. Along with less reliance, comes increased security as digital banking and e-wallets avoid the need to carry large amounts of cash.
3. How does digital banking benefit emerging markets?
Globally, the World Bank data suggests over 2 billion individuals do not have access to basic financial services like a debit or savings account. The on spur of digital financial services is one way we can bring the unbanked into the formal financial system.
Digital banking can help developing countries unlock their economic potential and accelerate their social development by increasing financial inclusion and access to credit facilities – not least for small and medium-sized enterprises, which are the backbone of most emerging markets. A recent report by McKinsey Global Institute reported that the widespread use of digital financial services can increase the GDPs of emerging economies by US$3.7 trillion by 2025 and create over 95 million jobs in the process.
4. What are the potential security threats of an online banking platform?
The more we move our everyday activities online, the more exposed we are to a new array of threats, and the more sophisticated these threats are becoming. This is true for online banking, as well as any other online activity. Having said this, online security measures have come a long way in the last few years and digital banks now offer the same level of protection as their traditional brick-and-mortar counterparts.
Criminal use of cyber tools and channels is on the increase. Phishing, which is the act of sending fake e-mails from reputable companies in an attempt to get user information, is one of the most common threats. This is closely followed by Vishing, Trojan Horses, Mule Operations, and many other threats which we must take into consideration when operating online.
At Standard Chartered, as we continue to develop and evolve our digital offering, cybersecurity continues to be a top priority. Our banking systems are managed by skilled experts and protected by multiple security lines of defense, including firewalls and encryption. We also constantly monitor threats and online activities round the clock to detect any fraud and take preventive measures to ensure accounts are kept safe.
5. How does Africa differ from other global regions when it comes to digital banking?
While digital banking in developed markets like North America and Europe is well-established, we have not seen the Sub-Saharan’s full potential yet. The opportunity in Africa is unique because it has the potential to remedy some of the continent’s greatest economic challenges while simultaneously presenting some of the largest opportunities for digital and online banking.
Côte d’Ivoire has the 5th highest rate of mobile money accounts in the world, the main reason why we launched our first digital bank in the market. However, this mobile money rate is closely followed by Kenya, Somalia, Uganda, and Tanzania – and that is just the tip of the iceberg. Cell towers are giving more and more Africans accessibility, bringing new choices and opportunities to the financially un-serviced. We have plans to roll out our digital retail bank across other countries in Africa, and we are excited at what these services can do for the markets.
6. What are some of the challenges of a digital bank in Africa?
While digital platforms have changed the face of financial inclusion on the Sub-Saharan continent, it is not without challenge. Some markets have infrastructure issues, with poor connectivity and low internet penetration being significant obstacles that need to be resolved. Ecosystem development is another critical component where a lot of work needs to happen. With few notable exceptions, regulators need to play a proactive role in supporting the development of a digital environment. Trust is another challenge: given that the continent still relies heavily on cash, we want our customers to feel safe and secure when using an online bank.
7. What is SCB’s strategy for success?
At Standard Chartered Bank, our aspiration is to be the digital bank with a human touch. That said, becoming a truly digital business is not just about being forward-looking: it is about pushing towards a strategic transformation that will allow us to create new and exciting services for our customers, thus enabling them to interact with us seamlessly.
Our digital transformation has been fortified by our drive to deliver superior value, as well as a user-friendly experience for clients, equipping our frontline agents with digital insights and incorporating cutting-edge technology into our processes.
Banking is fast approaching a bright new digital world, and technology will be at the forefront of our customer-centred vision for the future.