App-based mobile banking certainly serves a purpose, but it’s a far cry from meeting the needs of the mass market.
In Africa, banking the unbanked remains a pressing need. Roughly 700 million people in Africa are financially excluded – denied economic citizenship. Discussions on the issue beg the same question, time and again: why aren’t traditional banks offering mobile solutions to potential customers who desperately need it?
The American Bankers Association claims it costs between $150 USD and $250 USD to open an individual bank account through tradition channels. Over more than a decade, around the world, it’s been proven that alternative, disruptive technology such as mobile and branchless banking can reduce this cost dramatically, to less than 10% of the original amount. While remaining compliant with local regulations.
Between 2011 and 2014, banks opened over 700 million accounts for the previously unbanked – which goes largely unrecognised – yet so much more can and should be done.
Playing to problem-solve
It may be pertinent to look beyond service offerings from banks to another obstacle thwarting the growth of mobile banking in Africa: the exorbitant price of data. Handsets are status symbols at the lower end of the market. People naturally migrate and upgrade from a feature phone to a smartphone as soon as they’re financially able. Without access to data, the functionality of these smartphones is rendered useless.
This brings to light the futility of banks in offering mobile banking via application-based platforms. Without Wi-Fi or data, the functionality is inaccessible. And you don’t have to be an expert in topography or technology to know vast parts of the African continent remain unconnected. The areas that do offer connections often come hand-in-hand with sky-high data prices and are typically reserved for the urban areas – not rural areas or the locations of the mass unbanked.
The view of some that USSD is dead may well be misplaced in light of these considerations. As a FinTech and financial service innovator, WIZZIT International is constantly requested to scope and deliver USSD platforms to support the app-powered efforts of banks falling short of expectations.
The real cost of data
According to the recent ICT Africa report, released as the #DataMustFall campaign gains traction in the region, Tanzania has the cheapest data rates (1GB at $0.89 USD). This, in comparison to South Africa, at $5.26 USD. In Kenya, data is reportedly at an average of $5 USD/GB; Egypt $2.8 USD/GB; Nigeria $5.26 USD/GB; and Malawi $5.8 USD/GB. The exclusive nature of this pricing structure paved the way for the #DataMustFall campaign, which calls for fairer pricing and access to connectivity.
True economic development at all levels is impossible without financial inclusion. It’s at the core of improving the lives of individuals and their families in the modern world, where so much of existing in society is based on financial transactions.
Most families in more rural or isolated areas don’t have access to computers or smartphones, let alone data. If they do have access to a smartphone, the price of data excludes them from banking anyway – and that’s if a forward-thinking bank even offers the service.
Systems built to exclude
It’s a multi-pronged problem, with a lack of truly innovative systems at the core. A mobile banking platform that exists as an app serves a certain portion of the population – the same population who’d otherwise be banked anyway, because they have the financial means and access to bank branches and ATMs.
App-based mobile banking certainly serves a purpose, but it’s a far cry from meeting the needs of the mass market in terms of them becoming financially empowered and included.
Drive inclusive innovation
Traditional banks across Africa need to rethink how they offer mobile banking to the masses – and quickly. The cost of data is out of their control, and shows no signs of being driven down.
The solution is mobile banking that’s operational through any mobile device, simply with a sim card and even with a minimum data balance. Via USSD, for example. This is offered by all Mobile Network Operators (MNOs) and is incredibly cost effective to consumers working with any kind of handset – both smartphones and feature phones.
Know your customer
The evolution of banking functionality goes beyond the platform, to the heart of the process itself. Access to mobile banking in its current iteration requires a bank account, set up through a process of endless paperwork, proofs of residence and proof of employment and/or income.
Rigorous, ill-fitting requirements for the masses in emerging markets, many of whom can’t read or write, work part-time jobs informally and don’t have a fixed address. Knowing this, regulators still claim regulation and compliance requirements weren’t designed as an impediment to financial inclusion. It’s a harsh and cruel reality that people who can’t provide the required documentation are denied access to financial services.
The power of mobile
For marginalised individuals and families, inclusive mobile banking will be transformative. It will empower the masses to become active participators in a market from which they’re otherwise excluded – but are still expected to operate within.
It means safer banking and transactions for informal traders, women and rural communities. And it’s a golden egg waiting to hatch for the banks agile enough to act.
By Brian Richardson
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