Banks, technology and experience
African Financial Services 1.0
The first time that I met Greg Reeve of MFX was at a Mobile Payments event in Dubai. He was working then with Safaricom, and the mobile payments platform which is known as “MPesa” was his baby. He explained how valuable the platform had become with a simple illustration — “if MPesa suffers downtime for only thirty minutes, it was very likely that someone would die”.
We laughed when he said it, but he was not joking. It was that serious. People had grown very dependent on the payment platform. I saw it first hand in Uganda when the platform we were managing experienced downtime because of upgrades. There were riots in the streets. People had become accustomed to a service that always works and built their lives around it. Lives become disrupted when there is downtime. When technology becomes a critical part of daily life, there are expectations of consistency. People get very frustrated and react when experience becomes inconsistent. High availability and ubiquity were some of the reasons that made MPesa the favourite of Kenyans and contributed to its massive success. It was a vast improvement over having limited access to financial services.
Despite infrastructure constraints, Nigerian banks have done an excellent job of helping people move money around digitally. Instant transfers between banks is still a dream even in some advanced countries. Some services provided by Nigerian banks have also started to create that kind of dependence seen with MPesa. It becomes very frustrating when security tokens and USSD codes do not work when you need them to. Last weekend, I experienced such frustration first-hand, and it cost me a lot of money. For all the fees and charges taken by Nigerian banks, customer experience should not only be consistent; it should be delightful.
A lot of African banks (especially Nigerian banks) seem to see the retail customers as burdens rather than assets. A quick glance at the details of most bank results would reveal why that is so. Retail banking is not very profitable because the banks have failed to use technology properly. Technology should be used to make lives easier and not to charge for everything from notifications to debit cards. The profit margins on transactions for retail customers aren’t high. Margins could improve by providing new products rather than penalties and levies.
When First Atlantic Bank launched “Flash Me Cash” in Nigeria, it was a novelty that was far ahead of its time. The product name came from the habit called “flashing” that Nigerian telecommunications subscribers use to get the attention of more fortunate contacts by quickly making a missed call. While missed calls led to very successful advertising initiatives in India, “Flash Me Cash” did not catch on in Nigeria. Beyond the catchy name, there was minimal user education provided, and it was not built to serve common use cases. Our banks are notoriously bad at creating and selling technology based products.
I took a snapshot of the homepage of the websites of three major banks in the United States and compared it with the websites of three major Nigerian banks, and there was one glaring difference. The US banks highlight their technology products prominently and provide a very visible customer login interface. The Nigerian banks have more corporate content, and the login interface is usually on one obscure corner of their homepage. The bank websites in Nigeria are more of branding portals with a product afterthought rather than their primary technology product interface.
The Financial Services Sector has also become overregulated to the point where differentiation and innovation have become the exception rather than the norm. The fear of regulators has become an excuse most banks use to remain unimproved.
African Financial Services 2.0
Globally, technology in financial services has moved beyond just transaction processing. It has become a strategic asset and tool for customer acquisition and retention by creating great experiences. The term Financial Technology or “Fintech” is now practically synonymous with innovative new practices in Financial Services.
A lot of African banks erroneously see “Fintech” as a threat instead of an opportunity. The banks are the largest platforms for Fintech innovation. Fintech needs banks to thrive. It will not replace banks or banking. It will only change the customer experience. A lot of Fintech innovations are typically usability enhancements of existing bank products and features. Fintech is what unlocks the value in the previously low margin retail or consumer layer.
A few forward thinking local banks have seen this value, and they have become the platforms enabling the growth of local Fintech startups unleashing a tremendous amount of value in a very short time. These are still, however, early days. We hope more banks will join this bandwagon to support the startups in financial services. Ecobank Transnational Incorporated has recently thrown down the gauntlet with its Ecobank Fintech Challenge where it has invited Fintech startups to come and pitch for an opportunity to partner with them across over thirty African markets.
Regulation has to catch up with innovation as well. The Francophone West Africa Bank Regulators have taken the lead by issuing a Digital Fiat currency called the eCFA. They are doing this with the help of an Omidyar-backed startup called eCurencyMint. We hope that Anglophone regulators especially our own Central Bank of Nigeria will allow such initiatives and also finally allow well-funded players like telecommunications companies to participate in providing financial services. Nigeria needs its Mpesa equivalent.