COVID-19 Pushes for Digital Change in African Financial Services

The COVID-19 pandemic has been the greatest catalyst for the digitalization of African financial services. The pandemic has precipitated a race among African banks to become fully digital, as customers rapidly demand more customized service through multiple platforms. 

Furthermore, in a bid to prevent the transmission of the virus, the World Health Organization has been cautioning against the usage of hard currencies and promoting the use of digital payments. This move has encouraged African policymakers and authorities to introduce measures aimed at fostering further cashless transactions.

Digital Banking: Ensuring Delivery of Financial Services

The past few months have been a landmark time for the banking sector globally. Restrictions on the mobility and implementation of social distancing measures by governments have seen a more robust integration of stakeholders in the banking industry, Fintechs, Telcos, and regulators collaborating to ensure the distribution of financial services.

The outcome became a hotbed of new goods and services and an all-channel banking solution that utilizes multiple digital platforms such as USSD (SMS banking), internet and mobile banking to create a more accessible and inexpensive experience.

The COVID-19 pandemic has catalyzed the adoption of mobile and digital banking and won over customers from mainly older generations who were previously cynical. This is an opportunity for the banking sector to push for innovations and create solutions that serve the needs of consumers.

Furthermore, the combination of increasing smartphone penetration together with a young demographic and a huge unbanked population in Africa is the ideal opportunity for a new wave of digital products that are expanding access to financial services.

While more than 400 million people in sub-Saharan Africa still do not have connectivity to mobile internet, mobile broadband networks cover more than 70%  of the population, suggesting massive potential for digital banking to thrive with the right offers.

Fintech in Africa: Beyond Mobile Money

Now more than ever, Fintech is expected to become a significant move forward that will push Africa to become a fully digital economy. With more than 66% of adults in sub-Saharan Africa losing exposure to conventional bank accounts, mobile money has bridged the financial inclusion gap, taking financial services closer to the rural population.

The distribution of mobile money goods beyond peer-to-peer sharing (P2P) has also grown significantly in the last four years. Cellulant, Flutterwave, and Interswitch, among other companies, are launching the Fintech value chain to develop payment solutions customized to the region.

Through expanding payment platforms beyond mobile money, fintech in Africa is already heading into the next step of the mobile money revolution; the smooth convergence of mobile wallet systems operated by the current mobile money provider towards a single digital payment system across various industries and geographical boundaries.

Fintech is also providing the platform for the transformation of large industries in Africa on a scale. With the ongoing pandemic, the sector has a much larger position to play in helping businesses and organizations transition towards accelerated digitization in order to maintain market stability through this downturn and improve economic development afterward.

Concerning payment businesses, solutions are still required to promote seamless intra-African trade that will make it easier for Africans to have convenient and affordable access to financial services and for consumers and businesses to make and receive payments with fewer hurdles.