Collaboration with fintech companies and using their trust advantage are two key ways that traditional banks in Africa can gain a competitive in the fight for market share as the Africa fintech revolution continues according to a market insight by CR2- a leading digital banking platform vendor.
With the entry of non-bank fintech companies into the banking industry through financial technology in the past decade, banks have seen new competitors enter the market that they were not prepared for.
Fintech platforms now offer services that were almost exclusively perceived as core banking services before the advent of fintech. To that end, there are fintech solutions for loans, credit, mortgage and property financing, investments and other services now posing as a threat to traditional banks that used to offer these services exclusively.
However, according to CR2, it is not all gloom, as the banks can still find a way to stay resilient, and even grow market share through fintech collaborations, and making good use of their trust advantage.
Explaining this position, CR2 says, “ It’s important that the continent’s established banks be a part of the innovation transformation occurring in Africa, given their longstanding client networks and more defined regulatory environment. Africa’s banks shouldn’t make this journey alone, however. partnering with fintech start-ups and technology partners can accelerate their route to success.”
Furthermore, CR2 believes that for a traditional bank to stay relevant in the current landscape of the African fintech revolution, it must do the following:
- Offer a seamless digital onboarding experience
- Provide multiple day-to-day payment options (P2P, innovative remittances, and lifestyle banking)
- Broaden offerings to unbanked market segments via a digital wallet with a virtual card onboard
- Operate on both smartphone and USSD—to expand access to segments of Africa’s population with and without Wi-Fi connectivity and mobile feature phones; and
- Connect to ATM access to continue to offer access to cash parallel to online payment options
In another vein, the market insight report proposes that one asset that traditional banks have over their fintech counterparts is customers trust. Quoting research by Mckinsey and company, CR2 noted that customers across Africa are shifting to fintech because of the access and convenience it offers them, but there are still a majority of customers (60%) who say that they still trust traditional banks over fintech companies.
The reason for this is not far-fetched; most traditional banks have been in operation for years and are strictly regulated while the fintech companies are relatively new, and are often ahead of regulation. CR2 believes that traditional banks that take full advantage of customer trust in the current ecosystem are the ones that will be able to stay resilient:
“Those banks that pair their customer trust advantage to novel innovation on the product and platform side stand to excel in Africa’s 21st-century fintech landscape,” the report concludes.
Image Credit: Brookings.edu