How digital transformation is accelerating growth in Africa
Correspondent | Monday October 28, 2019 14:00
As we have seen so many times before, the continent has the ability to leapfrog technological trends and, with the rapid scaling of digital technologies, we believe there are huge opportunities waiting to be exploited.
The explosion of digital continues to gain momentum and digital, data, design and the emergence of the fintech sector are all fast becoming the driving force behind this.
All organisations across segments and sectors need to evaluate their strategies and their response to these trends. As a result, new business models are emerging, partnerships are forming, innovation is scaling, and the time to harness these trends to create more opportunities is now.
Africa is in a unique position to take advantage of the digital trends that are emerging at present. As a continent, it remains the leader in mobile money, with over $22 billion moved annually and that trend is likely to continue.
With the underlying improvements in technological capabilities and connectivity and the proliferation of mobile devices, we anticipate exciting times ahead for the digital transformation of the continent.
The growing use of big data, mobile, cloud computing and artificial intelligence gives organisations the ability to reimagine client experiences and deliver products and services instantly to large numbers of clients at a lower cost.
The other big trends that cannot be ignored are block chain technology, as well as the much-talked-about cryptocurrencies. These shift the way we think about international payments, trade finance and identity, as well as the future of money itself.
Over time block chain will bring transparency, cost reduction and efficiencies that organisations have not been able to offer before.Thriving fintech ecosystem
But it is not just emerging technologies that are changing the way Africa does business. The significantly lower barriers to entry that technology has provided to small businesses have seen a thriving fintech ecosystem emerge.
In 2016 there was a 33% growth in investment into start-ups that saw $367m flow into the sector. While there is a concentration of the fintechs around South Africa, Kenya and Nigeria, this trend actually continues across the continent.
Fintech companies on the continent are looking to go after African problems and opportunities, and many of these companies look into payments, remittances, identity, financial inclusion and leveraging data to improve credit-scoring and access to basic financial products.
These companies not only offer job creation, new revenue opportunities and cheaper methods of delivery, they also improve financial inclusion. As of 2014 over 60% of the adults in sub-Saharan Africa did not have bank accounts, so by embracing the fintech revolution, we will significantly improve basic access to financial services.
Partnerships and evolving business models
The World Economic Forum believes that partnerships with fintechs are one of the biggest business trends to watch this year, particularly in the technology space.
It was initially feared that fintechs would disrupt the big players in the various fields, however, these previous ‘rivals’ are coming together to use one another’s strengths for mutual benefit.
Through these partnerships and start-ups, business models are starting to evolve and move into new and sometimes unexpected places.
From this new digital perspective, the payments landscape is changing and becoming more competitive as young companies look to reduce the cost of transacting, as well as bringing speed and agility to companies operating in the African corridor.
According to the 2017 PwC Global FinTech Report, 82% of the financial institutions interviewed expect to increase their fintech partnerships in the next three to five years.
This will most probably be met with quite a bit of internal resistance as bigger organisations grapple with the new ways of working required to partner effectively with more agile and quick-acting start-ups.
However, the key to making this a success is to choose the right people to partner with. We cannot ignore the digital growth on the continent – as it opens up a wealth of opportunities to bring banking to the previously unbanked.
With financial inclusion high on our list of priorities for Africa, we are excited about accelerating our digital growth in Africa.*James Scott is Absa Corporate and Investment Bank Chief Digital Officer