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Botswana evolves into digital payments hub

Kumar is eyeing expansion in Botswana
With high mobile density, rising financial sophistication amongst consumers, supportive infrastructure and high per capita wealth, Botswana is fast becoming the preferred address in Africa for the growing digital payments’ industry. Unimoni, a global money transfer, exchange and payments giant, is eyeing Botswana as part of a US$100 million push into Africa. Staff Writer, MBONGENI MGUNI speaks to the group’s deputy CEO, TP Pradeep Kumar

BusinessWeek: What is your take on the growth of payment systems across the financial industry and in Botswana in particular?

Kumar: There has been a tremendous shift in global consumer behaviour and expectations. Such consumer behaviour is transforming financial services, challenging the status quo and blurring the boundaries of what it means to be a global financial services provider.

Technology, especially the smartphone, is at the centre of this change, creating experiences and opportunities that pave the way for the rapid and continuous evolution of payment systems globally. Examples like PSD2 in the UK and UPI in India are modern payment systems, which not just enable convenient, secure and speedy payments in a seamless manner, but also provide a solid foundation for Open Banking and API-led innovation in the payments space. (API refers to technical calls that enable the processing of a transaction).

In Africa, the notable growth of the telecommunications industry is driving a digital revolution across the continent, giving a voice to its inhabitants and advancing the African economies at large. In fact, according to 2017 industry reports, Africa accounts for nearly a tenth of the global mobile subscriber base, with mobile money transactions in the sub-Saharan region reaching to USD 19.9 billion (63% of the global figure). This is expected to grow faster than every other region over the next five years. An expansive geography, which has an ever-growing mobile-user base, and limited banking infrastructure are just some of the factors that have led to an increase in mobile money transactions in the region.

Another reason for the upswing in the African payment systems is due to the digitisation of payments through the telecommunications sector, given the diverse products available on the mobile platforms and its replication capability across countries. Many innovative examples exist across Africa. For instance, M-Shwari, the paperless mobile banking service offered through M-Pesa, has over 20 million accounts within five years – an impressive figure, given that the formal banking sector has some 30 million deposit accounts in all - and a total of USD 2 billion loans disbursed. Mokash in Uganda, in less than two years, has over 2.7 million accounts with over USD 10 billion loans disbursed.

The outreach and accessibility of mobile money in the sub-Saharan Africa region too has significantly increased over the past decade from 23% in 2011 to 43% in 2017 and as such resulted in bringing the unbanked population into the banking fold. Today, mobile money drives financial inclusion in the sub-Saharan Africa region.

Botswana, for example, introduced Making Access Possible in 2015, an initiative by the Botswana Minister of Finance and Development Planning, clearly proposing ‘Developing the Payment Ecosystem’ as a key priority with an aim to enhance financial inclusion.

Today, Botswana stands amongst the top countries within Africa when it comes to mobile penetration and has almost twice the regional average in mobile broadband penetration than others, clearly indicating the digital appetite of Botswana consumers. The mobile money transaction volumes too have grown sharply in Botswana when compared to ATMs and card transactions, with a 100% growth rate seen in the last five years as stated in various industry reports. This reaffirms our belief that “mobile money” plays and will continue to play a key role in financial enablement in Botswana. Yet, there is a substantial focus and greater industry collaboration required to achieve the United Nations Sustainable Development Goal of reducing the average remittance cost to less than three percent and to eliminate corridors with costs more than five percent.

Currently, the average cost of sending money into Africa is around nine percent, with Botswana having one of the highest cost remittance corridors in Africa. Frequent fluctuation in the local currencies in Africa is also a factor resulting in inefficiencies in cross-border payment systems.

We believe that collaboration between critical stakeholders in the fast-evolving overall payments value chain, like Banks, MTOs, Telcos, Regulatory and Tech providers, can disentangle the complexities and make payment systems more affordable and efficient.

BusinessWeek: How do you see Botswana’s financial service sector today?

Kumar: Underpinned by good governance and zero-tolerance to corruption, Botswana is one of the most stable and investor-friendly economies in Africa. The country, identified as a fast-emerging regional market, has created an enabling environment for capital and businesses to strive and support its strategic focus to diversify the economy into value-adding sectors.

Interestingly, Botswana along with countries such as Zimbabwe and Swaziland in Southern African Development Community (SADC), have relatively high levels of mobile money penetration despite reasonable levels of financial inclusion. Mobile banking users are relatively higher in Botswana at 22% compared to Internet Banking users that account for around five percent, indicating increased access and usage even amongst the banked population.

In fact, the Botswana Communications Regulatory Authority reported that 40% of the overall mobile usage was for buying airtime while 40% was used towards sending money, 15% for bill payments and the remaining five percent for receiving money.

The report is a compelling case-in-point and provides an encouraging outlook for the future of Botswana’s digital payments industry. Mobile money subscription is indeed witnessing exponential growth and bridging a substantial gap in the payments market.

Botswana is a top choice in the region for expats from various parts of the world, and specially from other African nations, due to its good governance policies, economic progress and political stability, which can be seen in the growing migrant population. This makes the country an attractive Outward Remittance Market with remittance volumes gradually growing over the past five years in the range of 2-3%, according to World Bank reports.

The country is also one of Africa’s most popular tourist destinations and is now emerging as a fast-growing outbound tourism market as well, opening channels for development through tourism-prompted financial services. Boosting tourism is a mainstay of the government policy, with the Botswana National Vision 2036 identifying the sector as a key pillar for economic diversification and national transformation.

However, as per Finmark Trust study, only around 45% of the Botswana population live in settlements with a permanent banking presence and many large population centres have no local access to banking services. Furthermore, just a small population borrows from financial institutions, paving the way for enormous possibilities in the lending space both amongst the banked and the unbanked population in Botswana. This presents a golden opportunity for cost-effective financial services providers, like us, that have the right scale and the cutting-edge technology to address these segments. With only roughly half of the adult population unbanked, a burgeoning trade scene and a bouncing tourism sector, we are bullish on our outlook for Botswana.

BusinessWeek: What are Unimoni plans in Africa & Botswana?

Kumar: As a group, we are extremely optimistic about Africa and the growth prospects for the continent. Africa is a key component of our global growth strategy and we have earmarked a substantial amount in investment to support our growth and expansion efforts in Africa over the next decade. To drive innovation and agility, the group encourages intrapreneurship i.e. creating a pool of ideas across digital payments and engaging with customers through newer channels and strengthening relationships.

Unimoni, which is a part of the Finablr network of brands, has wide access to the markets in Africa. Offering a broad portfolio of seamless financial services, Unimoni has a retail presence of 30 branches across seven African markets currently.

Right now, Unimoni has connectivity and disbursement capabilities throughout Africa through mobile wallets such as M-Pesa, fintech brands such as World Remit, smartphone OEMs such as Huawei, and other industry partners. We also benefit from a large network of cash pay-out locations and access to credit any bank account, directly addressing the last mile distribution challenge. This is complemented by our state-of-the-art payment platforms, API driven architecture and technological innovations, including Blockchain and AI, that help contend with several on-ground issues that these markets face. For instance, Zoey, our Virtual Assistant chatbot, is operational in many African markets, including Botswana. Zoey is integrated with all major social platforms and allows customers to book forex using their desktops or mobiles within minutes, at their convenience from anywhere.

While we will continue to build on our core portfolio of money transfer, foreign exchange and payments solutions in Africa, we are following a three-pronged strategy for the African market. We have plans to enhance our existing presence by increasing our retail footprint and to drive industry-leading efficiencies in our core market segments with a focus on new product innovations and developing our digital capabilities. We remain strongly committed to the cause of furthering financial inclusion outside the formal banking system with the help of mobile technology innovation models.

We expect to actively pursue opportunities to broaden our reach across the African markets through a combination of new market expansion initiatives, select ecosystem partnerships and joint go-to-market initiatives with partners. And finally, we plan to diversify by looking beyond our current portfolio of payments solutions into areas such as social remittances and consumer finance. Taking advantage of our large global network, we seek to continuously source innovations and best practices from across the world and introduce these in customised forms to create truly compelling product propositions that benefit and cater to the local needs of our customers in Africa.

As for Botswana, Unimoni aims to strengthen its presence in the country through retail and service expansion plans that include utility bill collections, micro-lending, and tax collection services. Unimoni is also poised to serve the increasing trade-related requirements that are driven by the government’s initiatives to develop exports. Through its Payment Technology Solutions vertical, the Group is looking forward to extending its end-to-end technology, capability and know-how to Banks, Money Service Businesses (MSBs), payment institutions and financial institutions who in turn would want to offer these services to their customer base.




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