Africa is poor partly because it missed out on two transformational global events- the Agricultural and Industrial revolutions. But it now has a unique opportunity to participate fully in the Digital Revolution. However, its regulatory authorities are thwarting its chances.
Why is Fintech (broad sweep of digital financial services) so important to Africa? Well, for one its demographic is young (~60% of population under 30).
This digital generation knows nothing but a digital world. Digital permeates the way they live, transact and experience the world 3/ Fintech also refers to one of the major avenues wealth creation in the 21st Century and presents a unique opportunity even for smaller countries to create competitive global enterprises. For example, Estonia 🇪🇪 with a pop of 1m boasts 2 $Bln coys-Transferwise and Bolt. Its regulatory approach is laisser-faire and it was the first European country to legalize/regulate ride-sharing. Its E-Residency program permits foreigners to open/operate a company remotely.
Singapore 🇸🇬 presently is aggressively growing globally competitive Fintech companies by actively seeking global connections for them. It actively organizes “meet and greets” events for its Fintech coys – Kenya (the Afro-Asian Fintech festival), Vietnam and the US, etc. In September, I received the WhatsApp message below from one of its Fintech companies (MAS is the Monetary Authority of Singapore or the Central Bank of Singapore):
The US OCC recently opened up the “business of banking” including the 3 core banking functions- receiving deposits, paying checks, or lending money- to Fintech. “Smart regulation”, i.e, Regulation that considers the national interest before the well being of commercial banks. In Africa, the protection of banks is the primary purpose of Fintech regulation. Else, why would Egypt’s FRA require $50m paid-up capital for Fintechs in Int money transfers or demand 50% of daily transactions be deposited with banks as a requirement for payment aggregators? 9/ Or why would Nigeria’s Central Bank require $15m shareholder funds for retail payment Switches?
Are Fintechs entities banks? Are they not pass-through intermediaries, as brokers are to insurance companies? 10/ But the tide is already in.
Recently, a Ghanaian bank MD boasted that the Telcos bank with them after all and that the Bank of Ghana will never issue a banking license to MTN
What is the best way for African Central banks to protect commercial banks?
– By forcing them to immediately implement an OpenBank API initiative (similar to what is planned for enforcement in the EU in the next couple of years).
– Transforming their Post Offices into the largest distribution channels where banking (deposits/withdrawals) and mobile money are offered, and govt services (passports, DL, taxes, licenses, etc) sold by putting a retail payment switch/interoperability platform behind them.
And what should the commercial banks do by themselves? Here’s a Harvard Business Review article by Ndubisi Ekekwe entitled “What Africa’s Banking Industry Needs to do to Survive”. This article is a blueprint for banks in terms of their response –
(hbr.org/2016/07/what-a…) African regulators should also borrow a leaf from the Kenyan Central Bank. Without its Governor’s innovative thinking to allow SafariCom to experiment with mPesa (most successful of its kind in the world), where would the Kenyan economy be? (in terms of overall GDP impact)?
Here’s the transformational impact: “By 2016 increased use of mobile money led to 75% of the population having access to formal financial services..”(CBK, KNBS, and FSD Kenya, 2016). Many African nations still struggle with financial inclusion and the bottom of the pyramid.
What about China and Alipay and WeChatPay both of which have surpassed one billion users and have transformed China’s financial landscape forever? (it is said that some young people in China have never seen paper money- cash). Both Kenya and China are prepared for the future.
The future indeed is at stake and Africa is going to experience digital colonization unless the regulatory authorities shift their focus from protecting banks to building globally competitive Fintech companies- like Singapore 🇸🇬.
Colonization? Here’s what is at stake
The Chinese company, Boomplay “has become the largest music streaming company in Africa; it has 46 million users on the continent with a catalogue of 5 million videos and songs”
(Boomplay is pre-installed on Transsion Holdings TECNO phones and It has raised $20m in April 2019).
The vision of Boomplay: “Our vision is to be the biggest distributor of African music in the world”
Orange, the dominant MNO in the UEMOA region (French West Africa) will not release USSD shortcodes for commercial bank’s channel access. Clearly, the future of Africa is digital financial services and the dominant players are TELCOs (we don’t own them).
But why has it not occurred to us to develop an alternative distribution network (eg, the Post Office) to compete in the mobile money space with the TELCOs?
The world is changing. The future is here and we Africans need to think and act DIFFERENTLY!
It’s not our grandfathers’ world. If you’re an African leader with a vision for your country’s future, get in touch. I’ll share my knowledge with you…free of charge
A Quick Thought from Dr Aloy Chife – An Entrepreneur. Humanist. Philosopher. Visit saanacapital.com