Latest Banking and Payments Trends in Africa Have Shown Progress, but there’s Need for more

Africa’s banking and payment channels such as ATMs and mobile wallets have recently been witnessing impressive growth, according to a new market insight by CR2. This notwithstanding, a key challenge remains – how African banks can equip themselves so that they can efficiently provide a wide range of channel options that will meet their customers’ demands.

Details of the Trends

Latest insight by world-leading Digital Banking Platform vendor CR2, said that a quick snapshot of banking and payment trends in Africa is indicative of growth prospects for banks on the continent. According to CR2, Africa’s diverse population has given rise to a wide range of banking and payment needs, thereby making it possible for all means of payments to have their place on the continent; including ATMs, Point of Sale (PoS), cards, digital wallets and mobile money. And across board, the volume of usage is increasing.

Interesting Facts and Figures

You probably didn’t know this, but Africa has always been the global leader in mobile money uptake. But then the COVID-19 pandemic had helped to spur this, even as the number of mobile money accounts in Africa surpassed half a billion. Africa alone also accounted for more than 64% of the value of global mobile money transactions which  totaled $767 billion. Now here’s the interesting part –there is no sign of this growth slowing.

Traditional banking and payment channels such as ATMs and POS have also shown an upward trend, highlighting the wide range of needs of the African population. To cite examples, both the volume and value of transactions at ATMs and POS in Botswana have shown a steady increase year-on-year. Between January and March of 2018, the number of ATM transactions stood at 9.979 million. But then by the first quarter of 2020, the number had quickly risen to 15.241 million transactions. POS figures show similar growth, with 9.986 million transactions being recorded in the first quarter of 2018, rising to 15.423 million transactions in the first quarter of 2020.

Meanwhile, in Kenya, ATM and POS transactions took a slight dip at the onset of the COVID-19 pandemic, but soon bounced back and have since continued to show an upward trend.

While card penetration in Africa has lagged behind when compared to the rest of the world, there has been some recent growth. For example, the number of cards issued in Ghana rose by 11% year-on-year between 2018 and 2019, with the volume of transactions rising by 51%. Note, however, that this growth occurred alongside a steep uptake in the volume of mobile money transactions (a year-on-year growth of 39%) highlighting consumers’ appetite for a variety of payment methods and channels.

“This is a trend we see reflected across the continent and highlighted in a McKinsey study that includes the results from their Covid Africa Consumer Pulse Survey conducted in April last year, showing the likelihood of increased or decreased use of particular banking channels. Using Nigeria, Kenya, Nigeria and South Africa as examples, it predicts a significant growth in both online and mobile banking,” said part of the report by CR2.

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The Need for more… African Banks must Understand their Customers

As you may well know, Africa is a continent with nearly 60 different countries. The circumstances of living in these countries also vary, in the sense that while some people live in highly urbanised areas, a lot more others live in rural areas and ear very low income. This has created a disparity between the banked, the underbanked, and the unbanked. CR2 wants African banks to always bear this disparities in mind when formulating their policies, and also ensure to put mechanism in place to reduce the barrier of entry for their customers – or potential customers – regardless of their location, income, or literacy level by offering a broad range of banking channels and instruments for payments.

Moving on, CR2 said in the quest for financial inclusion, access channels and reach are two essential considerations for banks. For much of Africa’s rural population, the proximity of a banking service or payment channel determines their habits. For many, an agent will be their nearest financial service access channel, followed by POS, ATM, Post Office and then branch. The more significant the service offering, the further away it is. This again emphasises the need for banks to offer an array of channels.

The fact that a large portion of Africa’s population is underbanked or unbanked, also underlines the need for a full range of services, from basic cash in, cash out and person-to-person transfers through to more enhanced services, including electronic payments such as debit orders, insurance offerings, access to credit and customer loyalty programmes.

As banks try to move their customers up this ladder, self-service is seen as the ideal bridge between physical and digital channels. As many banks consider branch rationalisation, these self-service options preserve a human element in the banking experience, which is still a priority for many customers.

Absa Botswana has reaped the rewards of expanding its self-service offerings. The bank reported a 34% increase in digital banking services usage as it rolled out a variety of digital financial services offerings, in keeping with customer appetite for self-service banking options. This includes the launch of Digital Corners in its banking halls where customers can utilise a variety of services, from forex and bill payments to card management and transfers.

In the long run, the challenge for banks should be to understand who their customer are and their differing circumstances/needs. It is by having this understanding that the banks can effectively deliver an array of services to ensure financial inclusion and ultimately economic prosperity for the African continent.