Partnerships Between Fintechs and Banks are Crucial to the Future of Finance in Africa

Banks, with their established buyer bases, substantial stability sheets and regulatory experience, can present a sturdy basis for innovation. However, fintechs, with their agility, cutting-edge applied sciences, and customer-centric method, can drive innovation and broaden entry to monetary providers for the unbanked.

Ike.S Anison, nation director, Ghana/Liberia/Gambia at fee agency Onafriq, addresses the transformative energy of collaboration between conventional banks and fintechs, emphasising their skill to reenergise and redefine monetary providers throughout Africa.

It’s no secret that entry to formal monetary merchandise has lengthy been, and continues to be, low throughout the African continent. Whereas there are apparent exceptions (81 per cent of grownup South Africans, as an example, have entry to a proper checking account), there may be nonetheless a protracted approach to go earlier than widespread formal monetary inclusion on the continent is achieved.

In truth, figures from the World Financial institution present that 350 million adults in sub-Saharan Africa don’t have entry to formal financial institution accounts. That’s roughly 17 per cent of the world’s two billion-strong unbanked inhabitants.

Partially, that’s as a result of most of the low-income earners who make up most of Africa’s inhabitants really feel that they don’t earn sufficient or have sufficient financial savings to warrant utilizing formal banking providers. But it surely’s additionally right down to a scarcity of formal banking infrastructure and the perceived price of economic providers.

However formal banking providers are solely a part of the monetary image in Africa. As connectivity and digital applied sciences have grow to be cheaper and extra ubiquitous, the continent has additionally constructed a thriving and dynamic fintech sector.

Fintech area

Startups within the sector, which account for the overwhelming majority of the continent’s unicorns (tech firms valued at over $1billion), cowl every little thing from funds to financial savings, funding and insurance coverage. Issue within the almost 700 energetic startups within the area and it’s straightforward to see why Africa is poised to grow to be the fastest-growing fintech area on the planet.

This fintech explosion has helped present tens of millions upon tens of millions of unusual Africans with monetary instruments they wouldn’t beforehand have had entry to. Critically, it’s executed so in ways in which cater to the lived realities of most individuals on the continent.

Nevertheless, each the standard finance and fintech sectors are at an inflexion level in Africa. The previous is struggling to beat long-standing challenges reminiscent of excessive working prices and legacy infrastructure. These obstacles make it tough for them to supply the type of reasonably priced, versatile merchandise that African clients demand. On the identical time, fintech firms typically battle to cope with advanced regulatory regimes throughout the continent.

These concurrent challenges don’t simply current obstacles to the organisations concerned both. They’re additionally impediments to Africa’s progress round monetary inclusion. There may be, nonetheless, an answer and it includes considerably increased ranges of collaboration between fintechs and conventional banks.

Advantages of partnerships

Carried out successfully, such partnerships might assist each events overcome their weaknesses whereas additionally leveraging their respective strengths. For banks, partnerships with fintechs may help unlock beforehand unseen ranges of agility and innovation. These partnerships would additionally put banks in a greater place to digitise outdated programs and meet their clients’ wants. Banks are beginning to realise the advantage of such partnerships too. A number of main banking gamers throughout the continent, for instance, both have in-house fintech incubators and accelerators or help ones run by third events.

Fintechs, in the meantime, can profit from banks’ buyer bases and the belief and credibility they’ve constructed up over many years of operation. Equally critically, nonetheless, banks may help fintechs navigate the advanced worlds of regulation and compliance.

That’s particularly essential in Africa. The continent is dwelling to a wide selection of economic regulatory regimes. The variations in regulation from nation to nation have helped create a extremely fragmented fee ecosystem. Because of this, each service provider or firm has to combine with every completely different fee service supplier individually to cater to the broadest attainable vary of shoppers.

Stronger collaboration, each between firms inside the identical international locations and people working throughout borders, would assist ease that fragmentation. It will additionally assist create and evolve fee ecosystems to the purpose the place they allow transactions, funds, and different monetary providers which might be omnichannel in nature and which provide constantly seamless experiences throughout platforms and borders.

Benefits to Africa

Such unified ecosystems can have vital advantages for banks, fintechs, and monetary inclusion in Africa. The sector would, for instance, be higher positioned to construct merchandise that match the wants of unusual Africans whereas additionally going through decrease transaction prices. In the meantime, each particular person and enterprise clients could be higher positioned to economize digitally and entry monetary devices reminiscent of micro-loans due to the info offered by fintech providers.

Making it straightforward for conventional banks, fintechs, and different adjoining organisations to come back collectively for partnerships and collaborations is one thing we’ve lengthy been enthusiastic about at Onafriq. At current, we’re linked to over 500 million cell wallets, overlaying over 1300 dwell fee corridors in 40 African international locations, with over 200 fee schemes linked, positioning Onafriq as a very pan-African omnichannel fee enabler.

It’s the type of collaborative spirit we imagine each organisation inside the monetary sector – whether or not they’re a longtime participant or a disruptive fintech – ought to intention for too. Not solely will doing so improve monetary inclusion in Africa, however it can additionally exhibit to the world precisely how a lot of a monetary chief and innovator the continent may be.