The expansion of mobile operations, efforts to boost cross-border payment flows and the continued influence of China are key themes shaping the transaction banking market across Africa.
From Kenya to Nigeria, the growth in the mobile landscape is innovation bred of necessity. The continent experiences high costs for handling cash, making alternatives methods of holding and moving money attractive.
While developed markets are still establishing how mobiles can be used effectively for consumer payments, banks and regulators in many countries are exploring, as a top priority, different ways to settle corporate payments and complete transactions between businesses.
Patrick Gutmann, group head of transaction services at Ecobank says: “Africa is playing a leading role in driving the evolution of mobile. How it plays out remains to be seen.”
The mobile push is coupled with the aim of achieving financial inclusion to create a stable, low-cost banking environment for unbanked population. A large number of consumers are more than comfortable casting their mobile devices as a bank and a payments method.
The continued development of mobile and payments platforms is presenting new opportunities. As well as established platforms like M-Pesa, banks are looking into the technology they can offer directly to their customers to take a slice of the payments market, attracted to the large, and growing, number of transactions processed.
Africa is not just the place where mobile technology is implemented – it is the place where innovation can develop. Citi’s Mobile Challenge in Nairobi attracted interest from around the world, and saw the event being one of the most tweeted about in Kenya that day.
“Corporates want to see how they can use the mobile infrastructure to expand their reach geographically, but also to see how they can reach beneficiaries that previously could not be easily reached through the traditional banking system,” says Gutmann. “The increased adoption of mobile wallets does present an interesting opportunity for banks and corporates alike.”
|Policies and regulations should ideally protect the end wallet-holders|
David Rego, head of cash management products for transaction banking, Africa, at Standard Chartered, says: “Besides P2P payments, we see a number of consumers making payments for goods, services and even taxes from their mobile wallets.”
The payment method has found particular use among companies that send cash to employees in remote areas, benefiting aid agencies, agricultural cooperatives and insurance companies.
Rego adds: “Companies are also accessing the benefits of mobile settlements, especially those processing high-volume low-value payments to individuals spread across a country. These payments can be cashed out by wallet-holders at agents across the country, even in the most remote areas.”
Promisingly, regulators are addressing the familiar gripe about investing in Africa: laws and regulations differ between jurisdictions, while divergent FX rates need to be taken into account.
Rego says: "The critical success factor for mobile money solutions is effective collaboration between the telecom’s regulators and the central bank in each country. Policies and regulations should ideally protect the end wallet-holders, drive a widely spread agent network, and ensure compliance policies are strictly followed by mobile wallet providers and their agents.”
Steps are being taken to meet these needs. The East African Payment System has been developed. This has seen the central banks of Kenya, Tanzania, Uganda and Rwanda establish a real-time settlement system for the movement of local currencies. The move is being pushed by the governments as much as by the banking community.
Rego says: “Separately, central banks are driving electronic payments and we already have instant payments between bank accounts in South Africa and Nigeria, with Ghana and Kenya implementing in 2015.”
Companies are looking at the growth potential, but appreciate the disparate climate across the continent.
Ecobank's Gutmann says: “The MNCs are looking for a pan-African banking partner, with whom they can partner with in terms of their financial and treasury needs across multiple African countries.”
Despite China’s economic slowdown, transaction bankers still expect the country to continue to flex its financial muscles in the continent.
“There is no doubt that China is very active on the African continent," says Gutmann. "We continue to see growth and expansion of Chinese companies in many of the African markets in which we operate, and we have hired Chinese bankers in some of our key markets to ensure that we can service and support the growing list of Chinese clients.”
Nevertheless, the usage of the renminbi as a trade currency of choice has yet to become widespread or reach significant scale.
“We are seeing some increase in RMB but it is still very small,” says Gutmann. "Mainly it is in the construction and the infrastructure sectors that there has been any RMB usage.”