Facing rising competition from telecoms companies, traditional banks are investing significantly to upgrade their digital platforms, while some have launched their own mobile services. Mobile banking is growing by the day, as the range of products available to consumers continues to rise.
Banking penetration has improved in recent years after lenders expanded their networks and the Central Bank of West African States required they offer a number of services, including opening of an account, without charges.
However, the proportion of people with a formal account remains low, at 19.6% in 2017. This is partly due to the fact that opening physical branches is very expensive and often unprofitable in remote areas. In this context, digitalisation appears to be a key factor to improve financial inclusion at lower cost for both banks and telecoms companies in addition to leveraging their reach.
Online-only Bank
In March 2018 UK lender Standard Chartered launched its first African online-only bank in Côte d’Ivoire. The fully digital service allows customers to open an account in 15 minutes and carry out their banking operations using an application on their mobile phones. Through the app, clients of the bank will reportedly have access to about 70 banking services; however, as of late 2018 the services available appeared to be limited to deposits and payments via a Visa card.
Standard Chartered joins other lenders that are heavily investing in digital banking in Africa to gain market share. Pan-African lender Ecobank launched its application Ecobank Mobile App in 2016, allowing clients to pay and withdraw money without a bank card. According the company website, this application is also available in Nigeria and will be introduced to other countries in the near term.
The bank has gone from 250,000 to 600,000 customers in Côte d’Ivoire since launching the application, with the total number of clients in its African portfolio rising by 40% to 14m in the same period. “Digitalisation could be a real growth driver for the banking industry. The need to significantly support economic growth and speed up banking penetration requires that credit institutions expand their networks to bring services closer to the population,” Ismael Fanny, deputy director-general of the Association of Banks and Financial Establishments in Côte d’Ivoire, told OBG. “To that end, we should usher in a review of the sector’s distribution channels and customer banking habits, and research new approaches such as digitalisation.” Building a bank agency in Côte d’Ivoire is estimated to cost between CFA500m (€750,000) and CFA1bn (€1.5m). While a bank in a village may attract clients, it is unlikely to be profitable, Dominique Banny, director of client coverage for West Africa at Standard Bank, told OBG. “The digital model is light in assets and allows for economies of scale,” he added.
Financial Inclusion
As the middle class expands and becomes more connected, consumer habits are changing, offering digital banking significant room to grow. This potential is heightened by the fact that 75% of the population is under the age of 35. A survey from consulting firm McKinsey & Company published in February 2018 showed that 55% of Africans from the middle classes prefer digital over branch banking.
“A lot of people – especially the younger population – have business ideas but need specialised mentoring structures in order to translate them into a strategic and executable business model with sound financial planning,” Jean-Luc Konan, chairman and CEO of Groupe COFINA, a financial services firm based in Abidjan, told OBG. “Currently, only 6% of entrepreneurs from small and medium-sized enterprises have access to financing, despite the fact they represent up to 80% of registered companies.”
As a result, it is no surprise that major banks are spending to digitise their operations in Africa. In addition to investing to upgrade its digital platform for existing clients, the French multinational investment bank Société Générale launched a mobile money application called YUP in 2017. The service was first introduced in Senegal and Côte d’Ivoire, and then expanded to all eight of the West African countries where it operates.
The lender said it aimed to double its customer base in the West African region to 2m people by 2020. The app uses a technology called near sound data transfer that allows clients to bypass mobile carriers. The service enables customers to make withdrawals, deposits and money transfers, or pay their bills, and relies on thousands of third party-agents like shops and fuel stations.
As telecoms firms in the country have managed to attract clients who were not the primary targets of traditional banks, Marc Giugni, head of corporate services at Société Générale de Banques en Côte d’Ivoire, the Ivorian unit of the Société Générale, said the bank plans to expand services to salary advances, loans and international transfers. “Telcos are a competition that banks had not seen coming, but now we are fighting back,” he said. A year after it was launched in Côte d’Ivoire, YUP already had 100,000 clients, according to Giugni.
Mobile Growth
Mobile money transactions have grown at an impressive rate in recent years. In January 2018 the government estimated that daily financial transactions through mobile money platforms stood at approximately CFA17bn (€25.5m), and as of mid-2018 more than 11.4m Ivorians had a mobile money account, a 43% increase from June 2017, according to the Telecommunications/ICT Regulation Authority of Côte d’Ivoire. Orange dominates the mobile banking segment, with 6.17m subscribers, or a market share of 54.17%, followed by South Africa’s MTN with 4.03m users and 35.38%. Morocco’s MOOV was third with 1.19m clients, or 10.45%.
Many Ivorians are accustomed to using mobile money services for withdrawal and payment transactions like rent, electricity and water, or even university tuition fees, and the products on offer continue to expand. Local mobile money lender Celpaid, for example, began operating microfinance services in 2017. In July 2018 MTN Mobile Money partnered with Bridge Bank to launch MoMo Kash, a service of micro-loans and micro-savings targeting unbanked populations and retail businesses.
Solid Results
Mobile money revenue amounted to CFA19.93bn (€29.9m) in the second quarter of 2018, up 22% year-on-year. Orange again ranked first, with CFA13.29bn (€20m), while MTN stood second with CFA5.43bn (€8.1m), followed by MOOV with CFA1.21bn (€1.8m).
In 2008 Orange became the first telecoms company to launch mobile banking operations in French-speaking Africa, namely Côte d’Ivoire, and now has 40m users in 17 countries. In the years since it has invested significantly in the segment. Its most recent attempt is to expand its services to loans and insurance products, relying on a vast network of 160,000 sale points throughout Africa.
In July 2018 Orange partnered with Banque Atlantique (BACI) to allow its mobile banking clients to purchase a Visa card for CFA10,000 (€15) that allows them to use payment terminals in stores or withdraw money from BACI ATMs. Côte d’Ivoire is only the third country in Africa – after Botswana and Cameroon – to have Orange Money’s Visa payment service. This complements the 2018 establishment of Orange Bank Africa, a 75:25 joint venture with Ivorian banking and insurance group NSIA.
“Mobile money has capitalised on the limits of traditional banks in Africa, and they have managed to capture a large client base that banks do not have,” Banny said. “Telcos have lower structural costs. With their existing distribution network stemming from their mobile operations and services, they can reach the people that banks are not able to serve today.”
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