The banking markets in Africa are among the most dynamic in the world. The continent’s entire banking market is the world’s second-fastest-growing and most profitable, and a centre of innovation. The digital banking sector, in particular, has seen the emergence of innovative business models in response to constraints such as low banking penetration, extensive cash usage, limited credit bureau coverage, and local branch and ATM networks.
Paperless banking delivers a wide range of value-added products and services to bank customers using electronic and communications networks. Electronic banking is the application of information technology to banking processes. It is a method for a customer to conduct financial transactions electronically rather than visiting a physical location.
This method relies on automated machines that are operated by a user who enters client instructions and the output is calculated by the systems. As a result of rapid technological advancements, increasing awareness, and demands that banks serve their customers effectively and at the lowest possible cost, today’s service environment in Africa is tremendously dynamic. In today’s Africa, information and communication technology (ICT) is at the heart of the worldwide transformation curve for electronic banking systems.
The next section of this blog tries to explore the factors that influence the adoption and success of paperless banking in poor countries of Africa, particularly in rural and isolated areas.
Many experts and observers have seen the adoption of paperless banking in a conceptual framework related to three different variables or factors. The influence of information communication and technology, mobile devices, electronic banking services, and bank workers are given as independent factors.
The moderating variable is government policy, whereas the intervening variables are cost and fees, convenience, privacy, trust, simplicity, and reliability. Finally, the independent variables influenced the dependent variable, which was customer service delivery.
Let us look at two different African nations with strikingly similar poverty and stagnation conditions rooted in different traditional and contemporary causes. While Kenya, situated on the eastern coast of the continent, has made rapid inroads in the development of the neo banking services, Ghana, which spans the Gulf of Guinea and the Atlantic Ocean to the south, on the other hand, is making itself familiar with new trends in digital banking during the pandemic.
Mobile money account ownership surged by over 200 percent between 2014 and 2017, with 35 percent of adults in rural areas reporting using the service. In addition, Ghana permitted non-banks, notably mobile network companies, to issue e-money, which was a crucial enabler. The World Bank’s CGAP contributed to this critical breakthrough, allowing Ghanaian mobile networks to innovate.
Government-to-person (“G2P”) and government-to-government (“G2G”) payments in the country are almost entirely digital. However, via volume, nearly 90% of government-to-business (G2B) and other government payments are still conducted by check or cash. Although 86 percent of government payments are done electronically in terms of value, person-to-government (P2G) and business-to-government (B2G) payments are still predominantly cash-based. The government is extensively using digital methods. Now the onus is on the local commercial banks to adopt a digital solution to cater to the changing demands in the nation.
Kenya boasts Africa’s largest and most successful mobile money market, continually outpacing the continent in terms of scale and innovation. It has become a common means of transferring money between people, with formal financial inclusion reaching over 80% of the population in 2019 – the highest in Africa.
There were 58.3 million mobile wallets in December 2019 or 1.7 mobile wallets for every adult. According to a recent study, mobile money has actively pulled 2% of Kenyanhouseholds out of poverty, owing to changes in financial resilience and savings, a movement away from farming, and a strong beneficial impact on women.
Kenya’s experience in digital financial services (DFS) demonstrates how risk-based regulatory methods can promote financial inclusion and innovation. However, despite the flexible regulatory approach allowing mobile money and digital credit to prosper, consumer protection concerns have been highlighted. Thus, commercial banks in Kenya also have an excellent opportunity to adopt digital practices by working on paperless banking solutions, allaying consumers’ fears about their data security.
The development of Paperless Banking services is expected to decongest banking halls and reduce the incidences of long queues in banking halls. ICT –based financial services have made a significant contribution in reducing the cost of offering financial services. Despite the stated benefits that paperless banking offers consumers, studies done in the Africa show that the adoption of these forms of banking has been limited and, in many cases, has fallen short of expectations.
New services and peoducts, such as pay-as-you-go solar, have become possible for customers in remote places because of the ability to transfer modest payments affordably and safely. In addition, to establish consumer permission and foster competition, third parties, such as budgeting applications, can now begin payments of users’ bank and payment card accounts or receive financial transaction data via open APIs.
Millions of poorer households in Kenya, Tanzania, Zambia, and Ghana have already received digital credit. 39 Machine-learning methods that exploit alternative data, including payments, e-commerce, social media, or mobile phone activities, can customize digital loans to user demands without requiring human participation.
Limited internet penetration, low bank account, and lack of timely delivery of physical items are all obstacles to expanding Paperless Banking in Africa and other poor countries. On the other hand, banks have invested much in telecommunications and electronic systems, and users have been validated in their acceptance of the Paperless Banking system as helpful and simple to use.
Consumer data is collected, stored, processed, and exchanged by several ecosystem stakeholders in DFS. This puts customers in danger of unlawful disclosure and use of personal information, necessitating the implementation of solid consumer data protection regulations.
WeCodee Innovations Pvt. Ltd. understands the new aspirations of the emerging nations of Africa. We have been working tirelessly in collaboration with various regional banks to help them adopt digital banking services and go paperless.
