At my own bank, the Commercial Bank of Africa, we teamed up with mobile money service M-Pesa and telecoms operator Safaricom to launch our mobile bank account M-Shwari. And of course to our long-term core banking system provider – Temenos. In less than a decade, the bank has signed up more than 43 million customers across five countries – a massive step in financial inclusion. At CBA, we are proud of this achievement and are now opening the bank to further collaborations and partnerships that financially empower our customers and grow our business.
For many of our customers, the account we provide is the first bank account they have ever had. It has helped them in many ways. Perhaps they’ve taken out a loan to start a new business or used the service to save for school fees. Financial inclusion is important; but we can do more. Banks like ours can make sure we have the right products and advice to help our customers fulfil their life goals.
This means working with retailers, insurance companies, healthcare providers, car companies, even the government and our competitor banks, to provide the fullest menu of services that can be facilitated by a bank. To be able to work with others effectively, our banking platform has to be open – digital, in other words. Only a digital platform can connect our banking systems with the APIs or interfaces used by third parties.
Banks working in this way will transform Africa for the better. We are already witnessing the first promising shoots. CBA is using the flexibility of its digital banking platform to move into new markets, bringing its expertise in rapid credit decisions to customers outside Kenya.
A good example is our partnership with a bank in the Ivory Coast that wanted to expand their retail offering. Working together, we have signed up 2 million customers in just two years, even though we don’t have a banking license to operate there; our partner bank has that covered. We in turn provide them with our mobile savings and loans service capabilities that they can effectively use within the context of their market.
The opportunities don’t stop with international banking partnerships. Many industries are already talking to us about various finance partnerships. For example, online retailers are looking for banks willing to extend credit so customers can pay for their purchases in instalments. Insurance companies, healthcare providers and the Kenyan government also see benefits in creating a community of services around the banking relationship with a client. In fact, we are working on setting up banking as a service, offered digitally for others to package and resell. We expect our new financing solution for the government, in partnership with other banks, to help it identify and lend to promising Micro SMEs to grow the economy.
The benefits of our new digital banking business model go far beyond their financial value. More customers mean more data with which to price and market our services more accurately. The data shared, where permitted, by our partners – on consumer habits – gives us a more comprehensive picture of our customers and helps streamline decision-making processes.
The biggest winners in this digital transformation are, of course, our customers. CBA is committed to not only improving access to credit, but also access to cheaper credit. We believe this can be done if banks can position themselves in a way that can foster better collaboration. This can ensure that the customer gets the best deal and the participating members stay on their toes in terms of data analytics and competitive interest rates. The rest of the market may just be compelled to follow suit to the benefit of the customers.
But for open banking to reach its full potential, Africa still has work to do. While in Europe and the UK, the second EU Payment Services Directive (PSD2) regulation is proving to be a catalyst for open banking, there is no pan-African equivalent. This is a shame. It’s important that regulators enter the discussion and provide a framework within which all players must operate. This will protect customers, avoid the creation of a few all-too-powerful players and help keep the playing field level.
Perhaps, rather than look to Europe for its inspiration, African regulators could turn to Asia. In Hong Kong, the regulator has established an API framework for the banking sector, helping to make open banking more efficient by reducing the number of variables. This would be a positive development in Africa – and the sooner it could happen, the better.
Open banking has already given millions of Africans access to savings accounts and small loans. But open banking can deliver so much more than that. It’s about providing services that truly benefit them, enriching and transforming their lives. The technology exists; now it’s time to ensure we have the right regulations and frameworks to profit from the opportunity and make sure the future really is open.
Mohammed Jama Dalal is Head of Applications for Digital Financial Services at Commercial Bank of Africa