Fintech’s Role in Accelerating Digital Change During COVID

Missed our keynote panel during this year’s Africa Tech Summit? Here are some of the highlights: 

– Digitization as a survival game changer to accelerate product development
– Facilitating increased cashless transactions
– The adoption of banks, financial institutions, and merchants to a new payments landscape
– Innovating to offer alternative channels and platform to connect merchants to suppliers and customers
– Aligning the role of regulators, incumbent banks, fintech innovators, investors, MNOs, and Private sector

DIGITIZATION DOESN’T HAPPEN ALONE 

Being the incumbents with the most resources, Banks and Telcos previously have been resistant to working with smaller Fintechs. However, now with the rapid change to respond to COVID, most of them recognize the need to work with fintechs in order to get to the next stage of development. Given the increased velocity of mobile money payments during COVID, these companies are now looking at alternative products through mobile and there has been more interest in collaboration noted Meryem Habibi, CRO of AZA. For example, both MTN and Telkom will be offering micro-loans in South Africa. By size, MTN is Africa’s largest operator, and it will be rolling out a business-focused mobile money product, which is currently being piloted in Rwanda, to other markets by the end of the year. While some of these products are internal innovations, a number of them have happened through collaborations or acquisitions with Fintechs. 

This also coincides with the growing prowess of Fintechs in general, with players on the continent like Flutterwave and Paystack gaining considerable market share. Even with the last 5 years, the African FinTech industry has changed from being scrappy startups to be well-funded tech infrastructure. Now with their respect and reach in the market, they are unavoidable, and banks and telecoms need to work with them collaboratively to survive. 

DIGITIZATION MEANS MORE DATA AND BETTER DECISIONS 

Lendable’s Executive Chairman, Chris Wehbe highlighted the role of data in making investment decisions. During the COVID period, they were able to analyze live data from a logistics company in order to better tailor a financing option for the specific company. Oftentimes credit models are built over long periods of time, and in Africa, are notoriously unreliable. However, changing investment offerings based on real time data means commercial lending can still happen, especially in times of crisis like COVID. In fact, this type of responsiveness and customization can lead to better credit standards, and which also means better lending practices and outcomes.

G2C GOVERNMENT TO CONSUMER PAYMENTS 

One of the biggest drivers of digital banking has actually been government involvement. Anytime the government begins to offer payouts or collections digitally or through mobile money, from welfare payments to tax, is any opportunity for use in that country to explode. While this is rarely emphasized, suggests Wasim Tahir, Sector Strategist- Financial Institutions, CDC Group, the public sector can play a more active role in mass adoption. In general, the use case strategy is overrated, it takes a much longer time for private fintechs to drive adoption vertical to vertical, such as ecommerce to education to health. For example, the Kenyan government partnered with Vodafone Group’s M-Pesa, Airtel Kenya and Telkom Kenya during COVID to directly disburse aid and stimulus monies, rather than food or cash payouts. G2C payments can cover much more ground, and more inclusively. 

FINTECHS MINIMIZE DISTANCE AND TIME 

Overall, we have seen increased scarcity in the value chain, but FinTechs can shorten the value chain. In COVID, due to the new government regulations around reduced fees in countries like Kenya, it has been cheaper for people to transact, and therefore more people transact in lower increments. Even this has been counteracted by the lower macroeconomic level we should expect to see increased liquidity in the markets.

About The Author

About The Author