Five years ago, when the Ecobank Group first set out on its digital transformation journey, McKinsey rated Africa’s banking sector as the second fastest-growing and second most profitable of any global region, next to Latin America and the Caribbean.
Africa’s robust macroeconomic growth and rapid technological advancements proved a catalyst for innovation, entrepreneurship and investment across the continent.
The financial technology (fintech) sector, in particular, made rapid inroads into a market dominated by big banks, increasing global investment into the continent. According to the African Private Equity and Venture Capital Association, the total number (139) and value ($1.4bn) of venture capital deals reported on the continent reached a six-year record high in 2019, with fintech dominating the African start-up scene in both volume (19%) and value (23%).
This scenario is unlikely to change, as lockdown efforts to restrict the spread of the virus have accelerated the global drive to digital. With students forced to study online, remote working and more consumers opting for e-commerce, at Ecobank, at a group level, we saw a 48% increase in transactions across all our digital platforms in 2020.
We also saw the emergence of another new trend within the payment space – leveraging popular social platforms such as WhatsApp on the continent.
This sustained digital drive will clearly impact the banking sector on a global scale. To remain sustainable, banking groups will need to embrace digital transformation and remain flexible to adopt ever-evolving business models – not least because these increase access to financial services for the marginalised.
The banking sector has a major role to play here, as Africa’s long-term, sustainable growth is critically dependent on encouraging and enabling small and medium-sized entrepreneurs to launch and expand businesses, and move into the formal economy.
Despite robust growth, 57% of Africans still do not have access to basic banking, reports the World Bank. In Sub-Saharan Africa, only 37% of women have a bank account, compared with 48% of men, a gap that is widening.
Only 10% of SMEs in Africa have access to financial services, even though they are often a key driver in creating employment, expanding the private sector, and increasing per capita GDP. SMEs and the informal sector represent over 90% of businesses and account for 60% of the employment.
Financial inclusion is key to rebuilding systems and processes to drive the economic growth of the continent. This necessitates a multi-partnership approach. In the financial landscape, big players such as banks should take advantage of fintech to drive this financial inclusion so that they are part of the value chain creation.
Using the Ecobank Group as a case study, we have managed to make huge inroads into these growing markets with various packages such as the virtual Xpress Account that can be opened on a mobile phone, an e-commerce solution, launched in December 2020 to provide MSMEs with free access to online markets, and the Ellevate programme, aimed at providing financial services and tools to women in business, whether as owners, managers or majority members.
Driving innovation and agility
Fintech has proven that non-bank firms can provide broader types of access to financial services, through smart collaborations. And the Ecobank Fintech Challenge is just one case study of how banks can successfully traverse the digital divide.
Launched in 2016, the Ecobank Fintech Challenge & Fellowship identifies and partners with fintechs that are ready to scale, providing them with support and access to Ecobank’s 33 African markets, as well as opportunities to integrate with existing Ecobank digital offerings.
Since inception, 31 start-ups have successfully completed the Fintech Challenge, with significant results – and several success stories:
- Invest Mobile entered the inaugural competition in 2017 and has since developed a platform for customers to have access to a smooth one-stop shop for investment products from their phones. The application enables a full digital experience for customers from on-boarding to investing, allowing transactions from the debit cards of other banks, and mobile money.
- Data Integrated Limited in Kenya and in Rwanda (another 2017 Fellow), enables customers to collect payments using Ecobank services.
- A fintech start-up is developing the Ecobank Investor app, dedicated for the group’s Wealth and Assets management entity.
The Ecobank Group’s pan-African Banking Sandbox is an extension of the Fintech Challenge, launched in August 2020 following a successful pilot with select fintechs.
The Sandbox enables fintechs to access Ecobank’s Application Programming Interface (API) for the development of innovative solutions. It is part of Ecobank’s Open Banking strategy and will accelerate its partnerships with fintechs and other associates across Africa.
We see our Sandbox as a huge opportunity for fintechs to access the 33 markets where we have presence in Africa, more so with the advent of the African Continental Free Trade Area (AfCFTA).
The official start of this initiative will accelerate intra-African trade, and Ecobank is in the best position to facilitate financial transactions and boost that business opportunity across the continent.
As an economic catalyst and pioneer in digital banking, these successes provide clear templates and proof-of-concept of how banking groups can harness technology and leverage partnerships with telcos and other companies to extend market reach, distribution and expand their target markets. We have seen first-hand how these partnerships and technology can enable a bank’s offering to become borderless, scalable and with a low cost-to-serve.
Fintechs are key partners in driving innovation and agility – and having spent the last three years intimately working with them, the Ecobank Group is well on its journey to becoming the reference bank for partnerships.
Djiba Diallo Diao is the Senior Fintech Advisor for Ecobank, leading the bank’s fintech initiatives and strategy. Ecobank won the Award for Innovation in Financial Services in the 2020 edition of the African Banker Awards.