Banking in the Digital Age – There is a lack of banking facilities for more than 2 billion people worldwide. Despite the fact that many of these unbanked people are located in developing regions, these adults call countries with emerging economies home. Less than half of the adult population in developing economies, specifically 41%, has access to banking services. The retail banking sector in Africa has not met the expected level of development and has deviated from the anticipated evolutionary path.
Currently, the focus of this blog post is mainly on African markets, but it should be noted that this is only a speculative assumption. The aim of this blog article is to present a graphic representation of the difficulties confronting banks.
Banking and Banks – Outlook
Traditionally, banks have strategically placed their branches to cater to specific demographic groups deemed to be thriving. Customers unable to meet the minimum deposit requirements have been denied access to banking services by some institutions. The banks’ perspective towards customers is focused on expenses, which could pose a challenge to their ability to cater to individuals of all economic backgrounds unless there is a transformation in their approach.
It is important to persuade individuals to transition from current technological systems to those of the future. This presents a significant obstacle since it requires substantial efforts in advertising, advocating the product, and informing potential consumers. The forthcoming technological advancements heavily depend on intelligent gadgets and efficient networks, yet the majority of African markets lack access to them. African consumers often face high prices when it comes to new technologies, primarily because of macroeconomic, regulatory, and political influences that impact the speed at which technology is adopted.
Young Africans tend to have a strong inclination towards technological adoption, resulting in a high adoption rate. If technological advancements are aimed at this demographic, there will be few obstacles to the implementation process. If the intended audience is older than 45 years old, the principal difficulties will arise. Changing from the current situation necessitates considerable training and education, as they need time to adjust.
Only a negligible fraction of banks, approximately one or two in a million, exhibit disruptive behavior. These financial institutions operate solely through online platforms and mobile applications, without the presence of any brick-and-mortar branches for conducting transactions. Integrating chatbots, robotic advisors, and video calls into client interactions
Banking in the Digital Age
During the early days of financial payments and banking, the process was antiquated and inefficient. Despite its sluggish nature, customers were content, as society was not yet fully immersed in the digital age. This information is not intended to provide extensive comprehension for specialists in various payment methods such as mobile, internet, paper, or card. Therefore, they need not feel discouraged after reading.
The main emphasis is on having in-depth conversations and demonstrations regarding the advancements in the payment industry, along with the potential influence of FinTech, MNOs, MFS firms, and banks’ renowned campuses on various payment methods such as mobile, internet, paper, plastic cards, and even vouchers. In Africa, there are many profitable yet untapped banking prospects that banks operating within the region must capitalize on in order to thrive.
FinTech provides access to financial services for communities that do not have established formal channels. Formal financial service providers, such as banks, are troubled by this situation, yet they are also resistant to stepping outside their familiar territory.
Despite having the opportunity to avail themselves of these chances, to ensure that everyone is accommodated, a bank needs a vast array of branches, which results in substantial initial costs. The cost of these expenses is ultimately borne by the consumer. With the introduction of change comes the emergence of prospects.
Banks and their fun with banking
In the beginning, banks were solely responsible for the entertainment and satisfaction of financial banking services (excluding non-banking services), and they were the only ones receiving profits. As technology progressed, non-banking organizations expanded their reach into financial services, aiming to capitalize on profit opportunities in the industry.
These were large-scale groups catering to numerous customers via extensive networks of distribution, which included mobile operators, retailers, and online vendors. Cash would reign supreme if there were a worldwide governing body for innovation in regulation and oversight.
Transformation of Payments
In recent years, there has been a significant shift in financial payments in many developing nations, with traditional banking models giving way to FinTech companies backed by mobile network operators. The transformation has resulted in the incorporation of financially excluded individuals and significantly enhanced the operational efficiency of the payment sector.
Conversely, banks have restrictions in terms of their operational time, and even with the advancement of technology that led to the expansion of banking services, the accessibility of banking halls is limited due to national boundaries. Although the banking system in most African countries has undergone a significant change, previously MNOs generated revenue from transactions while banks profited from account balance retention.
In contrast, mobile network operators have adopted the idea of a widespread agent system with minimal expenses. Typically, the agent network of MNOs is highly concentrated, ensuring there is at least one agent present within every 1km radius. The client does not have to undertake lengthy journeys or incur expenses to connect with an agent and conduct transactions that are agent-focused. Given the nature of their industry, FinTech companies have proven adept at catering to “always-on, global, and ubiquitous” demand.
This guarantees unrestricted and long-lasting availability of services, resulting in user convenience, increased transactions, and elevated earnings for the MNOs.
Why mobile money or mobile payment services offered by mobile network operators (MNOs) will always remain superior to mobile banking services provided by banks. I welcome both positive and negative feedback regarding my opinions, as they solely represent my personal views. The ability to be easily accessed is an essential element for the prosperity of any service.
Points to Note:
All credits, if any, remain with the original contributor. The points covered in this post were focused on MNOs, FinTechs, and banks’ styles of banking services. As banks and banking are no longer married, if a customer gets better banking services from MNOs or FinTechs, then why would the customer say no? I have also explained all the basics around the myth of mobile payments, its models, and the importance of quality service implementations, usage, and practice experience for markets.
Books + Other readings Referred
- Research through open internet, news portals, white papers and imparted knowledge via live conferences & lectures.
- Lab and hands-on experience of @AILabPage (Self-taught learners group) members.
Feedback & Further Question
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