Digitised Bank Payments –  The evolution of financial systems has been a long but interesting journey characterized by sudden changes in the underlying technologies like artificial intelligence, blockchain, and big data analytics. Retail banking in Africa is far from where it should have been; it never followed the natural progression. This is just an assumption, and the current picture is focused on African marketsThe idea for this blog post is to put up a picture of the struggle-saga of banks.

The New Technologies and Banking

Just one or two out of a million banks are getting disruptive. These banks have no physical branches and conduct all business through apps and websites. Incorporating chatbots and video calls for client communications, chatbots, and robotic advisors.


Financial payments and banking started in a very inefficient and traditional way, which was slow but still acceptable to the customers due to the stage of the information age. Experts in any form of payment, like mobile, Internet, paper, or card, should not get disappointed after reading this, as it’s not meant for detailed or deeper understanding.

The focus here is on high-level discussion and showing what is happening in the payment industry and the contribution or future impact of FinTech, MNOs, MFS companies, and banks’ well-known campuses for all types of payments, i.e., mobile, internet, paper, plastic cards, and even vouchers. There are lucrative but underutilized banking opportunities in Africa, and banks in the region need to step up and grasp these opportunities to succeed.

Communities are able to access financial services through FinTech that are not formally established.Banks or formal financial service providers feels upset about it but on the other hand does not want to move out of thier comfort zone as well. Even though they have the chance to take advantage of these opportunities. In order to guarantee inclusivity, a Banks requires an expansive network of branches, which incurs significant initial expenses. The consumer bears the brunt of these expenses. Opportunities arise with the advent of change.

Banks and their fun with banking

Initially, almost all the fun and joy in the financial banking services (except non-banking services) space was attributable to banks, with all the revenue being collected by the same entities. With advancements in technology, organizations outside the banking industry diversified into financial services, targeting margins in the space.

These were organizations servicing millions of customers through broad distribution channels, be they mobile operators, retailers, or online merchants. If we had any global ministry of innovation for regulation and control, then cash would be the single king.

Digitised Bank Payments

A small study on the informal financial system of Indonesia depicts very clearly that there are three products or services that are key in the Indonesian market: savings, loans, and remittances (domestic [money traveling from cities to villages] and international), which are also key products for banks, but due to the bank mindset of playing with big or large figures, this will never rise up well.

If Reserve Banks, Regulators, Fintech Companies, and MNOs play well, then this market size can grow up to approximately about a billion USD a month and can grow even much higher. Following the crisis, most countries have increased monitoring and regulation of banks.

The cost of transacting on a banking platform is very high compared to transacting on a Mobile Money platform. – MNO’s interest in retaining subscriber is more then banks by giving service which may or may not generate revenue and always try to run promotions around same to win back. Usually the cost of setup and signage is borne by the agent itself in a bid to be more visible and to attract more customers as revenue is highly dependent on the volume of transactions pushed by the agent.

The struggle-saga continues.

Africa is dealing with the challenges of putting in place efficient, secure, low-cost operating models, centralized operations, multichannel and multi-product capabilities, coupled with low-priced, lighter, and leaner operating models. According to a study by Google available on various links, 80% of Africa’s total adult population does not have access to any form of formal financial services. FinTechs (undercover by MNOs) in Africa are winning the race due to their focus and attitude of “be my customer” as opposed to the banks “who is eligible to be my customer” approach.

MNO’s speed to achieve their goal to standardize, automate, digitize, and remove boundaries by bringing cross-order financial and remittance services in the form of payments, cash, airtime, paperless, and online At the same time, banks are still in their canteens with their coffee mugs without any sign of worry, but in reality, all African banks struggle-saga is still on with MNOs and fintech players.

The role of informal institutions in providing financial services to the members of the community and concludes by highlighting the opportunities these present for formal financial service providers, but in order to ensure accessibility of banking services, a bank has to have a wide branch network of fully branded brick and mortar marble banking halls with all the necessary security systems.

The setup costs of these are so high, and to recoup the same, the bank has to pass on the cost to the ultimate consumer. Times have changed, and with change comes opportunity.

Transformation of Payments

Over the past few years, the face of financial payments in most developing countries has taken a radical change from a bank model to a FinTech (backed by MNO) company-dominated model. This change has brought financial inclusion to most marginalized citizens and greatly improved efficiency in the payment industry.

This article will focus on why banks mobile banking can never outshine MNOs mobile money. I am happy to get feedback in agreement or disagreement with these reasons, as these are purely my own views. Accessibility is a critical success factor for any service.

Banks, on the other hand, have limited operating hours, and for those who have utilized technology by diffusing access to service from banking, halls have a great limitation of country borders. MNO makes money on transactions, but banks earn money when money remains in the account (though this model has changed completely for most of the African countries).

MNOs, on the other hand, have embraced the concept of an extensive agent network at minimal cost. MNOs agent network is usually dense, with at least one agent for every 1km radius. The customer does not need to travel long distances or fork out any money to access an agent and perform agent-centered transactions. Due to the nature of the business, FinTechs have excelled in the “24/7, around the globe, use me” phenomenon.

This assures timeless and borderless access to services, which provides ease of use, more transactions, and higher revenue for the MNOs.

Some costs behind banking

In order for any business to thrive, it has to observe a wide cost-to-revenue ratio; however, banks are subject to a high customer acquisition cost of $10 to $100 per customer, whereas MNOs stand at between $2 and $10. This acquisition cost has a ripple effect on the charging structure throughout the life cycle of the relationship between the bank and the customer. Naturally, when the cost of customer acquisition is high, the resultant transactional cost will follow the same trend.

The cost of transacting on a banking platform is very high compared to transacting on a mobile money platform. MNOs’ interest in retaining subscribers is greater than banks by giving services that may or may not generate revenue and always trying to run promotions around the same to win them back. Usually, the cost of setup and signage is borne by the agent itself in a bid to be more visible and to attract more customers, as revenue is highly dependent on the volume of transactions pushed by the agent.

This is the time when customer centricity, financial inclusion, and customer-serving infrastructure (agents, merchants, billers, and remittance partner networks) should be on the top agenda for banks in Africa, but sadly, they are not. Banks want to run only behind high-value transactions, not dollar or two-dollar transactions.

Brand New Banking From Banks

Banks in the region will only continue to develop strategies to achieve sustainable growth, which may not materialize as of now since it looks like the only strategy is nothing beyond that. At the same time, without a doubt, I need to be honest with specific examples wherein a bank is trying to jump the MNO’s role with the idea of strengthening and furthering financial inclusion. Kenya’s Equity Bank and South Africa’s FNB Bank opted to be mobile virtual network operators (MVNOs).

A few golden rules or bullet points to get quick wins

  • Needs to focus outside the “digital and social media channels,” i.e., focus on radio, road shows with village communities, and groups within the local language and style.
  • Trust local people to act as brand ambassadors to increase customer loyalty.
  • Focusing on creating a cost-effective and efficient operating model is the golden key.
  • Carefully thought through branch expansion versus setting up an agent network
  • Managing risk, security, and compliance and bringing them up to a global standard
  • Use mobile as a primary medium for transactions, queries, and online banking.
  • Technology-enabled customer engagement and continuous innovation
  • A complete set of countermeasures against money laundering and the financing of terrorism and proliferation, covering the required legal, regulatory, and operational measures through a knowledge set
  • In-depth knowledge and willingness to attain knowledge on principles for mobile financial services infrastructure
  • Understanding and willingness to attain in-depth knowledge and hands-on core banking platform integration with MFS systems, architecture, banking grade switching, and rules around the same

The world is currently facing an economic crisis, and most people are living on a hand-to-mouth basis. Banks go against the economic tide by encouraging savings (which is correct and required for the country’s economy and the betterment of each person’s life), while MNOs encourage spending. There are few savings and investments in most countries; hence, most citizens spend whatever they earn on basic survival requirements. MNOs were quick to realize this and enabled ease of payment for most commodities through merchant payment facilities and for most utilities and bills through bill payment services.

MNOs and banks

In the case of new startups, MNO helped boost GDP by helping people with the will to start up their own businesses and grow with free consultation and support—the “You Grow, I Grow” philosophy. For distribution channels, money distribution should be treated as distribution of cigarettes, coke, and water bottles, which MNOs can do easily with flexibility, and banks never thought of creating agent networks where MNOs’ key success factor is agent banking only. On the limit side, MNO financial services limits are set at the upper limit, and for banks, they are set at the lower limit. So MNO’s whole game is on volume, and the bank only wants value.

MNOs exhibit a higher affinity to retain subscribers than banks. This is observed by the multiple promotions, which may or may not be revenue-generating and encourage customer win-back. An MNO can run as many as three promotions per quarter, while banks could go a year without any activity simulating a promotion.

Banks have generally been found lacking in the areas of innovation, technology utilization, and adoption. A typical bank will review the architecture of their banking system once every 5 years, while MNOs employ solution architects who work hand in hand with their product development and innovation arms to deliver efficient and relevant solutions that meet the needs of the market.

Suppliers of core banking systems have kept the system ecosystem as complex as rocket science, which makes integration with other systems a nightmare. This is in opposition to the open API approach adopted by MNOs. Most countries have slackened regulation of MNOs, while banks are subject to stringent regulation by their respective central banks and deposit protection bodies. Banks were known to be the center of most economies financial transactions, and in order to ensure stability, most governments maintain a close watch on transactions in the formal payment system.

Learnings for Banks to Improve Banking

This education encompasses the knowledge, attitudes, skills, and behaviors of consumers with regard to managing their resources and understanding, selecting, and making use of financial services that fit their needs. Mobile financial service providers, i.e., MNOs, banks, or even independent MFS companies, can succeed by focusing on some key areas to hold a much better position from today to tomorrow.

Because financial capability is a relatively new area, alternative definitions and approaches to its measurement exist in parallel. The term “financial literacy” refers to one aspect of financial capability—the knowledge and awareness of financial concepts and products.

The framework developed for financial inclusion and financial services for unbanked communities differs from country to country and among different service providers (banks, MNOs, and FS/FinTech companies). Relaxed regulation allows MNOs to diversify and tap into financial services, while banks find it difficult to venture into any other industry outside the usual core financial payments.

Most regulators impose stringent KYC requirements on banks for account opening. These requirements form a wide spectrum, spanning from proof of residence to a copy of ID, confirmation of employment to assure a source of funds, and a passport-sized photo. Most citizens fall short on some of these requirements, and failure to meet any one of the above immediately makes one ineligible to open an account. This places banks at a disadvantage because most people operate outside the formal employment system and therefore lack some of the account opening prerequisites.

Banking and Banks: No Longer Married

The relationship between customer and bank is one of trust; any customer deposit held by the bank is a liability that has to be honored whenever it falls due. Some banks have failed to manage liquidity risk, resulting in their being placed under curatorship by the respective regulators. Such a move has the catastrophic effect of disrupting the banks’ ecosystem as banks hold cross-investments with each other.

The informal trade market size is estimated to be worth around $7.4 billion for most African countries (based on assumptions and reading internet articles). Banks have a restrictive approach when it comes to onboarding customers. When one approaches a bank with a request, be it a new account opening or a loan request, they are subjected to rigorous checks and processes that frustrate would-be customers. This “who is eligible to be my customer?” approach results in a low onboarding rate for banks.

MNOs, on the other hand, use a “please be my customer” approach, which proves to be a hit as they onboard multiple subscribers daily. For this reason, MNOs are more inclined to tap into both the formal and informal sectors of the economy, while banks concentrate on the formal sector. Informal sectors prove to be more profitable than formal sectors because they push high-volume, low-value transactions.

The restrictive KYC requirements can also be applied in a tiered manner depending on the value at risk and the transactional volume of the account. A number of banks in Africa have embarked on agency banking to increase their footprint in the operating countries. MNOs, through underlying banks, have started giving instant loans using online credit rating systems based on credit data, transactional data, tenure with the MNO, daily spend, and other conditions. Banks take days to approve loans because they have a low-risk appetite.

The telecoms business is also characterized by a high rate of churn as subscribers switch operators looking for favorable deals.

How MNO is playing their part

Some countries have adopted number portability, where subscribers maintain their number when they switch operators. Banked customers, on the other hand, have a lot of thinking and clearance to do before changing banks because a number of financial services like loans, investments, and mortgages are tied to their bank account number.

In order to improve profitability and gain relevance in the mobile payment space, banks should invest more in market research and gather the requirements of the markets they operate in. This is easily achieved by setting up a dedicated R&D division and allocating an adequate budget for this cause. Based on the closed nature of core banking systems, banks can separate a mobile money system from the core banking system to achieve the flexibility required from a mobile payment system.

These policies from Ministries of Innovation MNOs are the best admirers and advantage takers. Sadly, for a majority of the banks, this is still an unknown path, and for some, it is not a preferred route. The so-called “haircut” comes along the way and helps in worsening the problem in a negative smiley way. The solution that is hastily designed to fall into large sums in offshore accounts can be avoided very well with MFS.

Mobile Payments Industry

Mobile payments are expected to explode beyond 3 trillion euros by 2020. Mobile money saves 2 billion USD for a few African countries. Mobile money is not just cash in, cash out via agents any more, or P2P money transfer. Africa has given a new and very different dimension and speed, like a blink of an eye, to getting money from the UK, the US, or anywhere in the world within seconds, around 24 hours a day, directly to your wallets, for all bill payments, merchant payments, loans, insurance, etc., and never stopping or ending the story.

Banks need to make a radical change from their current modus operandi in order to beat MNOs in the field of mobile payments or else take a back seat as clerks for reconciliations and accounting units, and regulators should allow MFS companies to innovate and bring new solutions and products in no time and make customers lives easier, less costly, and much faster. I guess banks still look like banks, but there is a shift in paradigm and model if you need to transact more than $10,000. In a nutshell, the retail division is almost underwater, and corporate still has a chance and time.

Their cash or savings were simply scalped and went to help fund the closure of one bank and the propping up of others. Opportunities are countless; whoever seizes them first gets the upper hand. Thanks to regulation and central bank support through the Ministry of Innovation, Get up, spread your wings, and grab as much sky (I guess there is no more land left) as you can.

Feedback and Comments:

Please comment and give feedback in the section below. If you have any questions, please email me at Contact.


Conclusions: This is to explore and deliberate. The suggestions or new thoughts or ideas on the table. Off-course comments in agreement or disagreement are welcome. Running on an unknown path without a roadmap or direction, with due respect, often results in disasters.

I personally have seen and taken part in programs to build my experience or hands-on mastery in such situations where mobile payments or mobile wallet-based cross-border remittances support country economies and have proven with 100% confidence that when it came to the crunch, many countries, including Greece, Cyprus, and Italy, had no choice but to accept rescue terms that affected not only bank bondholders and shareholders but many thousands of private deposit holders.

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Posted by V Sharma

A Technology Specialist boasting 22+ years of exposure to Fintech, Insuretech, and Investtech with proficiency in Data Science, Advanced Analytics, AI (Machine Learning, Neural Networks, Deep Learning), and Blockchain (Trust Assessment, Tokenization, Digital Assets). Demonstrated effectiveness in Mobile Financial Services (Cross Border Remittances, Mobile Money, Mobile Banking, Payments), IT Service Management, Software Engineering, and Mobile Telecom (Mobile Data, Billing, Prepaid Charging Services). Proven success in launching start-ups and new business units - domestically and internationally - with hands-on exposure to engineering and business strategy. "A fervent Physics enthusiast with a self-proclaimed avocation for photography" in my spare time.


  1. Reblogged this on sheetal05.


  2. ….. And their Struggle Saga with Friend FinTech …… will continue……


  3. Mobile Money Experts at

    Good post and banks are waking up finaly but how much they lost we dont know yet


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