Much has been said about how digital transformation is going to have a profound effect on the financial industry, and it is an area I find to be hugely interesting, particularly in my own region of Middle East and Africa (MEA).
Technology has had a huge impact on the way we bank, for example. The market has changed beyond recognition from what it was 20 or even 10 years ago. Ask a friend or a colleague when the last time they went to their local bank branch was and you are likely to hear “I don’t go to my branch very often”.
This has naturally had a big impact on bank branches. In the UK, one of the traditional powerhouses of the financial services industry, over 1,000 high street bank branches closed in 2015 and 2016. The disappearance of bank branches from the high street appears to be a trend that will continue and perhaps even accelerate.
One other trend I have noticed is the strong correlation between banks and telecoms companies. In Europe we had banks selling airtime to mobile consumers, whereas today we see the opposite happening – telecoms companies are becoming banks! The past couple of years have seen telcos muscling in on the mobile payments space.
Digital technology, and especially mobile, has transformed tools, applications and most significantly, thinking, in the financial industry. Mobility is completely altering the ways people now, buy, bank and pay.
Emerging markets, blank sheets of paper
It seems somehow insufficient to just talk about “online banking” these days. Throughout the Middle East and Africa, people who have never had a bank account before are now able to get one thanks to the emergence and growth of mobile technologies and financial technology (fintech). It is known as “banking the unbanked”. By contrast, the branch closures and digital transformation of all financial services throughout developed and more mature economies could be characterised as “unbanking the banked”!
In Africa we are seeing some great examples of how digital technology can enable financial services and solutions for people who otherwise might never have access to them. At Orange MEA, we are currently working with a financial services customer in Africa to help them create a digital bank that will bring bank accounts to an estimated 50 million unbanked citizens in that country. We are working on another similar project in a different African country, again enabling those citizens currently without accounts or methods of paying for goods and services remotely.
Both projects are about transforming traditional B2B corporate banks into becoming “banks of payments”, disrupting their traditional business models. They are no longer only targeting big revenues, but going after volume of customers. They are recruiting large numbers of young people just entering the financial services market and see them as longer term investments. In time, these new customers will grow, need loans, need credit, mortgages and so on.
In examples like these projects it is about more than ‘just’ enabling bank accounts for people not used to having them. It is about offering an end-to-end digital transformation service portfolio that offers financial digital strategy advisory services, including advice on regulatory issues, project and program management, fintech innovation, agile mobile application development (prototyping), application and system integration services and more - as well as digital infrastructure services including fundamentals like cloud, networks and cybersecurity.
Why finserv has become fintech
The transformation of financial services companies into financial technology companies is now more starkly-illustrated in my view. Technology has taken a traditional business sector in financial services and disrupted it hugely, using new digital technologies to create an innovative new industry. Consider the numbers: there are 223 million registered mobile money customers in sub-Saharan Africa. This makes sub-Saharan Africa the world’s largest market by far for mobile money customers. Because there are very few bank branches and little fixed line broadband connectivity, mobile has become the easiest (and sometimes only) way to bank.
With that in mind, businesses should focus on fintech. Orange is helping to accelerate fintech startups who have innovative thinking at their core. Orange Labs identifies the startup companies that are the likely successes and we then identify the orange Business Services customers we think are the best match for them – we then put them on the journey together.
Making the right choices
It is a matter of philosophy and of focus. Orange Money in Africa has had great successes by taking the right approach to fintech. We have developed an expertise in consulting with customers and delivering a tailored proof of concept. We employ 125 software developers in Egypt alone who specialize in mobile money apps.
With access to these types of skills a continuing challenge in Africa, and the costs of innovation and IT always factors too, it pays to work with the right partner to deliver fintech. Ultimately, banks could eventually do it themselves, but they would struggle along the way, take time and risk losing ground to competitors. Working with a partner who knows what they are doing is the best way forward.
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If you would like to talk further about the digital technology transformation of the financial services industry, please feel free to drop me a line!
To read further about Orange and the work we do around digital transformation in financial services, please see: http://www.orange-business.com/en/finance