New report: Cloud banking to drive financial inclusion in Africa

A new report co-authored by Genesis Analytics (the largest economics-based consulting firm in Africa) and Orange Business, with the support of the Bill & Melinda Gates Foundation, concludes that cloud computing solutions could help African banks to reduce costs significantly and provide financial services to poorer people who are currently either underserved or unbanked. The report highlights the critical role that regulators should play.

The new report – Cloud Banking in Africa: The Regulatory Approach – confirms that the high cost of providing traditional financial services means that many banks continue to focus on serving wealthier customers. The result is that only 41% of Africans are financially “included” and over 700 million people across Africa lack access to a bank or mobile money account.

However this is changing. “Financial inclusion in Africa is on the rise, and cloud is set to become a major driver,” states Pieter Zylstra, Regional Director Digital Transformation (IMEAR) of Orange Business and co-author of the report. “What is required is for Africa’s financial and ICT ecosystem players – regulators, traditional banks, mobile operators, fintech, infrastructure providers and others – to come together to address the challenges and ensure financial services are becoming more available for the rich and the poor.”

Cloud computing creates an opportunity for financial service providers to rethink their technology investment and significantly reduce costs by using Internet technologies to provide virtual infrastructure that is scalable and delivered as a service. ICT infrastructure and service costs are lower and utilization is higher, while helping overcome any ICT skills scarcity.

Cost savings are important, but there are other business benefits as flexible, cloud-based operational models can shorten new product development cycles, enhance customer responsiveness and deliver analytical insights in real time. A new customer-centric business model could emerge in which financial institutions also gain a higher level of data security, resilience, fault tolerance and disaster recovery.

Increasing numbers of African banks are realizing the value of cloud banking, for example, TymeBank. This new digital entrant to the South African banking sector has made a 56% cost savings compared to other startups by using cloud services from AWS. It has acquired over 5,000 new customers per day since February 2019.

Before the benefits of cloud banking can be fully realized by more customers, regulators need to support and approve the use of cloud technology within the financial sector. It’s already happening elsewhere. The European Union has been at the forefront by defining an enabling regulatory environment for cloud banking services and by involving the regulation both of the use of data, and the privacy and protection of data. Turkey and Argentina have also adopted similar legal and regulatory environments, which have enabled the use of cloud banking in their financial sectors.

Ultimately, the report urges African regulators to develop policies and regulations to enable financial institutions, and the people of Africa, to enjoy the benefits of cloud banking. Download the full report.

Glenn Le Santo
Glenn Le Santo

Editor in Chief, International, at Orange Business. I'm in charge of our International website and the English language blogs at Orange Business. In my spare time I'm literally captain of my own ship, spending my time on the wonderful rivers and canals of England.