African Banking’s Transitional Moment

Patrick Akinwuntan, group executive director of Ecobank Transnational, explains the bank’s plans to use mobile technology to vastly expand its customer base in the 33 African countries in which it operates

Global Finance: What have been the major forces shaping the African banking recently?

Patrick Akinwuntan: The last decade witnessed positive changes across Africa, including a boom in commodity prices, improvements in the rule of law and democratic culture, the growth of a young and active population, higher household disposable incomes, an emergent middle class, increased foreign investments and access to the Internet. Consumer spending also grew, and with that came increased demand for access to quality financial services. Additionally, mobile phone penetration increased significantly during the period, from about 12% in 2005 to over 75% in 2015. Yet only about 34% of adults in the region had bank accounts in 2014. There is therefore a clear opportunity to reach large numbers of people with banking services on mobile platforms.

GF: Who will win the battle for business on the continent, and how?

Akinwuntan: As the sector expands with increased financial inclusion and efficiency, banks that are dynamic and innovative will grow geometrically while those that fail to evolve in terms of operating and business models could face significant loss of business and value. While banks will continue to play a major role in mobilizing capital for infrastructure development and facilitating global trade, the bigger opportunity for growth in returns will come from the consumer and SME segments which are yet to be served properly and contribute to 80% of total employment and 55% of Africa’s GDP.

GF: How are the public’s banking needs changing, and how are banks responding?

Akinwuntan: Customers, be they corporate or individual, will demand 24/7 instant access to banking services and more variety in products offered. Consumer credit is quite limited in sub-Saharan Africa and banks will need to find ways to meet these needs while staying profitable. The use of automated credit scoring, which leverages the digital footprint of customers, coupled with an upsurge in the set-up of credit bureaus and biometrics will improve ability to access, grant and monitor small credit units. Ecobank currently offers instant microcredit loans on mobile phones at its microfinance subsidiary in Ghana and plans to expand this functionality.

GF: Mobile demand puts financial firms together with telecoms. How is this playing out?

Akinwuntan: It is now common knowledge that the future of consumer banking in Africa is linked to the mobile phone. Both banks and telecoms recognize the potential, but the willingness to collaborate is influenced by the regulatory environment and each party’s perception of the risk and rewards for doing so. At Ecobank, we believe that our partnerships with mobile network operators are mutually beneficial, providing telecom customers with savings and loans while we leverage their networks for distribution.

GF: How are regulations changing?

Akinwuntan: As technology widens the opportunity for deeper banking penetration and financial inclusion for all, regulators will need to better support and safeguard the industry. It remains in the world’s interests to ensure that banks have adequate capital, comply with anti-money laundering regulations, positively support the economy and protect depositors’ funds.