FinTech - Mobile money transforms access to financial services


A dominant theme in FinTech, particularly in Africa, is the convergence of financial services and telecommunications. In the last month, FNB became the first South African bank to launch its own mobile services that integrate with its banking systems, while both Moody's Investors Service, mobile operators body GSMA and communications technology provider Ericsson presented insightful reports on banking and mobile applications.

In the run-up to the second annual FinTech Africa meeting in Sandton on 25 June, we will be publishing a series of articles on financial technology in South African and Africa.

From 15 June 2015, FNB will be offering its own SIM cards to customers. The bank is no stranger to telecommunications, with over 2 million customers topping up airtime and bundles monthly and over 285,000 smart devices sold in the last 4 years. "Mobility and banking innovation are now synonymous in the minds of FNB customers," says FNB CEO Jacques Celliers. "We are excited to launch a South African first for banking via FNB Connect as the next step in our digital evolution."

The integration with digital platforms like FNB's online banking will give customers the benefit of a single login to manage their financial and mobile accounts. Ravesh Ramlakan, CEO of FNB Connect, is excited about the innovation. "The banking landscape has evolved tremendously and with the help of technology we are able to enrich the customer experience. We believe that this service will assist customers with the opportunity to do their banking and mobile services from one platform."

Financial inclusion
According to Moody's Investors Service, sub-Saharan Africa's fast-expanding banking sector has potential to continue its growth trend, boosted by robust economies and widening financial inclusion. The assets of sub-Saharan African banks have risen by more than 15 percent annually over the past 5 years. "We expect Sub-Saharan banking systems to continue expanding strongly over the next 12 to 18 months, helped by robust economic growth and greater banking penetration on the back of the growing accessibility of mobile banking," said Moody's Constantinos Kypreos, one of the authors of the report Banking - Credit Trends in sub-Saharan Africa.

While growth potential is strong across the sub-Saharan region, banking systems will likely develop unevenly. Amongst the differentiating factors identified is banks' ability to leverage mobile banking, enabling rapid banking growth and deepening financial inclusion, such as the Kenyan banks where a high proportion of adults have a bank account following fast adoption of mobile technologies.

Mobile banking has helped lift Kenya's financial inclusion levels to over twice the average for sub-Saharan Africa. The report says 75 percent of adults have a bank account, including mobile banking accounts, against an average of 34 percent in the region. Kenya is ranked above Nigeria, which has about 44 percent of adults with bank accounts, Ghana (40 percent), Ivory Coast (34 percent) and Angola with 29 percent.

Data usage
Findings from the latest edition of the Ericsson Mobility Report, published last week, show that by 2020 advanced mobile technology will be commonplace around the globe: smartphone subscriptions will more than double, reaching 6.1 billion, 70 percent of the world's population will be using smartphones, and 90 percent will be covered by mobile broadband networks.The rise of smartphones brings accelerated growth in data usage, and smartphone data is predicted to increase ten-fold by 2020, when 80 percent of mobile data traffic will come from smartphones.

According to Rima Qureshi, Chief Strategy Officer at Ericsson, the shift is unparalleled: "This immense growth in advanced mobile technology and data usage, driven by a surge in mobile connectivity and smartphone uptake, will make today's big data revolution feel like the arrival of a floppy disk."

According to GSMA, which represents the interests of mobile operators worldwide, 2.5 billion people in developing countries are 'unbanked' and have to rely on cash or informal financial services that are typically unsafe, inconvenient and expensive. Traditional "bricks and mortar" banking infrastructure struggles to make the business model work to serve low-income customers, particularly in rural areas.

Social impact
However, over one billion of these people have access to a mobile phone, which can provide the basis for extending the reach of financial services such as payments, transfers, insurance, savings, and credit. Mobile money services provide convenient, safe and affordable financial services to the underserved, thereby increasing financial inclusion.

"Mobile financial services have an important social and economic impact on millions of people in emerging markets around the world," said Tom Phillips, Chief Regulatory Officer, GSMA. "Mobile is a key enabling tool for financial inclusion and over the last year, we've seen significant growth in mobile financial services, not only in the number of services and geographies served, but also in the breadth of products that are now available to previously unbanked individuals. It's critical that we continue to build on these foundations to truly drive this industry to scale."

Mobile money has grown rapidly over recent years, and with 255 services in 89 countries, mobile money is now available in 61 percent of developing markets. In sub-Saharan Africa, the birthplace of mobile money, over half of mobile network operators have already launched a mobile money service and by December 2014, 23 percent of mobile connections were linked with a mobile money account.

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