Banking Survey 2020: African economies set to boom due to surge in digital transaction

Left to right: Ade Ayeyemi, Group CEO, Ecobank Group, and James Mwangi, CEO, Equity Group Holding

Since the beginning of this century, the surge in digital transactions in Africa has not witnessed a boom which can be compared to that which COVID-19 has brought. North, South, East and West Africa all have a similar story to tell when it comes to the effects of COVID-19 on electronic transaction.

The almighty Kenya, who come out as innovators according to Everett Roger’s identified five personas for innovation adoption, have a story to tell about how some people were still left out of the financial system even with what they deemed a high number of enrollers on the popular M-Pesa platform.

Digitization is ruling the global financial system and Africa arguably is the greatest beneficiary, accelerating its economy and giving central banks a more accurate picture of the worth of their nations.

Egyptian electronic payment company, Fawry, has reported a 59.5% jump in revenues during the first quarter of 2020, due to social distancing and other related measures amid the novel coronavirus (COVID-19) pandemic.

According to the company’s business results, Fawry’s net profit amounted to EGP30.7m in 1Q 2020. The latest figures can be compared to the EGP19.2m reported during the same period last year. The company’s revenues also increased by 48.4% to record EGP 257.9m in 1Q 2020, compared to the EGP 173.9m reported during the same period last year.

Fawry also achieved a 45.6% increase in total payments, to register EGP14.9bn during 1Q 2020, compared to EGP 10.2bn in 1Q 2019.The number of Fawry users increased to 26.2 million in 1Q 2020, compared to 22 million users in 1Q 2019, according to the statement.

It seems that only South Africa has been able to say no to Mobile Money services even though it hosts one of the biggest telecommunication companies the continent has produced. Last week, First National Bank (FNB), UnionPay International (UPI) announced that UnionPay cardholders will be able to make contactless payments with their cards via FNB Speedpoint terminals at merchants in South Africa.

This partnership marks the first time a South African bank has accepted contactless transactions made with UnionPay cards, providing customers with a safer and smoother payment experience.

According to research conducted by global tech market advisory firm, ABI Research, globally contactless adoption will increase between 6% to 8% when compared to pre-COVID-19 expectations. One of the main reasons is that contactless card payments require a lot less contact with Point of Sale devices, thereby minimising exposure to the virus. Contactless payments have been trending as a safer method of payment since the outbreak of the coronavirus globally.

Let us now move to East Africa; Kenya’s M-Pesa has 20.5 million customers across a network of 176,000 agents and generates around one-fourth (US$531 million) of the operator, Safaricom’s US$2.2 billion annual revenues (2018). The company has held nearly 75% of the mobile-money market share in Kenya for nearly a decade and the country has the highest mobile-money usage rates in Africa.

With this Kenya is using digital finance as a means to stem the spread of COVID-19. The government implementing measures to shift a greater volume of payment transactions toward mobile money and away from cash — which the World Health Organization flagged as a conduit for the spread of the coronavirus.

The Central Bank of Kenya last week announced that they will extend the measures they put on mobile money transactions that they announced back in March. Back in March, the Central Bank of Kenya removed charges for mobile money transactions up to Kshs 1000 and the withdrawal of money between bank accounts and mobile money wallets.

Also, the current tarrif for transactions above Kshs 70,000 will remain. There will be no charge by Payment Service Providers (PSPs) and commercial banks for transfers between mobile money wallets and bank accounts.

In West Africa, Ghana and Nigeria have had their own stories. In Ghana, the leading telco, MTN, saw their profit go up by 62% despite the economic challenges encountered especially in March due to COVID-19. This means that MTN Ghana made a profit of GH¢349million in the first three months of 2020.

In its financial statement, MTN said “Our strong growth in revenue coupled with our cash management initiatives resulted in strong growth in profit and improved our cash generation from our operation by 12.5%.” Giving some details, MTN indicated that Mobile Money revenue went up by 30.4% Many have attributed it to COVID-19 safety protocols and the measures put in place to stop the spread of the virus.

The telco said the increase could also be due to an increase in the number of active subscribers (+2.1%), higher transactional activity of person-to-person, and growth in more advanced services such as retail merchant payments and international remittances. Mobile Money revenue’s contribution to service revenue increased from 17.9% to 19.4%. Mobile phone subscribers also went up by 6.2% to GHC23.9 million. Data subscribers increased by 5.4% to 21.2 million and active data subscribers went up by 6.1% to 8.6 million.

For Nigeria, even though businesses are struggling because of coronavirus lockdown measures, the use of mobile money to transact business is growing rapidly. The use of mobile money grew by almost 15 percent in March, and experts say the practice is expected to become even more common as the pandemic continues.

Group CEO of Ecobank, Ade Ayeyemi, and the CEO of Equity Group Holding, James Mwangi have affirmed that the continent would be seeing greater leaps in these services. “Digital operation in the financial sector is accelerating; actually, COVID-19 has become the greatest accelerator of our time.

Before COVID-19, yes, customers understand that we should be cashless and people think they would get to it; but when overnight in one of our countries, they actually closed the banking system with less than 48-hour notice and people have to be able to transact digitally because that is the only thing that was available, people discovered that they can actually do it.

Because of that, I think, going forward we are going to have more and more digital transactions. Within our business, we do perform almost 90 percent of our transactions digitally, only about 10 percent is done physical; people going to branches.

During the COVID situation, we discovered that 95 percent of our transactions were digital but the other 5 percent were physical at places where the bank’s remained open. People were withdrawing a lot of money from the ATM as well,” Group CEO of Ecobank, Ade Ayeyemi said at the Bloomberg Invest Global virtual conference on the theme ‘Weathering Market Turbulence in the Age of COVID-19, the Macro View of Middle East and Africa’.

e further stressed that: “As we go forward and as government is using digital means to provide social safety net for their population, people are becoming accustomed to using those digital means. This is because it is cheaper, safer and it can be delivered to them at a price point they can afford. Physical cash is going to be bulky; it is going to be difficult to deliver and I think this COVID-19 has become the greatest accelerator of adoption of digital financial service. If there is any good thing that would come out of this, it is that people have tested it and they like it.”

On the part of the CEO of Equity Group Holding, James Mwangi, the efforts that financial institution pushed into educating the public about digital transactions is paying off.

“We pushed digital strategies to the market and the market is now responding. Financial institutions are now also responding to a pull of strategies from the market; as we speak the market is now driving the demand for digital financial services. There is urgency for this because of the health implication and also the health protocols that have been issued about the usage of cash and it being a source of transferring the virus.

We have also observed that training and literacy have suddenly been taken by advocacy and so it is no longer the bank advertising, it is the people trying to develop market solutions and after that demanding from the service provider (banks and fintech),” Mr. Mwangi said on the same platform.

He added that another thing is that lifestyle has become central and people would want a simple means to go on with their central lifestyle making digital payments attractive. He noted that economies are seeing governments becoming e-commerce sensitive and adopting digital payments and that is helping.

“In Africa governments are big players in the e-commerce space and that becomes a big enabler. Mobile technology and mobile POS, has enabled the retail commerce also to come on board in digitizing their operations and that would really fast track our efforts.

Maybe the biggest transformation that has happened this decade is being driven by COVID-19. At Equity Bank, we now see 98 percent of all our transactions happening outside the branch infrastructure. They are on platforms. Literally, we are becoming a bank where it is not about the place you go to but what you can do on your devices.”

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