The digitalisation of banks is a huge opportunity across Africa and partnerships with fintechs would address the challenges of financial inclusion and the rapid scaling-up that is needed across the continent. Partnership between banks and fintechs will not only help reach more customers but also build financial literacy among consumers in The Gambia and elsewhere in Africa.
For our banks to stay relevant it is important to understand fintechs and leverage the opportunities. Banks are still there and are still needed but they need to adapt to what is happening on the continent and partnering with fintech companies is key to doing that. Digital transformation is a necessity, so banks have to invest in transitioning into this new era. All companies are becoming technologies companies, whether a bank or not.
Cash currently leads the way in the majority of Africa, but to increase financial inclusion, which is increasing already through financial technology, digital banking will need to have continued growth. Financial inclusion also enables banks to feed new businesses and entrepreneurs, and hence builds the economy at the same time. Using the technology of mobile telephones, digital banking will have a significant role to play now and in the future.
Because we are cash dependent the opportunity to introduce digital payments to help promote financial inclusion is critical and to that we need to ensure that there is adequate financial literacy and skills building along the way to make it work for more people. In addition, the industry will need to develop the talent and skills, and this can be done across Africa ensuring the industry continues to grow.
Banks no longer see fintechs as disruptors but partners. More often, they asre seen as key part of their business with a shared responsibility for delivering to customers. Banks are going into a new world and need new platforms, new technology and a new architecture, the old core banking system is being surpassed and a new core banking system is needed. Fintechs will help banks provide a better service to customers, working together and within the same regulatory framework. Digital banking helps with financial inclusion and formalising the economy and banks, globally, need to react to the digital revolution and customer demand.
Economies around the world have suffered as a result of the pandemic, and Africa was no exception to that rule. Predictions by the World Economic Forum suggested that African economies will contract by 4.4% this year as a direct result of Covid-19. Despite this, fintech looks set to take off in this swiftly emerging market, and reports suggest the sector will be critical to the recovery process of numerous African countries.
The most positive sign that Africa will enjoy a boost in fintech, is the implementation of the African Continental Free Trade Agreement (AfCFTA), came into being last year after The Gambia ratification. Despite the pandemic, national economic development strategies that encourage economic growth and job creation, have remained ongoing.
Many African countries have also accelerated their digital transformation and telecom giants are building new networks, and streamlining existing facilities to speed up connectivity and improve Internet and wireless services. Recently, the World Bank reported that the 55 member nations of the African Union have a combined population of more than 1.3bn people, who have the potential to generate a gross domestic product of US$3.4 trillion.
Currently, bureaucracy causes a massive backlog of processing – and slows down African governments abilities to facilitate trade between countries. The introduction of fintech, which streamlines, simplifies and speeds up processes, looks set to change that in the next few years. Additional benefits led by the AfCFTA will see an increase in Africa’s exports by an estimated US$560 billion, mainly from manufacturing sectors. The boost in trade will continue to hasten the growth of fintech.