Must Banks Partner With Telcos To Survive?
The growing popularity of online and mobile banking – and even online purchasing, suggests that banks who do not embrace the technology run a high risk of falling by the wayside, according to a report by Chris Tredger in ITWebAfrica.
Once considered a threat to the financial ecosystem, telcos are now seen as valuable partners for banks — partners that can help banks transition into the domain of branchless, mobile and tech-centric retail banking, the report said.
This alliance between banks and telcos has resulted in a variety of services and solutions in emerging markets, including SMS-based mobile banking, e-wallets and mobile money service platforms, according to Spyros Salpeas, head of global services for Middle East North Africa, and country manager of U.A.E. for Orange Business Services.
Branchless banking initiatives are said to be at an all-time high including microfinance and mobile wallet solutions, Salpeas said in a report entitled “Retail Banking in Emerging Countries.”
In emerging markets in Africa, “rather than building an extensive network of physical branches, all banks … serve the majority of their customers via digital channels and only deploy physical branches where they are absolutely necessary,” Salpeas said.
The problem is people in rural areas are excluded.
Here are some of the factors affecting financial inclusion in banking, according to Mark McCallum, director and head of Global Services Africa for Orange Business Services.
- Competition from non-industry players seen as undermining banks’ dominant position.
- Security integration and overall integration of the services.
- Limited access to necessary infrastructure in some areas.
- Widespread populations.
- Limited or no access to technology.
Despite the challenges, there is a strong adoption in Africa of mobile money services and pockets of strength such as Kenya, where banking apps and mobile plug-in devices are emerging, McCallum said.
Innovation is a differentiator, McCallum told ITWebAfrica. Banks now compete through collaboration with telcos and various other external partners, as well as tapping into resources. “They use established networks, digital infrastructure and communication channels, as well as tapping into their partner/ecosystem established consumer base.”
As long as the popularity of online and mobile banking continues to increase, there is likely to be growth in cashless transactions and an increase in online transactions and purchasing.