How COVID-19 has accelerated the use of digital banking solutions in Africa

With 2020 being considered a year of survival, many have argued that 2021, and the end of the pandemic, will be the inflection point for society.

It’s clear that digital adoption in Africa will continue well beyond the pandemic

Distinct patterns and relationships have emerged in Africa and will continue to shift – across organisations, businesses, regulators, consumers and society. Green shoots have already presented themselves, and the future players have not only capitalised on this but have already organised themselves to capture post-pandemic opportunities.

As the world returns to normal, it is likely that a number of trends that appeared during the pandemic will become the new normal in consumer transactional preferences and client needs.

Efficient liquidity management is key

In Treasurer’s minds, sustaining good liquidity positions while seeking optimisation remains the most salient focus. In addition, the quest to shorten accounts receivable while extending accounts payable through dynamic liquidity tools that provide the ability to produce forecasting, predictability and previously unmodelled stress tests have been important, but not at the expense of unsettling already unstable supply chain predictability.

There has been an incremental rise in client willingness and interest in testing new technologies to provide a holistic understanding of business risks. Human-in-the-loop approaches with machine learning to build solutions that, for example, improve cash flow forecasting ability have been key for corporates, as well as spending time improving internal knowledge management systems for better visibility.

Digitisation has been fully embraced

The payments industry in particular has continued to mature during the pandemic. Across Africa, payments experiences are varied, innovative and seamless at best, clunky and slow at worst. The payments sector sits at various stages of digitisation, disruption, demonetisation, dematerialisation and democratisation. Creating meaningful client experiences requires striking the right balance between what is possible with the technology at hand and what solves a real problem.

Alternative payment solutions enabled by banks, technology companies, payments aggregators and mobile network operators have monumentally accelerated digital adoption, in some instances upending long-entrenched transactional behaviour altogether. These solutions have been delivered through a combination of existing and new solutions and prototypes – some of which were thought of, built, tested and rolled out rapidly during the pandemic to mitigate demand.

Regulation has been an important factor in promoting this change. For instance, statutory bodies across Africa have demanded e-commerce alternatives as well as API-based verified payments solutions to improve tax compliance and broaden the range of payment options. By increasing mobile money transacting limits and removing or capping transaction costs, regulators across Africa have lowered the cost to serve, and have facilitated the shift towards frictionless payments across several countries.

In addition, cryptocurrencies can no longer be ignored – Central Banks are already pursuing Central Bank Digital Currency (CBDC) initiatives. Fiat to crypto (and vice-versa) products will become more topical and will continue to enjoy more mainstream discussions.

Partnerships remain more important than ever

All payments providers and partners need to work towards achieving relevant and scalable interoperability as far as possible while leveraging existing channels that work.

All players (banks, technology companies, payments aggregators and mobile network operators) will continue to be led by this in order to find relevant partners with meaningful connections across mobile money, collections, statutory payments, merchant acquiring and cross-border payment propositions.

A wave of solution providers is sweeping through Africa with very real and scalable ideas at a faster rate of change than previously experienced. Further to this, end-to-end digital solutions, which facilitate enriched multi-client category and multi-sector ecosystems, will be possible by those that successfully leverage different infrastructure resources.

Cyber and other risks are gradually on the rise

As the number of digital transactions has increased, questions around security and trust have moved to the fore. Ensuring visibility and scrutiny of transactions, as well as the demand for real time transactions, will be an important balancing act.

Banks, as trust custodians of depositors’ funds, must recognise the need to invest in infrastructure that provides security, including closer scrutiny of potential risks that may be introduced by partners. While technology that enables transaction speed and visibility is important, security is paramount particularly as a single security breach can both ruin confidence in new innovations and, most importantly, will prove costly in terms of financial losses.

Overall, the past year has seen a trend towards the adoption and acceleration of digital banking products – not just in Africa, but across the globe. Bringing to the forefront existing issues, as well catalysing new ones, COVID-19 has forced the payments industry to integrate banking solutions that provide much-needed assistance when dealing with issues such as liquidity management, regulation and cyber risks. As these solutions begin to prove effective, it is clear that digital adoption will continue well beyond the pandemic.