Table of Contents
Potential growth areas for the Sub-Saharan Africa banking sector. Credit: EY
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Africa’s banking markets remain in an emerging status, in the sense that bank assets as a percentage of GDP, with the exception of South Africa, are very low.
In Sub-Saharan Africa, mobile money solutions are crucial. Introducing digital payment platforms could grow GDP by 0.5 percentage points per annum, estimates show.
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While east Africa (specifically Kenya) has had tremendous success in mobile money, South Africa has largely had greater success in launching mobile banking. Currently, mobile transactions are largely peer-to-peer (P2P) transfers, accounting for over 70% of the total mobile market. This is followed by bill payments, accounting for 12% of the market.
The regulatory environment is critical to mobile financial services, as regulators can either support or limit the market’s growth.
Nigeria’s regulator is very supportive of mobile platforms, in line with its objective of shifting the country to a cashless economy. This policy is driven by a need to reduce the cost of financial services, given the high costs of cash management.
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South Africa’s regulator was initially cautious about mobile banking platforms and driven by prudential reporting needs. But there is a growing acknowledgment that mobile banking could play a critical role in increasing financial inclusion.
In Kenya, regulators have become more receptive to mobile banking due to the consumer benefits it provides, as security enhancements limit fraud and provide greater consumer confidence.
The potential for mobile platforms in financial services appears unlimited.
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One possibility is the provision of credit via mobile platforms. Banks could therefore benefit not only from stronger transactional revenue growth, but also from higher interest income flows.
Thus far, transactional fee income has been the major benefit to banks, but the potential profit flows from lending activities via mobile platforms is likely to be significantly higher.
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Sub-Saharan Africa Banking Review 2015: EY
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