FinTechs are fighting to retain consumer confidence in Africa

There is no doubt that trust plays an important role when it comes to payment transactions.

And according to Isaac Kamuta, it is one of the most important advantages that regulated traditional banks have over newer, unregulated firms in the financial sector.

“Consumers just want to keep their money in a place where they are sure to find it tomorrow if they need it,” Kamuta, who is global head of payments and cash management at pan-African banking institution Ecobank, told PYMNTS in an interview. .

But the trust consumers have is not directly in the banks themselves, he noted. Instead, consumers have confidence that the banks operate within a regulated field and must comply with strict authority requirements when managing consumers’ funds.

“Consumers know that there is someone monitoring the banks, and they want to make sure that there is management and control [in place],” he added.

FinTech companies and neobanks, on the other hand, cannot claim the same advantage, he pointed out. However, these newer firms have been able to capture a significant market with solutions that are often faster and more efficient than traditional banking transactions.

In fact, Kamuta painted a scenario where a FinTech firm can meet a customer, understand their needs, and on the same day start coding and developing a solution to solve the problem. And within a few days, they can start piloting, testing and deploying the solution.

“This speed when it comes to responding to customer needs [is something] a traditional bank will struggle because of the many regulations within our setup,” he acknowledged.

But those hoops are there for good reasons, he added, and are why the incumbents still have the upper hand when it comes to consumer trust.

“Most of consumers’ money stays in the bank and they fund their FinTech wallets with just enough money to complete a transaction,” he said, adding that the amount of money people leave in their wallets is often so insignificant that even if they ended if you lose it, it wouldn’t hurt much.

Finally, Kamuta said, “The only time FinTechs will gain more confidence is when there is more regulation [in that space]. That’s when we will see the balance sheets start to build.”

Telcos Rule Mobile Banking Space

Home to the pioneering mobile phone-based money transfer service, Africa has made strong strides in the mobile banking space, bringing millions of people deprived of access to traditional financial services into the financial fold.

And according to Kamuta, the mobile banking channel will continue to grow as long as access to mobile phones continues to grow, especially in this age where the demand for convenience is higher than ever.

He further noted that telecommunications companies (telcos) will “always have the upper hand” in the mobile banking space, given the access they have to vast amounts of consumer data collected from SIM cards and phone wallets.

Even when it comes to payments, he said telecom operators will continue to play a critical role in driving digital payments growth if they get the business model right. That means having a strong agency network, operating in the right regulatory environment and offering an integrated mobile wallet with value-added services.

He also pointed out that governments and public administration entities, which he said are the largest consumers of utility services, have contributed significantly to the growth of telecommunication-driven digital payments and services.

“The moment a government says, ‘You can only pay for your birth certificate with a mobile wallet,’ you have no choice but to use it,” he noted, pointing to the term “authority-induced purchase” that has the power to influence the direction an industry takes in its growth path.

But despite the rise in the use of digital payments, Kamuta considers cash’s place as assured in the African payments ecosystem – at least for the foreseeable future.

Indeed, even in East Africa, and particularly Kenya, where M-Pesa operator Safaricom is based, he said analysis of daily payment volumes shows that cash payments are either leading or on par with mobile payments, depending on location.

“If it’s in East Africa where digital penetration is so strong, you could argue that cash is going to be around for a while,” he said.

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