Africa has long been touted as the continent whose specific geographical challenges and the widespread poverty of many of its inhabitants have enabled it to skip over traditional banking infrastructures into the waiting arms of cost-efficient fintech solutions.
The statistics, for those who are rooting for a cashless, bankless Africa, are encouraging. The following charts, sourced from a recent report on financial inclusion in emerging markets published by the institute of international finance, demonstrate that the economy is Africa is starting to pick up, along with mobile phone ownership.[caption id="attachment_10381" align="aligncenter" width="614"] Rising incomes means more people will be interested in formal banking services for the first time.[/caption]
The Boston Consulting Group estimated that by 2019 400 million people in the region earning at least $500 a year will own mobile phones. However, only 150 million of those will hold a traditional bank account, leaving the other 250 million ripe for mobile money disruption. This situation is already starting play out in sub-Saharan Africa: recent research by the Groupe Spécial Mobile Association shows that 34% of adults in the region had mobile money accounts in 2015, and 10% of all adults in the region held a mobile account.
Still, in spite of the excitement surrounding the social inclusion mobile money's bringing to Africa, the reality is much the same there as anywhere else: fintech may be doing exciting things with technology, but banks aren’t going anywhere.[caption id="attachment_10384" align="aligncenter" width="614"] Mobile money accounts aren't exactly threatening the banks, even in developing countries.[/caption]
Moreover, contrary to popular belief, financial incumbents are major drivers of economic inclusion in developing countries.
Of the 721 million accounts opened by adults between 2011-2014, 90 percent were opened with financial institutions, a trend that holds true for low- and middle-income countries as well.
Banks have a number of reasons aside from profitability to expand their activities in emerging markets, such as CSR and investment. Whatever the cause, the way forward for banks in developing countries will probably start with cellphones, smart or otherwise.