Over the last few years, tightening regulations, mergers and acquisitions, liquidations and collapses have driven the decline in the number of banks across Africa. In Nigeria, only 27 of the 89 banks that existed in 2004 are still operational.
Sharing thoughts on the African banking sector, IT expert, Victor Asemota, said that the biggest risk to African banking is people. He explained that key-banking decision-makers are old school and don’t understand technology.
The biggest risk in African banking is people. Not people outside but people inside. The fear of fraud or hostage situation and extortion is probably bigger internally than externally. This is because the key banking decision-makers are still old-school and don’t understand tech.
Victor Asemota, IT expert and Board member at PlaceFund
The new kind of banking in Africa
Despite the decline in the number of banks, some banks are flourishing by evolving with changing market dynamics. In Nigeria, traditional banks have been a force to innovate digital products and solutions to challenge the rise of fintech.
With the considerable progress tech is making in African banking, Victor revealed that if he was going to build a bank, he will leverage more on technology (software) and not physical branches.
If I had the opportunity to build a bank in Africa from scratch, it will have only 6 people working in operations and they will be software engineers. It will not own any branches at all but run exclusively on an agent franchise. Reduces overheads considerably and fraud risk.
Victor asemota
According to Victor, the system will build and own its own software or depend largely on open-source technology. Customer service operations will be fully outsourced and there will be another design/product team of 4 working on process improvement and product. His ideal bank will have one product only, an account.
He further added that the bank will be designed with the mind of tying a card and an app to an account that can meet the customer’s needs at any point. All these processes, of course, will be online.
A card and app will be tied to the account but those will be part of the product. What the account will do is meet what the needs of the customers are at any point. They can decide it is savings, loan, or business account and it will be provisioned accordingly. All online.
Victor Asemota
With this system, according to Victor, there will be “no need to compete with anyone as we will just do that one product exceedingly well. So well that other banks will decide that their customer accounts will reside with us as people will be leaving them in droves.”
Replying to Victor’s proposed banking model, Emmanuel, a brand manager at Yellow Card said it sounded more like Kuda Bank. However, as opposed to Victor’s model, Kuda still has some physical branches while most of its processes are digital.
A failing system
According to a research by McKinsey, the number of banked Africans has been forecasted to hit about 450 million in 2022, up from the 300 million recorded in 2017.
To capitalize on the vast opportunities technology offers, African banks have to reset their strategy from the old system of just physical banking. According to Victor, banking is a service business and not a real estate business determined by the number of branches it has.
Banking is a service business. It is NOT a real estate business, fashion, or automobile pageant. It is meant to be centered around the user and not the banker. The banker shouldn’t exist visibly, they should be replaced by the product. Existing bankers should run competing agents
Victor Asemota
“I don’t think anyone will disrupt African banking with organic growth. It has to be with a mixture of a machete and a scalpel. Investec once pulled this off too in South Africa, so it is possible. One product, no English.” Victor said
Amenze Iyamu, a career developer also agrees with Victor. According to him, the model is our inevitable future of banking. He added that the country needs some “new school” driven reasoning both in CBN, Banking and FGN.
Speaking on raising capital to create this model of banking, Victor advised entrepreneurs to use Social Capital approach to raise funds.
African banking is currently bloated and so-called challengers are not challenging jack as they are broke and not properly capitalized. If you want to do this, use the Social Capital approach. Do a SPAC and raise a shitload of money in hundreds of millions and list publicly.
Victor Asemota
Summary
For African banks, strategically crafting the future involves creating compelling digital products and not real estates by opening branches according to Victor.
Although, Victor’s model looks like a good and interesting idea that could help African banking and Nigeria in particular, it may not revolutionize banking in the country any time soon as the general public is still used with the traditional method of banking and may not jump on virtual banks without extensive education. Also, existing banking regulations could be a major obstacle.
