African banks are increasingly working with fintech startups once considered their competitors as they acknowledge that this is the easiest way to innovate and stay relevant for their customers.
This is happening in various ways – from running accelerators, to signing proof of concept (PoC) agreements, to make direct investments – and involves a great number of banks, including Barclays, Citibank, Union Bank and Standard Bank.
The benefits of such partnerships are mutual, with banks afforded access to quicker innovation and startups an entry into a market the size of which they could not have previously dreamed. But customers, or potential customers that currently lack access to formal financial services, stand to benefit the most.
In what ways are these bank-fintech partnerships assisting both the banked and underbanked in Africa?
When African banks such as Barclays or Union Bank get involved with incubators and accelerator programmes, as is increasingly happening across the continent, they are identifying startups with innovative new market offerings for their customers.
Barclays has signed a host of proof of concept agreements with companies that have come through its accelerators, most notably with South African parking payments startup WizzPass, to ensure they are able to offer their customers swift access to the best new solutions.
Graduates from last year’s Startupbootcamp accelerator in Cape Town signed 32 deals with corporates, most of them in the financial space.
“The fintechs offer newer and more market appropriate offerings. The offerings from the fintechs will improve the speed, value and breadth of the services the banks offer,” says Keith Jones, co-founder of the Johannesburg-based Sw7 incubator, with works to facilitate such partnerships.
Camilla Swart is ecosystem manager at Rise, Barclays’ innovation hub in Cape Town. She says the bank’s customers can be assured that it looks for the best products and services that have the customers needs and wants at the heart of the strategy.
“A bank that partners with fintechs will be relevant and stay ahead of the curve, with design thinking, agility, responsiveness, where we can offer the credibility of legacy with freshness of digital savvy solutions,” she says.
Much of the talk around banking in Africa is about those that lack access to it, with millions of Africans still excluded from the formal financial system. Around 300 million Africans lack access to banking services, as for traditional financial institutions it is too costly to roll out physical infrastructure outside of major centres.
This means these people are cut off from other services such as credit and savings. Banks have accepted they cannot reach these people of their own accord, and are partnering with companies like Nomanini and Zazu, which have developed solutions that can reach unbanked markets digitally.
George Wakaria, vice president of cash management for Citibank in Kenya, says this is a key way customers – or, more correctly perhaps, potential customers – stand to benefit from bank-fintech partnerships.
“Fintegration will power financial inclusion by providing tech-based solutions for the unbanked and underbanked segments of the population,” he says.
Wakaria says existing bank users will also benefit from improved customer experience, saying banks and startups are working together to develop real-time, multi-channel capabilities that are highly personalised and contextual.
He also points to improvements in onboarding processes, and says overall customers can expect cheaper solutions.
Customer experience is a benefit espoused also by Zachariah George, chief investment officer at Startupbootcamp in Cape Town.
“Customers get better user experiences and interfaces by using digital technologies that they are both more comfortable with using and more ideologically aligned to,” he said. “But they still get to experience this via the perceived safety, security and credibility of a large financial institution.”
Stanley Gabriel, head of innovation at Old Mutual Personal Finance, which is a partner of Startupbootcamp in Africa, says by teaming up with startups aligned to its vision, Old Mutual is exploring how to streamline, reorganise or redesign its business model, legacy processes and systems to meet customers’ changing needs and enhance their experience.
“We believe collaboration has a crucial role to play in enabling Old Mutual to provide sustainable financial wellbeing for our customers and their communities,” he said.
“Ultimately, Old Mutual sees these types of partnerships as enablers of our Positive Futures Plan, which aims to help customers thrive by enabling them to achieve their lifetime financial goals while investing their funds in ways that will create a positive future for them, their families, their communities, and the world at large.”
All very high-minded indeed, but a sign that banks have accepted the need to work with fintech startups, with the customer – and future customers – very much in mind.
This will continue to be the case, says Paul Mitchell, fintech and blockchain lead at PwC South Africa.
“There are very few markets any more where the customer offerings are stagnant. Everyone is innovating more, creating better products and services, and the customer is benefiting from that,” he said.
Amen to that.
Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.
