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The Maturation of Digital Banking and Opportunities for Small Businesses with an African Presence

Business.com / Last Modified: June 8, 2017
Photo credit: WAYHOME studio/Shutterstock

This article looks at three distinct ways that small businesses with a presence in Africa can benefit from the rapid spread of digital banking technologies in the continent.

Over the past few years, Africa has occupied a unique position globally as one of the few places that still hold massive reservoirs of untapped resources. Fuelled by business-friendly policies, massive infrastructure projects, and improved economic growth, African economies are becoming the next destination for investors and global brands looking to spur growth.

In fact, the continent, once defined by poor infrastructure, high costs of doing businesses, and unhealthy economic policies, now stands on the brink of an industrial and economic boom that was last seen over three decades ago in places like Asia and Latin America.

The Rise of Digital Banking

Disruptive technologies in the financial and banking sectors are a big part of the reason why Africa’s future looks promising. Digital banking, one of the biggest disruptive trends of the past decade, has transformed the way global financial institutions, businesses, and customers interact with each other.

Africa is one of the many places where digital banking has and continues to transform the economy. About five years ago, for instance, long queues were a common sight in banks in Nairobi, Lagos, and other major African cities. Today, small business owners can apply for loans, make deposits and withdrawals, and even get investment advice without ever having to see the inside of a banking hall, all thanks to digital banking technologies.  

For small businesses in Africa or those with African footprints, digital banking presents many opportunities for growth. Check out how your small business can cash in. 

1. Banking 4.0 opportunities

Banking 4.0 has become a central pillar of modern business environments, encompassing emerging trends such as blockchain and the internet of things. While much of the developed world continues to benefit from the adoption of banking 4.0, many countries in Africa still lag behind.

However, there’s every indication that African countries are catching up. Many people in the continent are joining their counterparts globally in transacting and investing using bitcoin and other cryptocurrencies. Smartphones and IoT devices are flooding markets in Sub-Saharan African in record numbers, a trend that will see more consumers transacting from their smart devices.

As a small business with customers in Africa, your business can benefit immensely from the current banking 4.0 trends sweeping the continent. Ensuring your customers can access your products and services via the latest IoT gadgets and the blockchain can help you increase business opportunities, conduct secure transactions, and increase overall business efficiency.

2. Use big data analytics to drive growth

Digital banking has helped bring millions of unbanked people in Africa and other third world economies into local and global financial systems. As a result, businesses across the globe are generating more data than they know what to do with. For instance, a typical in-store or online transaction produces a unique set of data containing information such as credit card information, customer name, address, and other demographic details.

Small business can use such data to determine shopping habits, which helps the business to better understand its customers. With the right data analytics tools, you can use such information to customize your customers’ experience, acquire and close leads, and improve overall customer experience for your African customer base.

3. Mobile banking opportunities

It’s impossible to talk about digital banking in Africa without mentioning the impact of mobile banking. Fuelled by low-cost smartphones and increased internet penetration in Sub-Saharan Africa, the region has experienced one of the fastest growth rates for mobile banking in the world. As a result, there’s been an upsurge in the number of mobile wallets and customers who use mobile wallets for basic financial transactions in the region. In Kenya, for instance, over 85 percent of the population use at least one mobile money service, with major players including M-Pesa, Airtel Money, and Mobikash.

Additionally, traditional online payment gateways are slowly becoming part of the financial system in the continent, which has helped link most African economies to global financial networks. For instance, PayPal has made it possible for customers to send and receive cash via their mobile wallets through local intermediaries. Payment gateways such as Skrill even allow their customers to send money directly to mobile wallets such as M-Pesa.

For small businesses, the changing mobile banking landscape makes it easier for small business owners to interact with their customers within the continent. Integrating gateways such as Skrill, M-Pesa, and other supported payment gateways can make it easier for your customers to check out, especially in areas where most people don’t have credit and debit cards. 

Bottom Line

Digital banking is transforming everything we used to know about B2C and B2B relationships. This is especially true in places around the world like Asia and Africa where the trend is still maturing. Businesses that take advantage of the opportunities presented by digital banking often benefit from faster, safer, and secure transactions, which leads to more customers, improved customer service, and better customer retention for small businesses with a global outlook.

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