London — A key battleground in the digital transformation of Africa's mobile industry is the flow of payments and financial services across the network and around the world. For all the success of mobile money payments, cash remains dominant and the potential for digital payments enormous. Russell Southwood spoke to Edward George, Head of Group Research, Ecobank earlier in the year and looks at how this might play out.

There are estimated to be 2 million mobile money agents in Sub-Saharan Africa and only 100,000 bank accounts. But despite this initial disparity, there are three players in the ring: the mobile operators; the larger Fintech start-ups (for example, I have recently covered MFS and Paystack); and the banks themselves. For the sake of completeness, it's worth adding all crypto-currency/blockchain players as the wild card.

Having listened to around 20 investments funds targeted at African start-ups talk about fintech as an area they're interested in, there's no doubt that there's going to be more investment in African fintech start-ups. But although it's already starting to get a little overcrowded, it's worth saying that there is a whole financial ecosystem to be built and it's not just about one-off payments.

mPesa was built as a simple payment system and has had to be overhauled at least twice to keep up with the growing complexity of the financial ecosystem that has grown on top of it in Kenya.

But whilst a lot of African banks have launched apps for their customers, few have really thought hard about how to innovate to take advantage of the wider digital opportunity. Notable exceptions have been Ecobank (more of which below), FNB (recently named best digital bank in South Africa); Bank of Kigali (through BK Tech House: and Kenya's Equity Bank. Both FNB and Equity Bank have launched MVNOs, the former with over 100,000 customers.

In this confusing new world that's shaping up, everyone is trying to do something that someone else used to do. MTN through its investment in Jumia has acesss to 4.2 million customers. Less than 0.5% of Africa's retail transactions might use e-commerce but if India can get to 2.6% then again there's money that will flow through the digital ecosystem. It's all about trust and behavior change and both of those are not the "real-soon-now" of start-up time but something that happens more slowly.

The most spectacular example of how the industry might upend itself was African payments company Wari trying to buy Millicom's Tigo subsidiary. The sale has gone through with another buyer and Wari is suing in the courts. But it has already bought itself a bank and other financial institutions.

But it is not an all-out war between the players identified above. Some of them need each other and are entering into co-operation agreements. In April MTN entered into an agreement with Ecobank to enable payments between MTN Mobile Money and Ecobank bank accounts and to digitize international remittances and mobile lending and savings. As Ade Ayemi, Group CEO said when the agreement was signed:"People who cannot participate (in the financial system) cannot save... They need to be able to do transactions at a branch."

The question that hovers over all of these kinds of arrangements is who is going to be the vehicle and who will be the road? At first sight, the mobile operators are providing the digital road (for a cost that will grow) but it will be the banks and start-ups who will be the vehicles, defining the line of travel through new products and services.

Ecobank is one of the banking players that is in a good position to make digital product innovations that will both change and open up the market to new customers. In May 2018 it won the best digital strategy award at the Retail Banker International's awards ceremony in London.

The current digital strategy started when Ade Ayemi, Group CEO joined the company two years ago. But the roots of its digital strategy go much deeper because as a bank with a presence in 33 countries it had to digitize internally:" You can't run profitably with so many branches. Digital turns the argument on its head. Ecobank has 33 banking licences. If you digitize, you can do multiple things. It has to be a digitilization process. Ecobank has certain advantages in tackling that process as a registered and regulated bank. It has a done whole series of digital projects over the last 10 years, some have been unique and some not. A fintech can't do that. In some markets, we've been there for over 40 years and we know the regulators really well".

At the heart of its current digital strategy is the Ecobank app, which was originally aimed at existing banking customers:"We had 11-12 million bank customers. 4 million more people have opened a bank account. It's picking up exponentially and the latest version of the app has been slimmed down". At the time of it signing the agreement with MTN, there were already 700,000 app users in Nigeria and 2.3 million in Francophone Africa:"The app is the workhorse and is in ongoing development. So we said let's get existing customers on to the app to make things more efficient".

"Our goal is to have 100 million app users. Originally we said by 2020 but the amount of downloads has significantly speeded up. Currently we're getting 1 million per month". A key part of the uptick in growth is the promotion of a know-Your-Customer (KYC)-lite account Xpress Cash (more of which below):" We are really focused on financial inclusion and approximately 3 of 4 of those who have on-boarded on the App have done so via Xpress Account. This means they are mostly new to bank and we are reaching people who previously did not have access to financial services".

"They have no ID so they need to go into a bank and fill in forms. They're also often illiterate. So for them we have the Xxpress Account. It has light KYC to open account and takes its KYC information from their SIM. You can do basic payments but with amount limitations".

For example, a bank customer can pay his domestic staff through an Xpress Account. They can transact electronically, paying merchants with Ecobankpay (powered by Mastercard QR and mVisa QR), pay bills, buy airtime or withdraw cash from an Ecobank ATM without a card using Xpress Cash or via Ecobank Xpress Point agent location.

"Within a country, there are multiple ways you can send money and not just digitally. We're building up an agent network. So for example, we have an agreement with Total Petrol stations in 10,000 places where the customer can use a QR code to pay or withdraw money. You can also send cash using an e-token with a number. Using the e-token and the number you can go to an ATM and take out cash".

"If you want to take the next step and have the full app, you have to go into a branch but then you get the app which works in all 33 countries. There are some service limitations so for example you can do everything in Nigeria but less in Gambia".

"The next version of the app gets around the problem of KYC and you will be able to open an account from your mobile. So for example, in Nigeria you would take a photo of your BVN (Bank Verification Number) and a photo of yourself". The Central Bank of Nigeria initiated the BVN scheme to provide a single biometric database for all banks' customers nationwide. You need to present one of the following: Nigerian International Passport; Nigerian National ID Card; or Nigerian Driver's License.

The next version of the Ecobank app is being tested and you can attach a credit or debit card to the app that you can use:"We charge 1% flat rate that is cheaper than anywhere else. We also have the best exchange rates because we have loads of local currency (in our branches)".

"We're working on a remittance product for later this year. (This is) the other key piece of infrastructure: Rapid Transfer. You can transfer money between accounts in 33 different countries. We agreed between the different regulators to have limits on amounts".

The Xpress Account will allow someone to send between countries:" So for example, someone calls from Accra and says I have a desperate emergency, I need US$1,000. The person sending it loads up the card making the payment and then sends an e-Token and they can use that to get cash out of the ATM".

"We are very focused on the digital natives and it's fascinating what's happening with them in terms of handsets. A featurephone is now a low spec smartphone costing in the US$35-40 range. You could use the Ecobank app on it and get technology (usually at a higher level) at this price. They're cheap and good for what they do".

But the digital strategy combines analogue and digital:" The key to a successful network is not forcing them to do it one way. It's like an escalator, you go up one step at a time. For example, cash is still king but it can be done digitally".


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