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Opinion & Analysis

Banking sector disruptors are already here

A KCB BANKING HALL IN NAIROBI. FILE PHOTO | NMG
A KCB BANKING HALL IN NAIROBI. FILE PHOTO | NMG 

Greek philosopher Socrates said that “the secret of change is to focus all of your energy, not on fighting the old, but on building the new.”

Although computers that are the source of many disruptions in many sectors were not in existence then, his observation is still very relevant today.  

Take the case of the Kenya Bankers Association (KBA). In their bid to compete with the growing number of fintechs, KBA built an old response in PesaLink instead of building the new.  

They are now likely to face new troubles with a new app known as Revolute, which threatens to wipe out not just the spread on foreign exchange in banks but might decimate forex bureaus.  

Developed by career investment bankers, Nikolay Storonsky and Vladyslav Yatsenko, the smartphone app linked to a pre-paid MasterCard offers interbank rates to its more than 160,000 customers in 90 different currencies and is still growing.  

The app is a magnet to forex deal hunters. In its short period in the market, it has spread very fast, with more than 1,500 new customers signing up each day.  

They are moving slowly but surely while perfecting it. A friend who used the card while traveling to the East said, “It is the best innovation that has come through in recent years.”

In their website, www.revolute, the company prides itself as beyond banking.  The app is built to be inclusive, allowing cash withdrawals below $500 per month and no fees on loading the card in dollars for some countries.

Fintechs are leveraging on three technologies, Artificial Intelligence (AI), Internet of Things (IoT) and Big Data to build new, hitherto unimaginable business models.  

Whilst banks are focusing on antiquated 4 Cs of credit, namely Character, Capital, Collateral and Capacity, emerging apps have inbuilt measures to create value at minimal risk.

 Banks look inwards to solve their problems while fintechs look at customers to solve their problems.  

In other words, fintech’s are making the customer king, something that assures them of the future while banks as we know them are likely to go the way of the dodo unless they seriously look for ways of solving customer problems.

This is particularly important given that the emerging or the future customer isn’t as tolerant as the old customer.  There is wisdom in banks becoming partly technology platforms that can seriously extend the boundaries of trade and in the process become central to economic development.

Here is how. Africa is poor because of lack of knowledge and credit.  Farmers produce, but due to lack of knowledge on supply chains, they waste up to 40 per cent of their commodities after harvest.

Africa is food insecure despite its abundant resources. Majority of countries in Central and West Africa import virtually everything.

Climate change is threatening to turn some East African countries into food deficit states.  

Building a partnership with processors, landowners, distributors and customers is not farfetched for banks.  

They could start with multinational corporations in Africa to create levels of credit guarantees and enhance the capacities of dealerships.  

The value of most dealerships is often higher than any collateral the banks seek to provide.

The financial services business model has to change before their role shrinks further than where it is at the moment.  

In the past, they managed to hide behind the regulators to scuttle new technologies like Blockchain, but with Over The Top providers (OTTs) providers like giant Facebook, Twitter, Google and more coming, regulation becomes murky.

Telecommunications regulators have tried before to have OTTs pay for their services, but they have failed.  These are powerful platforms with a following in virtually every country on earth.  

Facebook’s WhatsApp is widely used to transfer value and techies trust it.  It is certainly working to expand in that realm and others will follow. The problem with financial services companies isn’t the products they offer.  

It is their antiquated business model in the new world. Like OTTs, banks must seek to develop friendships with their customers in order to scale new heights.   

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