Financial innovation should not hinder the flow of money

Financial service innovation continues to attract the lion's share of funding in Africa in a mad dash for the unbanked, under-insured, and ill-invested.

Remittance, commerce, investment, and different flavours of banking are taking centre stage in the transformation of how the continent exchanges and grows value.

The African market is not homogenous; it is a minefield of culture, regulation, and geo-politics that can affect the most basic of business pursuits.

Yet, in the same breath, for the true benefit of all these amazing products to be realised, we need to transcend these challenges and get as close to one market as we can.

The biggest gap in our financial service innovations, playing against this desired vision is the creation of silos with every new startup or product.

Following the textbook strategy to ‘own’ the customer, many businesses assume that holding onto customer funds is key to driving stickiness and encouraging utility.

The effect is that we are now dealing with more wallets; oftentimes replicated in both form and function than we could make good use of.

Every business wants to have consumers stow away value, not in the product but in a ‘halfway house’ wallet.

Cash-in and cash-out cycles power the commerce engines for all businesses. Keeping the money moving and quickly at that, is important in the extraction of value from the medium of exchange.

The higher the velocity of money, the better it is for everyone. When I think of the term ‘frictionless’ as it is regularly bandied around especially when talking about infrastructure, I envision money going ‘straight to purpose’, much in the same way that it behaves offline.

If you look at your offline environment, you probably have one operative wallet from which funds are applied towards products or services. Why then do we try to force a multiple wallet experience in the digital world?

The customer belongs to the marketplace and we simply need to ensure that transactions are seamless and effortless.

In the longer term, this means that we must drive acquisitions and mergers to consolidate infrastructure, unify the user experience and get rid of costs that are inherent in every hop money has to make from the consumer to its intended purpose.

Competition should kick in at the product level and not at the faux moats, often with poor economics, that restrict money from flowing to the place of highest value.

Njihia is the head of business and partnerships at Sure Corporation | www.mbuguanjihia.com | @mbuguanjihia