Mobile internet adoption in Africa is taking place at almost double the global rate, a trend that has sparked debate among development and tech enthusiasts as to whether this marks a radical shift in the way the internet of the future will be used and accessed. Has the range of innovative services currently available on mobile devices come about purely as a result of necessity, or through a deliberate decision to focus on the mobile solution by forward looking African companies and entrepreneurs?
Some recent examples of the level of digital sophistication evident in Nigeria, and in Africa’s technology industry as a whole, can shed some light on this. In February this year, the BBC website announced with fanfare that RBS and Natwest, two UK banks, would be pioneering the use of Touch ID on the iPhone as a security enhancement for their mobile banking applications. What the BBC didn’t know was that Touch ID was already going live across mobile banking networks, with some Nigerian banks incorporating the feature before their UK counterparts.
Perhaps more telling was the storm of media coverage out of Canada in May, announcing that the country’s banks were now adopting Touch ID – three months after Africa, in a nation normally considered to be at the forefront of payment technology adoption. While Africa did not originate the technology, it clearly demonstrated the ability and the appetite to adopt and introduce it faster than the west. It also indicates a level of tech-savviness among consumers who demand the latest technology in both hardware and software.
The ‘needs must’ argument – that mobile banking in Africa leapfrogged or even completely bypassed the internet banking phase of digital financial services due to a lack of fixed connectivity and a level of demand from discerning consumers already using their mobiles for transactions – is demonstrated by intelligence from our partner banks, who saw their internet banking customer base outstripped by the mobile channel in a matter of months.
But perhaps the Nigerian banks were quicker than their African counterparts to realise the value of the mobile channel? The reality is that the race towards mobile has been happening globally. In the US in the third quarter of 2013, the rate at which millennials were ‘switching’ their bank was close to 20 per cent, with the primary reason being relative mobile banking capabilities. I dare say this percentage has increased dramatically as the momentum towards mobile has gathered pace. The reality is that more Africans use their mobiles to access the internet than their laptops, so the mobile channel became unavoidable.
Furthermore, Africa is not just focused on simple USSD and SMS menu based services, which are the solution focused on the feature phone. Within the mobile banking application development space, sophisticated analytics and two-factor authentication security underpin a complex software development cycle that can compare to many “first world” banking solutions. These are sophisticated solutions for an increasingly sophisticated market.
Where Africa can undoubtedly claim to be ahead is at the intersection between payments and mobile banking. What Africa lacks in access to credit through technology, it makes up for with the ability to pay for everyday needs directly through the application, and that ability lies at the intersection between mobile payments and mobile banking and mobile commerce. Across the Vanso network today, customers can buy airtime, pay for satellite television and ISP subscriptions and book and pay for flights. That is just the tip of the iceberg, with significant new integration expected over the coming 12 months.
At the moment, whether Africa is ahead of or behind global trends is not necessarily the point. Africa is ahead in some areas while in others it remains far behind, if catching up fast. The continent’s ability to maintain its pace of development will depend largely on the telecom companies’ ability to accelerate the roll out of stable, 4G mobile internet, and the simultaneous development of a fixed-line internet distribution system, similar to the one that has made BT so dominant in the UK. The revolution that has taken place in Africa over the past decade had been powered by the telecoms industry, which must continue to maintain the pace of growth.
Financiers are now beginning to take notice too, with 2015 seeing a wave of deals to fund growth across the sector. Most recently, Nigerian giant Interswitch announced that it intends to list in London and Lagos, making it potentially the first Nigerian tech stock in the UK. Last year, Kenya’s Equity Bank announced the establishment of Equitel, to offer mobile money, telephony and data services, and rival Kenya Commercial Bank has followed suit in a partnership with Safaricom as the continent’s first MVNO structures are rolled out. At the opposite end of the spectrum, a wave of startups funded by German fund Rocket Internet have exploded. The recent investment by private equity fund Leapfrog in AFB’s growing micro-loans business, and the rumoured sale of Emerging Markets Payments, show that the world is beginning to recognise the potential that exists in the convergence between the African financial services and telecoms markets.
That potential is best qualified by looking at the penetration of smartphones across the continent, of which Nigeria remains the biggest market. Smartphone use is estimated at about 30 per cent of the country’s 140m mobile lines, and growing fast, driven largely by the introduction of more affordable Android devices. From our own analysis we can see that our mobile banking apps are running on more than 900 different devices! Android is overwhelmingly the dominant operating system, best-selling quad core, dual sim models such as the Infinix series of smartphones are currently retailing for under N10,000, around the $50 mark. Competition is fierce in this entry-level market, driven by aggressive, domestic online retailers such as Konga and Jumia, and such pressure can only lead to a better deal for the smartphone-hungry consumer. Given that the sub $100 smartphone was hailed as a potential tipping point for the growth of inclusive digital financial services for Africa by the likes of Bill Gates, the momentum is definitely mobile!
The short term growth story is undeniable. With a number of banks already live on advanced Vanso mobile banking applications, and others in the testing phase, the demand is clear. Building on that installed base to bring new technologies in real time, if not ahead of the rest of the world, is the next challenge, and it’s one we look forward to taking on.