By Gabriel Onyango
Technology is fast evolving throughout the world, disrupting and flipping traditional industries on their heads. The financial services sector is not an exception and firms are forced to innovate to keep up with the ‘next generation’ digital savvy customer, especially in the Middle East, Africa and South Asia regions (MEASA).
According to a recent report commissioned by the Dubai International Financial Innovation Centre, the emergence of the next generation customer poses a challenge to service providers, to tailor their products to their needs. The report states that currently, 90 percent of people under 30 years globally, come from emerging markets. This group is noted to willingly adopt digitally delivered services and whose demand increases as they enter the workforce.
Technology advancement in the financial services market, opens up new opportunities for the emerging markets. Allowing for lower operating costs as providers do not have to open many physical branches to reach their customers
This in turn allows new products to be scaled to much larger audiences than previously possible without losing the aspect of personalized services to individuals.
In regards to the impact of phones, the report quotes Ronit Ghose from Citi Research who said, “Now everyone’s got a mobile phone and to get to the client, a company doesn’t need to open a number of branches.” Locally Kenya Commercial Bank (KCB) has the KCB App and a USSD banking service accessed through *522#, Family bank has the PesaPap App accompanied by a USSD service through *325#, while Commercial Bank of Africa (CBA) and Equity Bank have the CBA App and Easy App respectively
Emergence of challenger firms
Technology has allowed players from other industries such as telecommunication and e-commerce to also offer financial services hand in hand with their traditional products. Challenging mainstream service providers such as banks and micro-finance institutions to a point where, they are now playing catch-up.
For instance in Kenya, Safaricom has been at the forefront of financial innovation with products such as M-PESA, M-TIBA and M-Shwari. In India, Airtel has a digital wallet allowing bill payments and online transactions.
Investment on next generation customers
The report reveals that financial institutions are making strides too, investing to meet demand from these next generation customers.
For instance in the United Arab Emirates (UAE), Mashreq Bank launched a digital service where clients are able to open an account in less that 5 minutes. Locally, Equitel from Equity bank allows customers to use their phones to access all services they would normally get from physical branches.
The study found great potential for Blockchain technology, to be used to improve the security of financial services in the MEASA region.
Blockchain is a technology that involves an open system where a distributed database of information is used to record transactions across multiple computers: such that any record can’t be changed without altering the rest unless there is a collaboration between all the computers. Locally, Bitpesa-an online payment platform uses the same technology.
This technology would thus be of help to MEASA countries in dealing with the corruption enabled by a cash economy-curbing vices such as money laundering and cash siphoning from accounts.
Kenya being among the leading countries from the MEASA region in regards to financial services still holds a lot of potential to promote financial inclusion among its young tech savvy population.