TMS 2023: Future of finance laid bare

While it is evident that banks and financial technology firms (fintechs) are better off collaborating as opposed to operating in silos, long, hard and honest conversations must be had around areas such as regulation, risk and synergies, as well as the best model of partnership.

This was the view of a high-powered panel at the third edition of The Money Summit (TMS) organised by B&FT under the theme ‘Africa’s robust financial sector: the catalyst for sustainable economic growth’, who argued that deriving benefits of the synergy between both parties cannot be left to happenstance.

Speaking during the first plenary session, which focused on how fintechs and their transition from competing to collaborating with banks are shaping the future of finance, the Chief Executive Officer at UMB Bank, Nana Dwemoh Benneh, said contrary to the opinion that banks have displayed a high degree of inertia toward the adoption of technology, they are at the forefront of the digital finance revolution.

“Banks, for instance like us at UMB, have always had a deep understanding of customers and what they require; and as a result, over the years, we have found ourselves at the forefront of innovation,” he said.

While he admitted that fintechs have been more nimble, he stated that traditional institutions are beginning to roll-out solutions such as banking-as-a-service (BaaS) and Application Programming Interfaces (APIs) which allow for increased third-party participation, ensuring consumers are able to access all the required products and services from the same pot.

He added that since investors – who are increasingly concerned about the safety of their funds – feel more comfortable allowing banks to administer capital, this will see banks increase their interactions with fintechs; particularly in driving access to finance for small and medium-sized enterprises (SMEs).

“We are able to access more patient capital and many investors would rather have us handle disbursements… we will see more partnerships with fintechs for their own growth as well as our focus on driving the expansion of SMEs,” he noted.

Financial services will become more democratised as banks and fintechs collaborate to drive innovation, according to the Managing Director of GCB Bank, Kofi Adomako, who said the solutions provided by these partnerships must be scalable.

“We must see clearly what benefits of the synergies are and if the solutions are scalable, as a lack of clarity with these could undo all the possible benefits,” he remarked.

Mr. Adomako was also convinced that optimistic growth figures in the fintech space – for instance, like one from Mckinsey & Company which suggests that Ghanaian fintech revenues could reach US$18.6billion by 2025 – can be attained owing to measures which have been put in place to ensure growth of the domestic market.

“That estimate might seem an aggressive number, but it’s achievable if we continue to do the right things and implement good policies. There is no shortage of talent, and with the introduction of things such as the Ghana Card and registration of SIM cards, we are moving into a much more organised ecosystem, and this will help us grow,” he stated.

Similarly, Head of Retail Banking-FBN Bank, Allen Quaye, expressed conviction that more non-bank actors will begin to offer financial services as the ecosystem comes of age, with the trend already gaining traction in other jurisdictions.

Last month, technology giant Apple expanded its finance services by launching a high-yield savings account, providing its Apple Card users with an opportunity to save their daily cash rewards in a Goldman Sachs savings account offering a 4.15 percent annual percentage rate – which is over 10 times higher than the national average of 0.35 percent.

Announcement of the product generated a lot of excitement, after being previously announced in October 2022. However, Apple is not the only tech firm offering non-traditional options for customers to store their cash and potentially earn more.

Robinhood, an online discount brokerage, also recently increased its savings account offering rates to 4.65 percent annually; and this has come at a time when some bank customers have become apprehensive about depositing their money in traditional banks owing to issues within the banking system.

With this, and customers being more demanding, Mr. Quaye said the onus is on banks and regulators to be more agile.

“As we continue to see these developments, banks will need to innovate at a faster pace; and regulation must also not be vastly outpaced,” he noted.

On his part, the Country Manager at AZA Finance, Nana Yaw Owusu Banahene, reiterated his belief that the continent’s financial systems’ future will hinge on cross-border payments to drive intra-continental growth.

He reiterated that it is important to have seamless cross-border payments to enable trade and investment opportunities between African nations.

He stated: “It’s all about cross-border payments, and that is where we believe the future is”.

Moreover, he expects that in the medium-term there will be additional payment rails to complement the existing Pan-African Payment and Settlement System (PAPSS) infrastructure. He emphasised that additional payment mediums are necessary to meet the increasing demand for cross-border transactions.

Mr. Banahene also underscored the need for proper credit analysis, and said that involvement of the diaspora is crucial to achieving financial inclusion as they can contribute to growth of the economy through remittances and investments.

“Our conversation around financial inclusion has been limited to deposits and transfers, we must see how we can bring in more services like insurance – even as we try to rope-in the diaspora,” he explained.

For the Head of Business Enablement at Stanbic Bank Ghana, Marian Amartey, there is a growing recognition of the critical role that data analysis will play in the success of financial institutions in coming years.

She stated that with the increasing amount of data being generated and collected by companies, it is becoming increasingly important to have the right tools and skills to extract valuable insights and make informed decisions – adding that banks and fintechs must invest heavily in data analysis capabilities to ensure they can stay competitive in a rapidly evolving marketplace.

“Data is one of the things that will drive how we will execute things in the future, so it is important that we invest in how we analyse data,” she explained.

The Chief Executive Officer (CEO)-Ghana Association of Banks (GAB), anticipates a paradigm shift that will see banks heavily invested in technology. This, he said, will be demonstrated in an extensive focus on the digital footprint of consumers.

“We will get to a point, and we are approaching there, where the digital footprint of consumers will be the defining factor. It will mean less than physical collateral,” stated Mr. Awuah, adding that the future will see fewer human interactions, reflected in fewer mobile money agents as fewer transactions are truncated.

Speaking further about lending, he explained that telcos are able to provide micro-lending services aggressively because they have access to data that banks provide them. Using algorithms, they are able to determine how much money to lend to whom and at what interest rate.

However, he questioned the extent to which regulations are facilitating the sharing of this data, which would allow traditional banks to also use this data and provide lending services quickly.

The GAB CEO emphasised the need for regulation to enable open banking and data sharing in a safe and secure way.

“Currently, we do not have access to this data the way the banks do, so it would be unfair to compare our ability to lend at the micro level. Regulation should come in to remedy this,” he explained, stressing the need for regulation to move in tandem with technological advancements to ensure that consumers are protected while still being able to benefit from innovative financial services.

He added that banks must decide which model – partnerships, acquisition or investing – would work best in their partnership with fintechs.