Activities to commemorate the financial inclusion week culminate this week with The Africa Fintech Festiva,l which starts tomorrow, (5th November) here in Kampala.
The festival’s theme is “The role of fintech in Africa’s digital economy”. The word Fintech has come into everyday use in the last decade or so and is used to describe the use of technology in facilitating banking and financial services.
The financial sector has always been ahead of the curve in the adoption of technology, but its only in recent times that applications have brought these efficiencies to the man on the street.
The speed of innovation and adoption has made us forget how traumatizing it was to deal with banks and financial institutions.
There was a time when banks were only on Kampala road, opened from 9 am to 1 pm, never on weekends and account opening and minimum balances were so prohibitive as to serve as a barrier to entry.
At the time banks would keep hand written ledgers that had to balanced every day, hence the early closure and the reluctance to go for the mass market. As competition increased, banks had to seek new clients forcing them to rack their ties and jackets to mix it up down town. New technologies helped them cope with the increased volumes of transactions and operate longer hours.
The introduction of the mobile phone created a new platform, nearer to most than their local bank branch, which has seen an explosion in accounts.
A few weeks ago the Bank of Uganda reported that mobile money users had grown to 25.8m last year compared to 22.7m in 2017. But while the value of transactions reduced to sh66.9trillion from sh73trillion the previous year the number of transactions nearly doubled to 2.5 billion from 1.3 billion.
These numbers are interesting because commercial bank accounts in Uganda last year were just under eight million, a third of mobile money accounts. This speaks to the fact that people want to and see the benefit of engaging in the formal financial sector, but for most of them it has been difficult to participate. As a result the benefits of credit and other financial products have eluded them and in effect hobbled their prospects of climbing up the social ladder.
And we will only see an acceleration in the innovation and adoption of fintech. On a micro level it will make us more efficient and productive. It has been said that the Ugandan worker is not as productive as his counterparts in the region. While a part of it is our laid back attitude to work, there is also the fact that our processes have not been as capital intensive as our neighbours.
With miniaturisation computers are becoming faster and smaller. Its barely two decades ago when 256MB CPU was adequate for our desk top computer. Now you hold that power many times over in the palm of your hands. You can now spare yourself the ordeal of visiting the banking hall depositing and withdrawing funds, receiving and making payments off your phone or computer.
The potential of an economy can be seen by how fast money moves. The time spent filling forms, standing in line, moving to and from the bank, is everyday being reduced to its bare minimum, which will and is having a ripple effect through the economy.
The beauty of technology is that upgrades are flying off the shelves almost every year, meaning “old” technologies are becoming less costly, guaranteeing that even the poorer members of the society will be hooked up faster than ever.
In Uganda today mobile phone coverage stands at about 76% across the border in Kenya it is at 105%. And it shows. Last year about sh393b daily was transacted across all mobile money platforms in Kenya, the comparable amount here is less than half that at about sh183b.
The relative sizes of the economy aside, Kenyans are well ahead of us in the use of mobile money to not only transfer funds, to provide credit, insurance and facilitate business transactions to the point that a cashless economy is a very near possibility.
One of the major challenges of our economy is that we are not aggregating our resources into meaningful sums be they human resource or land but especially capital. It is not a stretch of imagination to see how fintech will provide a real solution for our inability to aggregate capital.
Believe it or not some people don’t deal with banks out of some deep seated phobia, dealing with their phone not so much.
It’s become so pervasive that we forget that fintech is still in its early days, services are still more costly and there are still a lot of legal gray areas that have to be ironed out before it can reach its full potential.
Fintechs potential to mop all the loose change lying around, fashion products for the lowest of low as well as increase efficiency in the whole financial sector is scary. Scary in a good way if it makes all our lives easier.
No comments:
Post a Comment