The scramble for digital finance is real

Leading financial institutions and mobile phone operators in East Africa are seeking to out-do each other in pursuing partnerships with major global tech firms to gain an edge in the region’s digital payments ecosystem.

Although coming late in the day, KCB, which has a presence across all East African countries hinted it is pursuing partnerships with global tech firms such as Facebook, Facebook, Google, Apple, Alibaba, Samsung, Twitter, Samsung PayPal and Tencent. The bank, which has established KCB Fintech under which partnerships will be modeled, a move that is set to shake-up East Africa’s mobile and digital payments ecosystem.

The lender is yet to make clear the finer details of the discussions but anticipates that KCB Fintech will have registered up to 20 million customers by end of 2017. KCB will be coming neck to neck with its rival, Equity Bank, which also has a presence across East Africa and in the DRC and has had a better stab at the partnerships with other global players in electronic payments. But, in mobile payments, Safaricom's M-Pesa is a clear winner with banks and other service providers, unable to match the mobile money platform’s capability relying on partnerships to stay ahead of rivals and grow new revenue streams.

“Done correctly, this could potentially begin to turn the tables on mobile money. Banks have missed out on the hefty profits made in that sector, and it seems first Equity and now KCB are making a stab at getting a share of the proceeds. Our telecom and financial sectors will be so much the better for the innovation that this will undoubtedly spur,” says Peter Wanyonyi, a technology specialist.

With KCB looking to establish partnerships with global players, Equity Bank already has Equitel, which it launched in 2015 to provide mobile money and digital banking services. By establishing a mobile money platform, Equity got into more competition with KCB and Safaricom’s M-Pesa and M-Shwari (a loans and saving service). However, riding on its ground-breaking money transaction service M-Pesa, Safaricom has specifically had an advantage in launching additional products, forging strategic partnerships with banks and other service providers, Banks are now aggressively following suit to maintain their margins. Safaricom’s partnership with Commercial Bank of Africa (CBA) to launch M-Shwari, a mobile micro-savings and lending platform has had run-away success in Kenya and Tanzania (M-Pawa). CBA has replicated the M-Shwari model in Uganda (MoKash) in partnership with MTN, with the service having already registered 600,000 customers in less than three months. It now plans to launch an M-Shwari replica in Rwanda.

KCB and M-Pesa’s partnership (KCB M-Pesa launched in March 2015) had by June this year signed up seven million customers. It handles approximately 30,000 loan requests every day and disburses an average of $0.5 million by the day. At present, 78% of transactions occur through mobile and digital platforms.

M-Shwari, on the other hand, boasts of 13 million customers and disburses loans worth $3 million to an average of 80,000 Kenyans on a daily basis. By June this year, Equitel disbursed loans worth $0.2 billion. The platform now accounts for 82% of all loan disbursements compared to 18% of branch loan disbursements. In Tanzania, M-Pawa, a partnership between CBA and Vodacom, had 4.8 million customers, with $20 million worth of loans disbursed through the platform by June this year.

Equity, which has been one of the more aggressive players, launched a suite of digital banking products to ‘disrupt itself’ further by reinventing into a digital bank to respond to the needs of fast-growing digital customers.

Some of the global players the bank has partnered with previously include Airtel, PayPal, IBM, Cisco and Oracle in the areas of digital payments, data security, big data and analytics.

Image Credit: Digital finance. Image-Globasure Technologies.

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