Over the weekend, my social media news-feed was filled with speculations that one of the international banks was planning to exit the African Market. As we wait for official communication from the respective Bank, I want to offer my two cents concerning traditional Banking systems.
When Bell telephone was struggling to get started, its owners offered all their rights to Western Union for $100,000. The offer was disdainfully rejected with the pronouncement:
“What use could this company make of an electrical toy.”
A few years later Western Union was almost swallowed up by the newly emerging telecommunications giant into which Bell Telephone would shortly evolve.
Western Union was saved from demise only by the U.S. Government’s anti-monopoly interventions.
What can we learn?
The closer a service is brought to an individual, the easier it becomes to adapt and that is what Mobile Money has done to the Banking industry.
Mobile Money growth was accelerated by two things:
- Took the banking industry closer to the people: You can find a Mobile Money agent in every corner of the country including islands, which is not the case with Banks.
- Made is easy to have an account: With a Valid ID, I can be signed up and within minutes my Account is ready, which is not the case when it comes to Banks.
Surprisingly, its more expensive to transact using Mobile Money compared to Banks, since most banks charge a flat fee for every transaction while Mobile money rates are based on the volume.
Banks charge an average of UGX 1,000 for every ATM withdraw made, while when it comes to Mobile Money, the charge for amounts more than UGX 30,000 is over UGX 1,000.
Also, according to figures from MTN Uganda, more than 70% of utility bill payments are made via Mobile Money, which charges for those transactions yet most banks receive the payments free of charge.
This simply means that accessibility and convenience play a big role in the growth of any service.
What Needs to be done?
- Whereas Banks can not have as many agents as Mobile Money agents, they need to find ways of improving accessibility to their customers.
- Partnerships is also another way through which Banks can adapt. There are still a number of services which at the moment can only be accessed through Banks. Banks can come up with an arrangement with Telecoms where Mobile Money users can access these services and vice versa.
- A co-existence strategy also comes in handy where some services are specific to only banks and some to Mobile Money.
- Finally, Banks need to start thinking outside the Box when it comes to innovation, they need to be knowledgeable about the current innovations and how they can use them to their advantage.