Digital Transformation Drives New Profits in Middle East and Africa Banking
Its a good time to bank in Middle East and Africa, banks have seen their assets continually rise 15% annually over the past 4 years (from 2010-2014 Moody's reports).
Overall growth for the continent's economy was , which is double - and in some cases triple - the growth of developed countries.
5.2% in 2014 Couple this with the massive untapped potential of the - where on average world's fastest-growing population only have a bank account - and you can immediately see why top African banks like 15 out of 100 adults Standard Bank, Ecobank, and United Bank for Africa are now operating across the continent in competition with larger global banks.
Sharing the honor of being one of the world's fastest growing banking and capital markets is the Middle East. , connected populations who seek out more Here, banks are capitalizing on younger and better services from their banks
There are no qualms about it. For banking, Africa and the Middle East represent one of the biggest opportunities of our generation. They are already dynamic markets for personal banking, portfolio management, institutional investment. And they will only get much, much bigger as digital banks, next generation banking, online banking, and other financial services arrive to claim their stake.
But everyone is too comfortable to lump Africa together into one word. Like it was only a country, instead of the being the second largest continent in the world. Africa is a mixture of many cultures and people who have different histories, who have homes in different places, who live different lives. A lot changes between the white stone walls of Tangiers and the dense jungle of the Congo. When the Middle East is added to the conversation, it adds even more levels of complexity. In Qatar and the UAE, the average wealth is well over $100,000. Contrast this with the 75% of people in Africa who have no bank account, and the size of the challenge to operate a bank across Africa grows.
With different consumers comes different demand. The reason why local banks have had such great success in Africa and the Middle East is because they are well-suited to understanding the needs of their local consumers. But those customer centric understandings evaporate quickly over small distances. In order for a growing bank to be in the best position to capitalize on this huge opportunity, it must operate with the highest level of flexibility.
Banks must offer a wider range of services to fit the variations in customer behavior across new areas. With every new region, new infrastructure challenges arise: conflicting payment structures, stronger or weaker regulations and standards, security threats, dealing with digital footprints, and which digital channels people use.
Banks in Africa and the Middle East have already been harnessing the power of IT infrastructure to succeed in this unique marketplace. The Economist's research has shown that driving the IT transformation is "the commoditisation of banking technology (...), giving a big boost to domestic and regional banks that would previously have been outclassed by international rivals."
In some regards, African banks are even ahead of their international peers in terms of the technology they use. They have been developing their systems from scratch, which has resulted in African retail banks having up to 40% lower costs (as a portion of their income) than banks from rich countries. While those systems have been able to operate up until the point, in the next phase of growth know-how is critical. For small to medium size institutions, it pays to have the most powerful banking IT running your operations.
Just think about security. As Africa and the Middle East's banks continue their digital transformation, moving more and more of their computing into the cloud, security becomes increasingly vital. We've all seen what hackers can do to banks, and it's important to remember that recovery is always more expensive than prevention. In addition to security, the next wave of technology demands includes mobile payments, mobile banking, big data, smartphone applications, and e-commerce. The better-equipped a bank is with their IT services, the more flexible they become, and more rapidly they can take a larger share of the market.
Banking IT is the structure upon which a global bank is built. Let's get building!