Absa at WEF
Digitising the financial sector - crucial for creating a more equitable world
Prepared by Songezo Zibi, Head of Communication, Absa Group
The disruption of many traditional markets and industries is already underway. The Fourth Industrial Revolution (4IR) offers huge potential to transform and realign our economies and societies. How can we shape these transformations to create a more equitable and socially responsible world and address the Earth’s most pressing challenges, and not exacerbate them, asks Absa CEO, René van Wyk.
Globalisation has certainly created international growth and development, but only for some. Too often, it has merely fuelled excessive inequality. And instead of using our collective intelligence and basic humanity to resolve poverty and other divisive social issues, we have allowed the gaps to widen.
A Task Force that grouped together for the first time at the World Economic Forum (WEF) gathering in Davos earlier this year was co-chaired by Achim Steiner of the United Nations Development Programme (UNDP). It brought together market leaders, disrupters and rule-makers united by a desire to ensure that the digital revolution transforms the financial sector to benefit the planet and all its people.
Under the theme of Harnessing the Digitalization of Financial Services in Pursuit of the SDGs, the mandate of the Task Force was to investigate the changing nature of the financial market and how its digitisation can enable us to meet the United Nations’ (UN) Sustainable Development Goals (SDGs). In other words, how to overhaul global banking systems so money becomes easier and cheaper to access by those who are currently excluded, and how we can elevate them towards economic development and independence.
How the digitisation of money unfolds will depend on who drives it and for what purpose. The famous management consultant Peter Drucker made the distinction between efficiency and effectiveness: efficiency is doing things right, effectiveness is doing the right things. What is required is digitalisation process that will lead to more effective financing: where capital is directed towards sustainable development and includes everyone.
This cannot be achieved without a fresh approach to financing, and there is a window of opportunity now, to make the sweeping advances of the 4IR to help governments, business and society to achieve these goals, not make them harder to attain. This means both mitigating unintended adverse consequences of change and maximising positive social and environmental benefits.
The disruptor economy already offers more choice and value to consumers, with mobile money contributing directly to some of the SDGs by providing financial access to individuals and small businesses that were previously excluded. Mobile money solutions allow migrant workers to send money home, give them access to electricity, water and sanitation, facilitate access to low-cost remittances, and facilitate cash transfers during emergencies. Another healthy disruptor is crowdfunding, which lets individuals invest small amounts in projects that their innovative creators would otherwise never get off the ground.
It is estimated that half the population in sub-Saharan Africa will subscribe to mobile services by 2025.** Absa and MTN are proudly African businesses, and Africa is a hotbed of innovation that will influence much of the financial digital revolution.
Africa is also home to millions of young, talented, innovative people hungry for change and designing new ideas to take the world forward. Africans have gleefully embraced the potential of digital technologies, leapfrogging into the future thanks to the absence of legacy systems and technologies that never fully penetrated this vast continent. Africans devised the first mobile money payment systems, and Africans invented the ‘call me back’ service on mobile phones for people with no money to buy airtime.
Projects being pioneered by African fintech companies include new payment mechanisms, cheaper delivery methods, and leveraging data to improve credit-scoring and access to basic financial products. Established banks and financial service providers initially saw these bright start-ups as a threat, but now these potential rivals are working together to use their respective strengths for mutual benefit and the benefit of consumers.
Another example of African innovation recently saw tech-savvy civil servants from 11 countries on the continent exchange ideas on how to modernise their governments through technology. The event was hosted by Absa Group and The Pathways Commission, established by Melinda Gates, co-chair of the Bill and Melinda Gates Foundation The Commission is hosted by the Blavatnik School of Government, at the University of Oxford in the UK and aims to catalyse conversations that encourage the co-design of solutions that make frontier technologies work to benefit the world’s poorest and most marginalised communities.
While technology has reduced the cost of banking, the World Bank estimates that as many as 66% of sub-Saharan Africans are still listed as unbanked. The potential on the continent is huge.
African technology and financial institutions must continue to innovate to address customer needs and embrace cutting-edge technology such as AI and leverage analytics and data to create efficiencies, reduce costs, and improve customer experience. This technology will also enable them to automate their processes seamlessly to achieve improvements in frontline productivity and open new streams of revenue to remain competitive.
Equally, it can help improve financial institutions’ risk management, credit allocation, and fraud detection such as anti-money laundering capabilities, as well as increase their share of digital sales and transactions.
There is however a risk that the digital revolution will make financial systems more efficient but at the same time merely reinforce the status quo, where capital continues to flow to the people and projects it already reaches, only in faster and larger quantities. That would further entrench the already dangerous divide between the haves and the have-nots.
Most of the creative thinking remains to be done about how the upstream effects of the digital revolution, especially on financial services, can advance the achievement of SDGs, especially in Africa.
We believe that Africans have the talent not only to solve our own problems, but also to shape the world – yet we don’t always have the money to do it.
Making African voices heard at the World Economic Forum on Africa is a vital opportunity to influence the fortunes of our continent, because we need to attract large and sustained investments to help our countries seize the opportunities of the future.
But this is now a two-way street, not a case of Africa begging for international aid.
i) White paper: AI presents opportunities in Africa https://api.itweb.co.za/download/d22691c4281bb6345db317d8fec740ad2e7c632a
** Source: GSMA Intelligence “The Mobile Economy: Sub-Saharan Africa 2019”