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As the evolution of mobile banking continues to disrupt the financial services sector, the founder and executive chairman of privately held telecoms conglomerate Econet Wireless Group sounded the death knell for traditional transaction banking.
“The transactional side of banking is gone,” Strive Masiyiwa tells This Is Africa on the side of a Clinton Foundation forum in Marrakech, Morocco.
By ADRIENNE KLASA @ This is Africa
As telecoms providers innovate to put banking services in the palm of the hands of mobile phone users, the relationship with banks – who fear losing out on their traditional turf – has grown uneasy. African markets including Kenya and South Africa have been at the forefront of the global mobile banking on the back of homegrown innovations such as Vodacom and Safaricom’s M-Pesa payment system.
For his part Mr Masiyiwa, a Zimbabwean national who has built out his empire from his home country to other African markets including Burundi, Lesotho and Botswana as well as in the US and New Zealand, is not inclined to calm the waters.
“Is it a collaboration with banking? I am really not that interested in looking at it from that perspective. It might make regulators happier,” he says.
“What we are seeing on financial services is the brick and mortar bank being torn away. For what we need to do, we do not actually need them [the banks], but the regulators have not caught up so it is more about meeting the requirements.”
Lacking other infrastructure, mobile providers including Econet have innovated to provide mobile money services to the unbanked. Launched by Econet’s Zimbabwean subsidiary in 2011, the company’s EcoCash service registered 31 percent of the country’s adult population within 18 months of its launch.
Like competitor services including M-Pesa and MTN Mobile Money, EcoCash allows users to transfer funds, pay bills, withdraw cash and receive remittances on their mobile devices, without ever having to set foot in a bank. EcoCash accounts now outnumber all other bank accounts in Zimbabwe combined.
Disrupting for the unbanked
Consumer banking penetration into African markets has long lagged behind other emerging markets, hindered by lack of banking infrastructure in most of the region as well as low financial literacy. Levels of formal education are closely linked: among Africans with primary or no formal education, only 10 percent have bank accounts with traditional financial institutions.
Mobile penetration rates are changing that. Sub-Saharan Africa is the second largest mobile technology market after Asia, and the fastest growing one. Across the region, 80 percent of urban households and 63 percent of rural ones have mobile phones. Telecoms companies saw the opportunity to roll out banking services through this platform, with the evolution of the technology often pushing the pace at which banks and regulators are willing to adapt.
“The banks come into this kicking and screaming, trying to protect their turf,” Mr Masiyiwa says. However, while he thinks the traditional relationship with individual customers has already been displaced, banks still have a significant role to play, according to the businessman.
“There are a lot of things that you need banks for, and those will not go away. You will not be able to do a $200m transaction on your cell phone.”
The Econet Group remains privately held and controlled by Mr Masiyiwa. Only one subsidiary – Econet Zimbabwe, the country’s largest network – is publicly listed. The Zimbabwe subsidiary alone brought in $752.7m in the last quarter of 2014, an increase of 8 percent on the back EcoCash’s growth.
At present, other parts of the group look unlikely to come to market, despite the fact that Mr Masiyiwa was being wooed only last week by bankers trying to persuade him to list Mauritius-based subsidiary Liquid Telecoms, the conglomerate’s fibre optics division and the largest fibre network operator in Africa.
“At a group level, in terms of a specific business unit, you are more likely to see us come to market with one of our individual businesses,” he says, refusing to disclose more specifics. However, at present he says he does not feel his businesses need the injection of capital a listing could provide.
“I do not feel any particular pressure for capital, particularly in the business we do, which is building telecoms infrastructure,” he says, though, he adds, “at the end of the day, it is about what the business needs, so I cannot say to you: we never will, or we will, or whatever.”