Fintech has remained the most funded sector in Africa in 2020, pulling in 24.9% of the total tech startup funding in the continent. Investors are realizing the immense potential of tapping into products that are designed to serve the unbanked, underbanked and migrant populations while trying to bridge the gaps from existing legacy models of traditional banks, mobile wallets and money transfer operators. To top that off, with the rise of digital inclusion and penetration, technology has now empowered consumers to scrutinize and research heavily before demanding for convenient and customised solutions to cater to their needs.
While statistics show that there is increased access to digital financial services (DFS) in Sub-Saharan Africa, there is still an obvious gap in usage and continued retention among consumers - for example, the number of dormant accounts is estimated at 49%. With the rapid rate at which fintech is expected to grow in this region, the business model that would survive and thrive would be one that hits the nail on the head for seamless customer experience and one that is successful in reinventing the wheel around legacy technology or banking.
In this day and age, no matter how perfect the product is for the market, what it boils down to ultimately is consumer confidence upon usage. When it comes to financial matters, a single bad experience can negatively impact the reputation of the service provider and compromise the customer’s confidence leading them back to relying on cash. Deep empathy with the customer base is important for solving the huge gap between the availability of financial services versus the actual usage of these services.
In terms of the challenges and opportunities, that are typically faced for enhancing customer experience, it funnels down to 4 Cs that we’ll describe further below:
Consumer Confidence and Trust
Cost of Financial Services and lastly,
Comprehensive Regulatory Framework.
Due to the existence of multiple financial ecosystem players, a consumer ends up owning multiple accounts, especially in a market like Tanzania which is multi-banked and multi-simmed. In essence, it means that with all the players in the ecosystem, everyone is fighting for the same consumer’s attention. When consumers in this case face any disputes or challenges, the consumer is often left confused in terms of which player to be speaking to. The opportunity here lies in building an ecosystem with strategic partnerships and multilateral agreements between different market players such that the customer derives greater value from the full suite of financial services as opposed to being pulled away by oligopoly-based marketing strategies. Furthermore, those having well defined policies for the resolution of customer complaints will enjoy customer loyalty and a successful brand image in the long run.
Consumer Confidence and Trust
Trust in digital financial services is under threat by a number of challenges including fraud, system failure, weak data security and privacy. This often leads a consumer that inherently trusts cash to be more apprehensive of keeping their funds in digital accounts. Furthermore, due to poor technology, system failures are not uncommon in the EA region, which compounds the negative customer experiences whenever their transactions are delayed or missing. There is a considerable challenge in convincing financially and digitally illiterate population segments to store their money in digital accounts rather than in cash. So far mobile wallets have only managed to become channels of P2P or P2B payments rather than accounts for creating savings and onwards spend, which limits the transformational potential of digital financial services. Additionally, fintechs employing high level security and reassuring customers regarding the security measures will benefit by gaining the trust of their customers through transparent practices.
Cost of Financial Services
It is not hidden to anyone that most charges levied by banks, mobile wallet operators and other financial service providers are regressive in nature, thus negatively impacting the low income customers. These include costs such as mobile money transfer fees, costs of digitally paying bills and utilities, withdrawal charges and such. They cause wealth erosion instead of financial empowerment, while indirectly eating towards consumer confidence. On top of that, considering the cost of mobile data and smartphones are high, it is also understood that internet and app-based services will only reach a limited number of the population. In a low income economy, it’s easy to see how these charges would discourage and impact the overall customer experience when utilizing digital financial services. As part of the effort of boosting the demand side for digital financial services, conducting financial literacy workshops and campaigns for different population segments will help to increase the ability of customers to make clear and informed financial decisions. Non-profits, for-profits and governments should all collaborate on such projects and complement each other’s capabilities in enabling digital financial services to realize their transformational potential
Comprehensive Regulatory Framework
Ultimately, the final umbrella is directly under the regulatory and supervisory framework which has to be able to keep pace with the requirements of the fast-evolving digital financial services industry and protect consumers and monitor the operations of different stakeholders. With the need for financial inclusion to the bottom of the pyramid, even concerns of agent conduct in the market need to be addressed, as they are key points of contact and regulations regarding agent malpractice and penalization need to be clearly articulated in the policy to safeguard customer’s experiences with digital financial services. The opportunity lies in the purposeful lobbying of laws and regulations representing the combined interests of digital financial service providers in order to ensure new policies and laws specific to their industry are created to enable the reach even with minimal KYC for agents while maintaining the standards for liquidity and safety.
Overall, the digital financial services industry is at its peak, and consumers are ready to take the risk. However, approaching this sector with a human-centered approach is critical is ensuring that adoption picks up just as quickly as the penetration of both digital inclusion as well as financial inclusion.