Cloud-computing solutions can reduce banking costs in Africa, report

More than 700 million Africans lack access to a bank or mobile money account and only 41 per cent of Africans are financially included.

This is due to the high cost of providing financial services in Africa which forces many financial services providers to remain focused on serving wealthier customers.

These are some of the many insights from the report Cloud Banking in Africa: The Regulatory Opportunityby Genesis Analytics and Orange Business Services on how the application of cloud computing in financial services can help financial services providers reach and serve the poor. 

Part of the cost problem is that financial institutions in Africa are so much smaller than elsewhere – the biggest bank in Africa (SBSA with assets of $148 billion) ranks 296th globally; most banks in Africa have assets of less than $5 billion. But African consumers are increasingly expecting these banks to provide the same range of digital services as banks in other countries. This is why consumers have been turning to mobile banking in such numbers. The telecommunications companies have been much more successful at delivering affordable financial services than banks are, but also need to find new ways to reduce costs if they are to reach out to even poorer customers. 

Cloud computing creates an opportunity for providers of financial services to rethink their technology spend and significantly reduce costs. Cloud computing involves using internet technologies to provide virtual infrastructure that is scalable and delivered as a service. Fixed costs can be converted into a subscription-based approach and upfront capital investments are converted into operational costs. Cloud computing allows banks to pay less for ICT infrastructure and services and achieve higher utilisation on ICT spend. Particularly for small banks in small markets where specialised ICT skills are in short supply, cloud computing can ease a critical operational constraint.

The most compelling reason to move to the cloud is undoubtedly cost savings, but there are other business reasons too. The flexibility of cloud-based operational models allows financial institutions to experience shorter development cycles for new products, which supports a faster and more efficient response to the needs of customers. Cloud computing provides the computer power necessary to deliver analytical insights in real time, which enables financial institutions to move towards a customer-centric model where the financial needs of customers are fully understood. Financial institutions can also gain a higher level of data security, resilience, fault tolerance and disaster recovery from cloud computing.

A few international and African banks have already realised the value of cloud banking. WeBank is China’s first digital bank that is based in a private cloud and uses innovative technologies, such as Artificial Intelligence and blockchain, to effect an extraordinarily high volume of transactions at a very low cost. WeBank has been able to run at 95% lower cost than that of traditional banks’ IT operations and has passed this cost saving onto their customers in the form of low account fees. TymeBank is a new digital entrant to the South African banking sector and has made a 56% cost saving compared to other startups by using cloud services from AWS.

Before financial service providers can adopt cloud banking, regulators need to support and approve the use of cloud technology within the financial sector. Some international regulators are already allowing the use of cloud banking in the financial sector. The European Union has been at the forefront of defining an enabling regulatory environment for cloud banking services, which has involved both the regulation on the use of data and privacy and protection of data. Under the regulations, financial institutions have to ensure that consumer personal data is gathered legally and under strict conditions and that consumer data is fully protected. Other developing markets like Turkey and Argentina have adopted similar legal and regulatory environments, which has enabled the use of cloud banking in their financial sectors. 

Africa’s financial sector regulators’ approaches are very much work in progress. The report urges African regulators to develop clear policy positions and regulations on data privacy, risk and security; data sovereignty; cybercrime; protection of intellectual property; vendor risk; and migration complexity and operational risk to enable financial institutions to reap the benefit of cloud banking.

Genesis Analytics is a global African firm that has worked in more than 74 countries across the world, 41 of which are on the continent, and Orange Business Services is a network-native digital services company and the global enterprise division of the Orange Group, connecting, protecting and innovating for enterprises around the world.

The full report can be accessed here

www.genesis-analytics.com

www.orange-business.com

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[South Africa] SA Taxi adopts FICO’s cloud-based solutions to drive lending growth

SA Taxi, a financier of over 10 percent of South Africa’s minibus taxi fleet – the nation’s most affordable public transport used by 15 million people daily – has introduced FICO’s cloud-based decision management solution to drive lending growth of 25 percent. The FICO® Blaze Advisor® Decision Rules Management System has also reduced decision time on applications from two hours down to 10 minutes, while improving controls, capturing rules and creating an audit trail.

Rapid growth had meant the company’s manual processing system was becoming overwhelmed – with a lack of consistent and timely decisions adversely affecting business growth.

“When credit changes were required, they were simply added to the queue with the rest of our IT changes – which always had a higher priority,” said Itumeleng Nomlomo, senior credit analyst at SA Taxi. “This left the business with no option but to resort to manual decisioning, which really constrained our agility and created a number of issues such as inconsistent credit decisions.”

SA Taxi implemented FICO’s Blaze Advisor solution to integrate automated decision-making into its origination process. The decision management solution ensured reliable and consistent credit decisions that were in line with its strategy and business rules. Its cloud-based application lifted the infrastructure burden being placed on the business, which had become considerable. And its flexibility allowed SA Taxi’s business managers to configure rules without development/technical support from FICO, as and when its strategy changed.

“SA Taxi has embraced the power of a cloud deployed solution and reaped the rewards through incredible improvements in agility and efficiency,” said Michelle Beetar, managing director for sub-Saharan Africa at FICO.  “By automating the decisioning element, the team has been able to spend more time on strategy, analytics and enhancing the current process.”

For its achievements, SA Taxi won a 2019 FICO® Decisions Award for Cloud Deployment.

“SA Taxi has overcome the challenge of translating what seems to be a simple idea into a workable solution,” said Denise Sleem, functional specialist Afrocentric Technologies, one of the FICO Decisions Awards judges. “SA Taxi has really impressed by building a flexible solution to support the growth needs of their business and their clients through their digital transformation project.”

www.sataxi.co.za

www.fico.com