BANKING & PAYMENT TECHNOLOGIES EAST AFRICA, 2009: Interview with Joe DiVanna

Q. AITEC Africa’s Banking & Payment Technologies Conference is gaining popularity as a flagship event which pairs the financial services and technology industries on the continent. What are the expectations for the event in Nairobi next month?

A. Expectations are high for the banking sector in East Africa. As the banking crisis continues in Western markets, African markets are showing their resilience as the new home of payments innovation. Although African economies have had some side-effects from their traditional trading partners, new partners are emerging such as China, India and the Middle East. Africa is on the move and African banks need to strengthen their technological infrastructure to meet the new demands for financing from businesses, consumers and investors. They say every cloud has a silver lining, and the financial chaos in the Europe and the US creates an opportunity for African banks to prepare for the next wave of competition. History has shown us that strong, healthy banks typically emerge as a result of a banking crisis. These strong, cost-streamlined banks will be eager to expand into new markets and will be looking at Africa to expand their operations. Consequently, indigenous African banks must work diligently to lower their operating costs and expand their offerings to a wider number of customers. Engaging customers with technology will be the key to their success.

Q. What role do you see technology playing in helping to foster the long-term health of indigenous African banks?

A. Banks are unlike any other industry; they provide social financial cohesion. Simply, banks provide the economic bond that holds the nation together. Technology enables banks to facilitate commerce and support the lifestyles of consumers. With the meltdown of the banking industry in Europe and the US, African banks have an opportunity to leapfrog their Western counterparts by leveraging their technological investments. This is why during the last 24 months we see experiments, trials and prototypes of banking products spring up all over Africa. New consumer-based bank cards, micropayment schemes, mobile phone banking, new lending products, and a host of branch redesigns indicate that Africa is now the land of banking innovation. Although banks in other parts of the world may lay claim to inventing banking technology solutions, innovation is applying banking technology to consumers and businesses in new ways. Long-term, the biggest challenge for African banks will be to lower the cost of distribution or what we euphemistically call “the last mile”, between the bank and the customer.

Q. As the conference chairman and CEO of a UK-based financial consultancy which specializes in research and advisory, what are the key issues the conference will address?

A. Statistics show that fewer than 20% of people in Africa have a formal banking relationship. In East Africa, the vast majority of people in the bottom-half of the economic pyramid have yet to experience a banking relationship. This does not simply mean economically disadvantaged; people are actually without bank accounts. Our research shows that many people with jobs and small businesses rely solely on cash and do not participate in the formal banking market. New technologies enable people to make secure payments in new ways, reducing the need to carry cash. The agenda for the conference focuses on engaging customers through technology, with special attention to facilitating the payment needs of consumers and small to medium-sized enterprises.  

Q. The regulatory framework for the electronic and mobile payment systems is just evolving in  Kenya and elsewhere in Africa. Will the conference shed light on this important issue facing the industry?

A. There have been numerous discussions on what is the right regulatory framework for African payments. Payment technology vendors with a myriad of solutions are courting national regulators, the central banks, each vying to become the de facto standard. There is no right answer for which regulatory structure is best for which nation; what is important is that there is interoperability between national payment systems. The presenters at the conference will discuss what is happening across Africa, with examples of what is working in various regions. The industry needs three separate discussions: payment providers with regulators, banks with regulators and regulators with their counterparts in other African nations. Our hope is that the Banking & Payment Technologies conference will assist in taking these discussions forward.

Q. Who are the targeted stakeholders for the conference?

A. The main participants of the conference will be CXO-level bankers, central bankers, payment providers and other financial services providers. However, payments are the key to economic growth, so anyone who wants to be kept abreast of the developments that will change the face of banking in Africa should attend. Banking in Africa is poised to be an enormous engine for facilitating change in Africa, so I encourage young banking professionals to attend to update their knowledge since they will be the next generation’s agents of change.