Open Banking APIs Help Africa’s FinTechs Scale | Techy Kings


According to the International Monetary Fund (IMF), there are more than double the number of mobile money accounts in most African countries.

To give just one example, Mali has 935.6 registered mobile money accounts per 1,000 adults, indicating an exceptionally high level of penetration. However, the same data shows that the number of depositors in commercial banks is only 195.1 per 1000 adults.

With numbers like these, it might seem like open banking is a dead end on the continent because there isn’t a large enough base of account holders to make it worthwhile.

But in reality, some of Africa’s biggest banks are betting big on open banking application programming interfaces (APIs) that allow FinTechs to access their data and services.

While elsewhere open banking is associated with account-to-account payments, in Africa the movement is proving its value even among unbanked populations.

As Djiba Diallo, Chief Financial Technology Officer at Ecobank, said in a recent interview with PYMNTS, the pan-African bank’s open banking strategy is as much about expanding the scope of its services and allowing third parties to develop as its infrastructure. existing customers.

Read more: API combines FinTech infrastructure and banking regulatory expertise

“It’s about connecting banking services, or enabling FinTech to connect banking services, whether it’s payment or collection, [opening] accounts or create tokens to withdraw money at our ATMs,” Diallo explained.

She went on to say that Ecobank is partnering with telecom and mobile money operators to leverage their technology and services, which will enable them to create more useful products that can be used for things like cash from ATMs and digital payments.

In fact, banks across Africa are expanding their API catalogs and building sandbox environments to embrace mobile money and allow FinTech companies to use their payment rails, ATM networks and even account opening and lending services.

This type of FinTech enablement has the greatest potential for segments of the African population that have previously been difficult for banks to reach.

Richard Southey, chief digital experience officer at pan-African bank Absa, also told PYMNTS that “open banking games are important because banks themselves will never be able to build all the customized applications that will be relevant to, say, an informal merchant.

However, he added, “FinTechs are starting to address these issues [and] we are seeing more and more banks getting involved in API marketplaces where FinTechs could step in.

African Regulators – Open Banking Systems

While Ecobank has been moved to open up its infrastructure to third countries, realizing that FinTechs can reach new customer segments that have traditionally been underserved by the old banking model, many African countries are also considering EU-style regulation of second payment services. Directive (PSD2).

This legislation acted as a catalyst for Europe’s open banking movement by giving banks the legal mandate to share account data with authorized third parties and allow payment initiation through open APIs.

Last October, the Central Bank of Egypt (CBE) adopted a new set of regulations governing the country’s Instant Payment Network (IPN).

See more: Central Bank of Egypt approves rules for instant payments

Taking a different approach to open banking than PSD2, the new regulations allow approved mobile apps to provide payment services and instant transfers, revealing the mobile-centric nature of Africa’s emerging open banking sector.

Amany Shams-Eldin, CBE’s first deputy manager of banking operations, said at the time that the focus on mobile payment applications was “[support] improvement of the provided financial services and contributes to the creation of new competitive opportunities that will attract new customers to the banking sector.

Meanwhile, the Central Bank of Nigeria has published an Open Banking Regulatory Framework that defines how Nigerian banks should exchange data with third countries.

In turn, in 2021-2025 In a strategy paper, the Central Bank of Kenya (CBK) also hinted that an open banking mandate is on the horizon. “CBK will aim to define standards for efficient and appropriate API development and mandate reliable yet secure data portability in the marketplace,” the five-year plan states.

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