In emerging markets, mobile devices have become more than a default channel to deliver rudimentary services to unbanked consumers. Improvements in handset capabilities and the expansion of the mobile money model demonstrate a mature, diverse market — one that attracted IBM to make major inroads with a number of banks across Africa in just the past couple of months.
IBM has signed contracts with five of Kenya's largest banks: Credit Bank, Co-operative Bank, Family Bank, First National Bank of Kenya and National Industrial Credit Bank. That the specific services differ for each deal is a further sign of the maturation of the technology market.
"Throughout Africa, we are seeing increasing signals that more banks are keen to take advantage of the growing number of customers who own a mobile phone or can access the Internet to deliver financial services using the medium," says Tony Mwai, country general manager for IBM in East Africa.
"The growth in the number of customer accounts has driven more banks to modernize their core banking software to handle the volumes and integrate their transaction banking with mobile channels," Mwai says. "We have helped banks transform their systems to accommodate these new services in a cross-section of some of Africa's biggest markets."
At National Bank of Kenya, IBM is providing IT services, hardware and software; at Family Bank, IBM is supporting the launch of new products and services; and Credit Bank is turning to IBM to manage a core banking overhaul.
IBM is seeing more interest in developing secondary financial services, Mwai says. These include commerce, insurance and savings — all delivered using digital banking systems. That's led IBM to develop pooling and cost-cutting capabilities via a microfinance processing hub (MFP), which offers a shared multi tenant on demand software as a service (SaaS) tech platform to support retail banking.
"Already it is possible for farmers to purchase crop insurance using a mobile phone, without physically ever going to see an agent," he says. "Kenyans can start savings accounts on their mobile phones without ever having to visit a bank branch, and there are now over 400 Kenyan companies that accept mobile payments for goods and services."
The mobile enabled financial services market in Kenya first began to take hold in a big way at M-PESA, a Kenyan telecom-driven mobile money service that at first faced rampant political opposition in that nation. IBM manages the tech that underlies the M-PESA system via a contract with Vodafone, whose Safaricom affiliate operates the mobile money service. Overall mobile phone use has grown quickly in Africa, making it a hot spot for a variety of recent mobile banking plays beyond M-PESA.
"In places like rural Kenya, where access to banks is limited, there is a tendency to gravitate toward digital banking solutions," Mwai says. "Banks are also keen to expand their operations past the traditional brick and mortar model and this has led to more take up of services such as mobile and Internet."
In addition to the five Kenyan deals, IBM has also recently implemented technology at Commercial Bank of Ethiopia; National Microfinance Bank of Tanzania; First National Bank of Namibia; and Union Bank, Intercontinental Bank and FinBank in Nigeria.
The deployments are challenging, as global regulations differ in varied jurisdictions.
"As each implementation is conduced on a case-by-case basis, it is difficult to pinpoint the specific obstacles that banks encounter," Mwai says. "In most cases, our clients … will be responsible for managing the security, regulatory and infrastructure requirements, while we provide the solution to manage that process."