The emergence of the smartphone industry was the clear opportunity for revolutionising payments, but the traditional banking industry missed the boat completely.
“Instead of creating a really innovative new payments landscape or network, the card schemes and the banks and the regulators around the world forced the industry to iterate on the existing plastic card model. So they stuck a card inside the phone, because most of these card schemes wanted to keep access to the point of sale, and therefore generation of interchange revenue, as a core element of payments for theretail and consumer experiences.”
The result is that China, where the card business was just emerging at the time, took to mobile payments as a more efficient alternative. Last year, China saw over $31-trillion inmobile payments. According to King, if you combine all the credit and debit cards around the world, they only reached about $22.5-trillion dollars in transactions in 2019.
This provides the clue to how African financial services will emerge from the coronavirus crisis.
“In countries like Nigeria, Ghana, Kenya, South Africa and others, you see a real shift in people moving to mobile commerce wherever possible. The behavioural shifts we’re seeing are not just around e commerce, but around the use of online and mobile banking and the decline in the use of cash. The declining use of physical branches is likely for many customers to remain a permanent feature of their lives.
“Customers who have never used mobile banking before and have done it for the first time during this coronavirus are becoming dependent on it and are unlikely to go back to their pre-coronavirus behaviour. While some may return to branches, seeking that social connection, the reality is this is likely to accelerate the multi-decade trend we’ve already seentowards digitalisation.”
One other key element he expects is that banks are going to have to change their focus from encouraging people to spend more money to encouraging them to save.
“We’ve already seen more savings accounts created during the coronavirus than we have historically over the last few years. But encouraging that savings behaviour, having a systemic capability built into the banking platform for customers to do this, is missing. Most banks prioritise spending, because of revenue. That is going to have to dramatically shift.”
The next banking revolution, then, is not only about technology, but also about human behaviour.
• Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee
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