How Rwanda can accelerate uptake of financial technology

The majority of financial institutions in the country are currently transitioning from traditional ways of doing business to technology-based ones. More technology-driven products and services are also being introduced as technology advances. The advance in technology has enabled financial services providers to roll out more innovative business approaches and models that have helped them reach more customers and give them new experiences. New products, including cross-border mobile money transfers, e-government payment facilities and e-savings services by telecoms, among others, have been rolled out, pushing banks to come up with more strategic interventions to stay relevant and competitive. Today, hundreds of companies are tapping into the potential of the financial technology (FinTech), which is revolutionising the banking industry and giving millions of people access to financial services. FinTech, is an industry composed of companies that use new technology and innovation with available resources in order to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services. The question, however, remains on what countries like Rwanda can do to accelerate the uptake of FinTech to benefit more people. According to Khan Salam, the vice-president of SouthTech, a software company operating in Asia, Europe and North America, new banking models are emerging for the first time, with FinTech start-ups and technology firms “potentially disrupting the status quo”. But that the challenge remains in how to bring everybody onboard. “Africa has adopted the end-user technology quite faster than many other parts of the world. For example, a customer can be able to make payments using mobile money if an organisation does not have other e-payment facilities. This shows remarkable shifts being made by banks and FinTech startups,” he said on the sidelines of the recently ended Dot Africa finance conference in Kigali. Salam said one of the reasons some of these latest technologies are not readily embraced is because people don’t understand the benefits they bring. “People do not clearly understand the benefits that come with technology as opposed to traditional channels. Few years ago, when we started automating the services of one of the largest microfinance banks in Myanmar, they were using paper-based accounting which would take about eight days to finish. However, when we introduced a new technology system, they were able to do that same volume of work in just 10 minutes. This proved to them that technology had unprecedented opportunities,” he noted. In fact, such initiatives have led to the growth of digital payments and number of online transactions in Rwanda, according to central bank figures. For instance, the National Bank of Rwanda monetary policy and financial stability statement for 2016 indicates that there have been significant changes caused by the growth of mobile financial services and Internet banking between 2015 and 2016. It shows that the number of active mobile money subscribers rose by 34 per cent from over 2.5 million subscribers to more than 3.3 million users, while the penetration rate of access points (agents) increased by 48 per cent over the period. Similarly, mobile money accounts were up 27 per cent and the volume of transactions surged to 205 million. In addition, mobile banking users increased by 18 per cent, and Internet banking users inched up 20 per cent. When well harnessed, these and other technologies present the financial sector immense opportunities, experts say. Opportunities offered by financial technology Experts say financial services providers that tap into the FinTech industry have been able to introduce new products to the market, as well as take the right decisions and promoted inclusion. Nyakeriga says the mobile money service has deepened financial inclusion. / Timothy Kisambira For Benjamin Nyakeriga, the chief development officer at the Development Bank of Rwanda, to be able to accelerate the uptake of FinTech, users need to first understand the “possibilities and the opportunities that this technology is presenting”. “FinTechs are small and more agile, and they help service providers to understand customers better. Besides, digital technologies that can be accessed on mobile phones have enabled players reduce the costs. Therefore, sector actors need to be aware of such opportunities presented by the latest technology,” he said. Nyakeriga said this means that the bigger sections of people who were previously not financially included can be reached wherever they are, particularly in rural areas where there is limited or no infrastructure. He noted that the evolution of FinTech is currently enabling more banks and other financial services players to revolutionalise payments and transfers, arguing that countries should establish required infrastructure to facilitate the uptake of the FinTech. “In regard with the advent of FinTech, the smartphone is one of the biggest innovations in the past few years that support the sector. People are now able to trade and transact on their smartphones. Microfinance institutions are also now designing more customised products targeting mobile phones user. All this is happening seamlessly and it’s changing the way we do business,” he added. Blockchain technology and FinTech In a related development, experts project more benefits with blockchain technology, an emerging fintech that promises friction-free, peer-to-peer transactions to help banks and other players cut costs of transferring money and other assets. According to Jon Matonis, the founding director of Bitcoin Foundation, the leading promoter of the use of Bitcoin cryptographic money worldwide, for developing countries like Rwanda such technology can enable them to leapfrog growth of financial technologies and drive uptake. “One of the interesting facts about Africa is that an increasing number of people own mobile phones. With the growing penetration, the mobile phone will be more important than your regular wallet, or your debit and credit card. With blockchain, people will seamlessly transact money without approvals from operators, regulators or banks involved,” he explained. Matonis added that adopting blockchain technology will enable integration of countries and also have a ripple influence to most of the emerging sectors. “I have seen African students struggling to register and pay for online university courses as they had to first acquire a Visa card. But when you use a global currency like Bitcoin that everyone accepts, you are instantly connected to an international network for payments. The facility has enabled merchants to sell their services in areas where they don’t have credit cards; this has integrated economies,” he said. Matonis and other experts say increasing investment in FinTech startups and empowering more technological innovations will fast-track the development of the financial technology sector. “This will also support other industries like the agriculture sector where people currently face challenges of lack of credits, yet it employs millions of people,” according to the experts.

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How Rwanda can accelerate uptake of financial technology