The African banking sector has a big problem. This problem, according to a report by Genesis Analytics, is that African banks tend to have a cost to income ratio that is much higher than their international counterparts. Why is this a problem? Well, if the overall cost of providing banking services is higher, then the costs of banking will be higher for customers. As a result, financial services remain inaccessible to a large proportion of the continent.
“Despite several decades of interventions to promote financial inclusion, the average rate of financial inclusion in Africa is just above 41% and there are approximately 717 million adults in Africa who are financially unserved or underserved.” This is according to the World Bank’s Little Data Book on Financial Inclusion for 2018.
According to the Genesis report, cloud computing presents banks and financial services providers with an incredible opportunity to rethink their strategies. Cloud banking, the report states, makes use of Internet technologies to provide virtual information and communication technology (ICT) infrastructure; meaning that these financial services players no longer have to make massive investments in expensive hardware and software. With cloud, African banks can get more out of their ICT spend.
Evolution not revolution
Perhaps the most significant benefit is around cost savings. With increased flexibility, banks can only pay for what they need and don’t have to bear the costs of upgrading their software/hardware when new technologies are rolled out. Similarly, the cost of running a specialised IT department also falls away because all cloud and ICT-related issues or concerns are handled by their chosen cloud service provider.
But costs aren’t the only benefit. From a development perspective, cloud computing operating models make it possible to have shorter development cycles. This, in turn, means that banks can respond to changing customer needs and develop products to meet these new needs far quicker than they could before.
Cloud computing can also aid bank business continuity. When working with a reliable and trustworthy cloud provider, banks no longer need to worry about “keeping the lights on” because their cloud service provider is being paid to take care of all things relating to resilience, security and disaster recovery.
Sceptical? The report also showcases some real world success stories. WeBank, for example, is China’s first digital bank. Based in a private cloud, WeBank uses innovative technologies, like AI and blockchain, to allow for an incredibly high volume of transactions at a very low cost. By using Cloud, WeBank’s IT operation is able to run at a cost that is 95% lower cost than the cost of a traditional bank’s IT team. Similarly, TymeBank, a new digital entrant to the South African banking sector, has enjoyed a 56% cost saving by using cloud services.
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