The Bank of Namibia (BoN) has called on the banking sector to consider financial technology to improve ease of access and financial inclusion.
In its recently released annual report, the central bank said the more options there are to access banking products and services, the more clients would be reached.
Namibia is still considered to have many individuals and businesses not registered with banks, and which prefer to transact on a cash basis.
This means many potential customers of the banking and financial service industry are still excluded from the formal economy and could contribute to the growth of the financial services sector.
The central bank last year conducted an assessment on the effect the Covid-19 pandemic has had on the banking sector, and found that although the sector’s performance deteriorated as a result, it remained stable and profitable.
Innovation, on the other hand, remained low and needs to be scaled.
“The fintech needs of clients identified during the pandemic should form the basis of what fintech facilities should seek to address, be it mobile money or electronic access to various loan facilities,” the central bank recommends.
The Namibian reported earlier this year that electronic money has become the most popular way of sending funds in Namibia.
In 2020 alone, over N$40 billion was moved through e-money platforms, such as eWallet, easyWallet, Blue Wallet and other similar banking services.
A year before, this value was just N$14,8 billion, meaning it has grown by 177% – more than the growth in value pushed by bank cards and electronic transfers.
While e-money in Namibia has only been used to pay for services and the transfer of money, mobile platforms in other countries are used for clients to apply for soft loans – especially in the underserved small business space.
While risks are high with most fintech products, the future of banking is still headed to these platforms.
“A prudent lending process is encouraged, with regulators maintaining a healthy balance of regulation and risk-taking.”
Data from the central bank shows that Namibian commercial banks had a property, plant and equipment balance of only N$2,6 billion at the end of last year.
Of this only N$734 million involved information technology and peripherals.
This suggests there is an opportunity for start-ups in financial services to penetrate the market if the cost of entry into the sector is reduced.
Banking services are regulated by the BoN and licence application fees are currently exorbitant.
The BoN’s figures for December indicate that at least N$1,6 billion worth of commercial banks’ assets is tied up in physical assets – N$1,3 billion in buildings, and N$390 million in vehicles, furniture and fittings.
This is despite most, if not all, commercial banks in their recently released financial statements saying they are heavily invested in technology and enhancing customer experience.
Brick and mortar is still the conviction at most African banks, and the wave of financial technology could swallow some, several analysts have warned.
Like most companies threatened by competition, Namibian banks have started buying out financially innovative companies which serve those who are overlooked.
n 2016, FNB Namibia acquired and later killed E-bank – a branchless bank which delivered innovative inclusive banking to its clients, many of whom were in rural areas with little access to banking services.
In 2019, Standard Bank Namibia bought a controlling stake in Mobipay for N$53,2 million, which saw the bank taking control of its services. Mobipay is an electronic payment solutions company.
Nedbank Namibia is said to have affiliated with PayToday, another payment solutions company.
According to the World Bank, the sub-Saharan region’s big financial-inclusion gains have been driven by mobile money since 2014.