80% of Africa population is unbanked - banking conference

Some experts believe most African banks' business models are outdated and irrelevant to such an extent that they lack a cultural fit, thus making it difficult to lure the unbanked.

Despite the continent's ongoing social, economic and political challenges, such as low education levels, political instability, Vir acknowledged that the continent's economic environment is improving as many countries seek to invest in infrastructure and put in place reforms aimed at liberalisation and diversification.

Opportunities for growth

The rise of the urban working middle class in Africa, coupled with a large and young population and more than 52% of the rural population, and the prospect of Africa becoming the world's largest workforce by 2040, should constitute immense opportunities for growth for the continent's retail banks, according to Vir.

However, Zimbabwe's Tawanda Nyambirai, CEO of TN Holdings, told delegates that banks need to innovate and look beyond their traditional delivery channels, and move away from the obsession of creating a better customer experience in order to bridge the gap between themselves and the people, if they are to attract the unbanked.

"Banks have to put in place innovative mechanisms to create strategies that have a cultural fit, and at the same time integrate seamlessly with channels that provide goods and services that meet consumers' primary needs," Harare-based Nyambirai urged.

Failure to do so, he said, will result in retail banks facing new threats from other retailers and utilities. "The loyalty programme, such as the expensive one launched by Pick n Pay in South Africa, is an assault on the traditional savings account.

"The same applies to telecommunications companies that offer airtime credits and social media networks that provide vouchers."

Lack of confidence in banks

Then there is also the problem of the people's lack of confidence in banks, which continue to invest more money in branches as 'delivery channels', even though their importance is declining in the face of the rise of other alternative channels.

According to Nyambirai, changes in the retail banking environment are being driven, among others, by the reduced growth in branch revenue and the availability of other channels to handle processing and customer service (such as ATMs, mobile banking).

He added: "African banks need to be customer-centric. Customers are not specifically looking for better customer experience, but for products that meet their primary needs."

First National Bank (South Africa) CEO Pieter van Asperen, a panelist at the conference, said his organisation has understood that retail banking is no longer what is used to be, and is getting involved in selling more and more non-bank products.

"Retail space is becoming expensive, so you have to maximise whatever opportunity you have in this environment."

Catering for the unbanked

Statistics revealed at the conference also show that at least 85% of sub-Saharan Africa's adult population is unbanked, prompting panellists to urge retail banks to flex their muscles to ensure that this large portion of the population is catered for.

SA has a 48% banked penetration rate, the largest in Africa.

According to Vir, the business of retail banking is a complex one, as it comprises a whole lot of logistics to be put together efficiently in order for a bank to operate at its full potential.

These logistics include marketing, sales, treasury, business partners, regulations, technology, services and credit.