That technology has introduced a paradigm shift globally in the functioning of banks and delivery of banking services is beyond debate. A recent survey commissioned by the United Nations on the banking sector further attests to this and must serve as a wake-up call to local banks in terms of how they do business in the wake of disruptive innovations.
The Making Access Possible survey carried out by leading South African think-tanks showed that banks are in real trouble and have lost a lot of ground to mobile money operators.
The survey noted that financial inclusion in Zimbabwe is not about credit or savings, but about payments. The survey showed that while the number of people with bank accounts had increased to 30% of the country’s seven million adult population from 24% in 2011, there has been a rapid decrease in the use of bank accounts.
Dormant bank accounts have increased from 4% in 2011 to 25% in 2014, the survey said. The emergence of mobile banking services such as EcoCash, OneWallet and TeleCash on the scene has also created alternative platforms where people transact and save their money. This only served to bolster long-held views that banks — critical in financial intermediation — are still stuck in the proverbial brick and mortar model of business where literally everything is done under the roof with the help of a teller. While a few banks have realised the need to change their business models, most financial institutions have failed to respond to market needs swiftly, timely and adequately.
Against such a background, banks must not sit back and cry foul over the emergence of mobile money operators. The world over, disruptive innovations have become the order of the day. A disruptive innovation is an invention that creates a new market and value network, eventually disrupting existing market and value network while also displacing established market leaders and alliances.
A good example is the appearance of the worldwide web and its global acceptance in today’s fast-paced technology-filled life. The newspaper industry did not sit back and whine about the threat of online news to its business two decades ago. Instead, dynamic newspapers companies adopted such digital platforms to reach their readers. One doesn’t need to be a genius to realise that banks need to be innovative. All major mobile payment systems are a result of mobile network operators’ creativity and innovation and futuristic.
As such banks must not let outsiders lead innovation. Gone are the days of banking models where customers had to come into banking halls and do manual transactions. Now customers are more sophisticated and want convenience, not hassles.
Until banks realise that the status quo has changed, they stand to be relegated to the corporate dustbin. Lack of innovation and failure to read the market has never had good endings in the long-term.
So banks should not engage in futile battles to stymie change, but adapt to the new demands of the market. Already billions of dollars are moving through mobile money platforms. Statistics from the central bank show that total banking sector deposits stood at US$5,6 billion by June 30, 2015, compared to a total of US$6,1 billion that was transacted on mobile platforms between 2009 and 2014. Electronic payments are expected to hit the US$50 billion mark by year-end.