Coronavirus Accelerates African Banks’ DX Journey

The spread of the COVID-19 pandemic across Africa has seen a surge in digital payments and e-commerce transactions as financial institutions scramble to offer businesses and consumers contactless ways of spending, borrowing and lending together with making payments.

Although cashless solutions like mobile lending and digital payments were already growing rapidly on the continent even before the pandemic struck, it has accelerated the growth.

“Even in 2020, millions of people across sub-Saharan Africa still pay their bills and send money each month by drawing cash and physically going to a retailer or a bank to make a payment or to receive grant payments. Now, for safety reasons, they don’t want to make physical payments anymore, meaning that banks and FinTechs will have to rapidly roll out safer, contact-free payment methods,” said Samuel Tayengwa, Acting CEO at TransUnion Rwanda.

As markets prepare for life beyond the pandemic, digital transformation is becoming a key strategic initiative for financial institutions across both digital and traditional channels. Financial services providers will need to focus on offering payment and lending solutions, as well as onboarding customers digitally in a seamless, easy, and secure manner.

The Fintechs are increasingly being supported by economic policy changes from regulators and national banks, to further the national digitisation agendas.

The National Bank of Rwanda has put in place a range of measures, including zero charges on certain types of transfers and contactless point-of-sale transactions, and a three-fold increase from RWF 500,00 to RWF 1,500,00 in the limit for individual transfers using mobile money wallets as one such enablement.

“But as growing numbers of consumers and businesses transact online, one of the biggest obstacles to the mass uptake of digital solutions will be security,” adds Tayengwa.

TransUnion’s quarterly analysis of global online fraud trends found that the telecommunications, e-commerce and financial services industries have been increasingly targeted by online fraud, with the number of suspected fraudulent digital transactions increasing by 5%  compared to the periods of January to March when the World Health Organization (WHO) declared the coronavirus (COVID-19) a global pandemic).

The analysis identified more than 100 million suspected fraudulent transactions globally from March 11-April 28 alone!

Banks and Fintechs must, therefore, deploy robust identity verification and fraud detection tools to manage risks and avoid losses at a time when demand for credit is growing. At the same time, they must ensure a smooth customer experience that does not alienate the customer before they have even been onboarded.

“Now that even more transactions have shifted online, fraudsters are trying to take advantage and companies must adapt. Lenders and businesses need to know exactly who they are dealing with, and how to protect their genuine customers from fraudulent activities,” he avered. “The businesses that come out on top will be those leveraging fraud prevention tools that provide great detection rates, and providing the ability to open accounts online in an easy, personalised way.”

Rather than asking customers to manually enter their personal information, financial institutions can leverage online document-validation processes. Once an ID is established, the next step is effective ID Verification to detect and prevent fraud. Digital transactions carry an increased risk of fraud that businesses need to address through a multi-layered fraud strategy including assessing the risk of digital signals like device, email, phone, and behaviour.

After ID management and fraud risk and prevention steps are taken, the final steps in a seamless onboarding experience include assessing the consumer’s ability to pay, based on actual or estimated income and credit history.

“COVID-19 has put immense pressure on African financial institutions to transform digitally, and to do this, they will need access to the most comprehensive set of offline and online data assets,” Tayengwa added. “Providing a truly seamless onboarding process requires up-to-date data sourced from credible data sources like credit agencies, government agencies, telcos and utility providers.”

COVID-19 will, on the African society, create permanent changes in the way of using cards and cash, creating both opportunities and challenges for financial institutions.