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| By Kelvin Mkwawa, Seasoned Banker. |
Slowing economic activity in Tanzania has impacted banking soundness indicators, which have shown some signs of weakening: non-performing loans (NPLs) are still a challenge, banks’ lending activities typically focus on a few key sectors which leads to high portfolio concentration risk, and a limited number of large corporates. Banks need to reinvent to remain competitive. In Tanzania, where the majority of the population lacks access to formal financial services (only 17% of the population are banked), mobile money has taken off and filled that gap left by banks. Mobile network operators are the dominant players in Tanzania’s banking ecosystem. There are more active mobile money agents than there are bank branches and ATMs in Tanzania.
Furthermore, technology companies (Fintechs) start-ups are channelling their focus on catering to the financially excluded Tanzanians who do not qualify for traditional financial services. In addition, with the number of investments on digital financial services from Fintechs and telecommunication companies, there is no doubt that the banking sector faces major disruption. So what will the banking industry look like in the next five or ten years? This is the question many bank CEO and shareholders should ask themselves. In this article, I will share what I think is the future of banking, and what banks need to do to not be left behind.
In my humble opinion, the future of the banking industry will depend on its ability to leverage the power of customer insights, advanced analytics and digital technology to provide services that help today’s tech-savvy customers manage their finances and better manage their daily lives. As technology advances in the next five to fifteen years, consumers will rely on their virtual assistants to do their banking and simplifying their day to day activities. Banks need to shift their mindset as well. You might argue that this doesn’t concern us (developing countries) as the state of advanced technology is at the earliest stage, but you can’t deny that what happens in developed markets has effects on our local markets as well. Hence banks should shift their focus from servicing the customers physically to investing in providing digital financing while also working on strengthening their security features and mechanisms to safeguard customer’s information hence improve consumer’s trust in digital finance.
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