African banking offers a wealth of opportunity
AFRICA'S banking sector is becoming increasingly deregulated, forcing banks to look for new technology to ensure their competitiveness. This provides an opportunity for companies with the right technology to attract a great deal of new business.
As the industry becomes deregulated, so niche banks are moving in and cherry-picking opportunities. Private banking is a growing trend. These banks take on the entire financial aspect of their clients' lives. What's more, they don't charge unless their customers see real growth in their income. To achieve this, these banks are turning to technology to link products and create wealth.
The demand has been further boosted by many of Africa's banking systems not being wellpositioned to deal with the millennium bug. While South African banks have the problem firmly under control, countries north of the border face high risk and time to do something about it has just about run out.
Many African banks will be further pressurised in the new millenium because their computer systems will simply not be able to roll over correctly, making a shambles of the data housed on them. For that reason, the client bases of many African banks are likely to be absorbed by larger financial organisations.
"Some banks are going to hit severe problems with this issue," says Kevin Williams, director of Temenos, a division of Global Technology Banking. Temenos distributes the Globus Banking System in Africa. "Certain computer systems used throughout Africa to control banking services have been around since the seventies. This excludes systems in multinational banks represented on the continent. It is these banks that are poised to mop up clients of non-compliant banks in African countries after the millennium.
"It's also a tremendous opportunity for companies that are able to set up systems that will work well into the future," he says.
Inter-regional trade in southern Africa is worth about R20-billion a year and is likely to be severely affected by the millenium bug. South African computer systems are up to speed in terms of being rid of the problem but they are vulnerable to problems associated with networks they are linked to.
With deregulation, the millennium bug and increasing international competition, banks have to ensure that they maintain the level of service they give their clients.
"Nowadays people understand that a bank is there to serve them and not the other way around. They will look for the best deal on their financial services," says Andrew Turpin, general manager of Sagacious Systems, a division of Global Technology Banking.
Sagacious is a company that produces middleware, software used to switch payments like salaries, pensions and dividends between institutions. It also has a sophisticated fee-charging mechanism which helps financial institutions track the fees derived from their services.
Williams says Temenos and SFI work well together in an African context because they provide the technological infrastructure to run banks and to ensure their interoperability.
"We see great opportunities in the micro-lending environment. Niche banks will employ the latest technology to service this market."
Turpin says financial institutions are looking for greater return on their technological investment.
"Most organisations have a five-year technological cycle. They look at systems, implement them and then attempt to gain a return on the investment before the technology changes sufficiently enough to warrant reappraisal.
"We believe we can extend that five-year cycle so that technology has more time to pay for itself and the banks gain more from their investment.
"Buying technology is just the tip of the iceberg - there is a tremendous cost associated with training people and developing systems. Change things too often and the expense can be overwhelming. Our philosophy is to ensure that banks get the highest return on their investment possible," he says.
Williams says Africa's banking landscape is changing fast.
"We are ideally positioned to earn dollar-based revenues in Africa. We are an African company that understands the banking needs of the continent."