Banking in the UK is set up almost like a human right. Pretty much everyone has access to banking services and daily operational banking.
But in Africa the situation is quite different.
Andy Baker, CTO at Absa, grew up in the UK and had first-hand experience of the abundant availability of basic banking services.
Chatting to ITWeb on the sidelines of the SpringOne Tour in Cape Town, he explains that these differences between developing and developed markets present financial institutions across Africa with a wide range of challenges, but also a number of opportunities.
"Since living in South Africa I've experienced that 'boer maak 'n plan' mentality and it excites me. In a place like England there aren't as many hurdles so there's no real need to get creative in order to solve problems around access and inclusion," he says.
For Baker, addressing the financial inclusion conundrum requires banks to reduce their costs to such an extent that banking charges become so low that people do not really care about paying them. But the reality in Africa is that banks still need to have branches and all of this real estate is quite costly, he says.
The obvious alternative is for banks to increasingly offer their services to customers via digital channels, he says, but notes this can be complicated because some people still do not have access to smartphones and the Internet. Baker believes a hybrid approach is probably best; with a mix of digital solutions and physical branches.
"Compression is having a big impact on all aspects of banking," he explains. So we are seeing fewer branches and also fewer data centres. As some of the big public cloud players dip their toes into African markets, it makes sense for businesses to reduce their on-premises facilities. If we're able to sort our costs out, it will be easier for us to improve our coverage, which is something we will see a lot of banks doing over the next few years, Baker asserts.
The last piece of the financial inclusion puzzle - which is a rather key component, according to Baker - is identity. If someone lives in an informal settlement and they do not really have an address, it is extremely hard to give them financial services.
But if we create an environment where anyone looking to access banking resources has a self-sovereign identity - meaning that people have sole ownership of their digital and analogue identities and that they have total control of how their personal data is used and shared - this hurdle will be eliminated.
Is AI the answer?
Baker believes artificial intelligence (AI) has been greatly oversold. True AI goes beyond just scraping information from one system and planting it onto another, he says.
Within the banking space, the most interesting applications of AI at the moment are related to fraud. "With AI, the old ways of detecting fraud can be improved in quantum leaps. But fraud remains an incredibly complex problem."
A big issue that AI addresses is false positives, notes Baker. Banks cannot afford to constantly be phoning people to check if a transaction is or isn't fraudulent. With AI, it is possible to reduce the likelihood that a charge is incorrectly labelled as fraud.
Speed to market and overall efficiency is one of the key benefits of tech innovation, he continues.
In the past, setting up infrastructure to address customer problems could have taken several months. Today, it can be done in a matter of minutes. And it's not just faster; the quality is far better and it's also cheaper, concludes Baker. From a customer perspective, the results are profound products and services that reach more people and have a real impact.