The Fintech Revolution: An Opportunity for the West African Financial Sector

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By Prof. Hua Wilfried Serge Koffi

The 2008 financial crisis has generated a confidence loss among financial institutions (banks), businesses, and customers. This erosion of trust is getting worse over time because of the financial services offered by their banks that have been deemed to be out-dated by the clients. In our century, the march of technology, internet connectivity, and
digital connectivity toward financial institutions are inevitable. This economic downturn leads financial institutions to turn to technology in order to improve their services vis-
a-vis the clients, and prevent the spread of this trust crisis. In many financial service
organizations, technology has moved from the back offices to the front. The industry
has become the world’s most digitized one according to Strategy & Analysis; they say
that 60 percent of all retail banking transactions now are done online. In Europe, more
than 47 percent of ultra-high-networth individuals use Facebook and more than 40
percent of high-net-worth individuals under the age of 50 view social media as an important channel for communicating with their bank, according to a recent study by Assetinum. Similarly, a recent Deutsche Bank study finds that more than 33 percent of all
new banking business with customers between the ages of 16 and 39 is conducted fully
on the Web. Among these younger clients, online channels (including social media)
have become one of the most important information sources for investment decisions.
Before 2005, the West African financial system was underdeveloped and the banking
system was concentrated in two or three commercial banks in the majority of the
WAEMU countries. Financing entrepreneurial activities and housing remain a challenge. Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) is a unique central bank for the eight countries and governs the financial institutions across the WAEMU. Currently the financial system in West Africa is dominated by the banking sector it is evolving rapidly with the emergence of new transactional banking groups and micro-finances. This evolution in the banking system is still not enough to be named among the best financial regions in the world. A TIPCEE working paper is stating that the actual interest rates charged are ranged between 31% and 36%. The report explains that interest rates charged by banks for loans are the result of persistently high bank operating costs and a risky lending environment. Additional work is needed to lower operating costs and technology may have an important role to play in helping all financial institutions in West Africa become more efficient. Many authors have discussed about Fintech and its innovation in banking and financial services. In particular regarding West African, the question that needs to be addressed is: how will the Fintech revolution aid in the development of the West African financial sector?