Pan-African FIs open APIs to FinTechs
Regulatory frameworks such as the EU’s revised Payment Services Directive (PSD2) have played a critical role in the implementation of open banking, forcing retail banks in the region to make customer account information available to FinTechs and non-bank third parties through the use of application programming interfaces (APIs).
But even without legal mandates like PSD2, banks are taking proactive steps to build win-win models for bank-FinTech collaboration through APIs.
Pan-African bank Ecobank is one of the financial institutions (FIs) in Africa working towards this goal, Djiba Diallo, the bank’s FinTech head, told PYMNTS, by allowing FinTechs and other technology partners to use and experiment with Ecobank’s APIs through the bank’s pan. -African Banking Sandbox.
According to Diallo, the sandbox is part of Ecobank’s open banking strategy, which wants to enable “FinTechs, third parties, telcos and other companies that want to offer innovative digital payment solutions to their customers, to work with us very easily.”
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And while much has been said about how the rise of neobanks and new FinTech entrants threatens the dominance of established players with solutions that are often cheaper, faster and more efficient than traditional banking transactions, Diallo takes a different view.
“When the FinTech revolution started a few years ago, there was a lot of good talk about FinTechs being the main competitors to the banks in Africa and taking our market share,” Diallo pointed out, “but what actually happened, that’s another story.”
She said Ecobank’s approach has been to view FinTechs not as competitors, but rather as partners in a win-win relationship where both sides leverage their strengths for mutual benefit.
For banks, they can expand the reach of their services through the wide reach of FinTechs, while banks can provide “an umbrella that [FinTechs] need to operate in [banking] field,” she explained.
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A win-win Bank-FinTech model
Diallo pointed to a recent partnership between Ecobank and Toganese mobile money company Semoa as an example of a bank-FinTech collaboration.
To allow users to load and cash out their mobile money wallet, and receive transfers from friends and relatives, Semoa operates a network of agent bankers – micro-entrepreneurs who have been critical to the success of African mobile money adoption so far.
But a significant limitation of the agent banking model is that it relies on people being able to reach an agent when they need access to financial services, not to mention the security risks of having to withdraw cash at odd hours of the day, or even on a holiday when Semoa’s agents are not available.
To circumvent this limitation, Semoa has leveraged Ecobank for its Express Cash API and with that integration is now able to leverage Ecobank’s infrastructure to offer withdrawal services to its customers at any Ecobank ATM or Xpress Point.
Beyond mobile money, the use of APIs to promote bank-FinTech collaboration is also contributing to the growth of a new generation of digital-first neobanks.
On this front, Ecobank has built the Express Account API, which allows mobile banking apps to offer a range of banking services via its own front-end platform, while Ecobank acts as a back-end account provider.
Related: Instant payments set to increase intra-African trade by $5 billion annually
Through this initiative, the pan-African conglomerate, present in more than 30 countries across the continent, is able to support the creation of local banks through its “banking as a platform” business model. This model, according to Diallo, allows Ecobank to connect the dots between FinTechs in different locales and focus on its central mission of enabling intra-African trade.
Read on: Ecobank says Africa’s payment, FinTech future is bright
And with 10 APIs already live and counting, Diallo said she is optimistic about the future of the African FinTech ecosystem and Ecobank’s ability to support it.
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