Banking In Africa – An Interview With Tracy-Ann Mooney
Tracy-Ann Mooney shares her insights on the banking industry in Frontier Markets in Africa.
We recently sat down with Tracy-Ann Mooney who shared some of her insights on the current state of banking in Frontier Markets in Africa. Tracy has worked in Zimbabwe, Mozambique, Nigeria, Ghana, Tanzania, Kenya and Uganda with multi national brands across the FMCG, durables, banking and telecoms sectors.
getchee – What is your background and connection with banking in Africa?
Tracy – I originally started working in the IT industry together with companies such as Novell. I developed a keen interest in market research while working with Electronic Arts South Africa where I was mandated to develop modern retail channels of distribution. As the South African retail IT industry was in its infancy, there was little or no market data to guide channel development and consumer insight. Being entrepreneurial by nature, I started a boutique research business, collecting competitor information from each IT retail store in South Africa. Over time, this manual data collection became electronic, and eventually I was collecting EPOS records and delivering aggregated sell-through data to brands such as Microsoft and Electronic Arts. This boutique business grew into the durables-focused local subsidiary of a multinational quantitative research company. Ultimately after heading the South African retail practice for SAS, I then began leveraging geospatial data to engage with global brands entering the African market. The idea was to provide consumer data where none existed, assisting brand development at a country level. Over the years I have worked across the financial services, FMCG, durables and telecommunication sectors.
What’s the difference between “Emerging Markets” and “Frontier Markets”?
Tracy – Emerging markets are usually located in what used to be referred to as “less economically developed countries”. These countries represented greater risk with greater potential reward when compared to the developed markets. Examples of emerging markets include the BRIC NATIONS – Brazil, Russia, India and China. Frontier markets are even less economically developed than emerging market countries. Many of these countries don’t even have a local stock exchange. Frontier markets are often not transparent, offer little or no demographic data, and carry high potential for political and currency risk. That being said, perhaps the greatest risk is missing out on the opportunities. Many consider the frontier markets to be the emerging markets of 10 years ago …… e.g. Nigeria, Kenya, Morocco, Pakistan, Philippines and Vietnam
How has banking strategy in Africa changed over the last 10 years?
Tracy – South African banking strategy has changed dramatically over the last ten years with the introduction of African Bank (1994) and Capitec Bank. Both these mass market consumer banks relied upon the big 4 retail banking incumbents’ inability to interface directly with mass-market customers. Both African Bank and Capitec Bank focused on offering user-friendly tools and credit models to assist their customers quickly and efficiently – the recent credit crunch has shown South African banks that existing credit models are rapidly becoming redundant.
What are the biggest challenges facing banks in frontier markets like Africa?
Tracy – Frontier markets such as Nigeria and Ghana are complex in that there is no established consumer credit profiling mechanisms commonly found in developing and developed markets. Low levels of formal employment, means that the majority of potential banking clients are firmly located in robust informal economies, which remain unmeasured and difficult to verify within traditional banking credit models. This position is further compounded by seemingly simple problems such as address verification and asset scoring of potential customers. Bricks and mortar bank networks are slow to develop given the lack of property infrastructure in many frontier markets. This implies that retail banks need to rapidly bridge this divide by developing online strategies.
What opportunities are there for banks in frontier markets?
Tracy – The flip side of the coin is that opportunities are immense for frontier market banks. Reaching the unbanked is very possible given the high levels of mobile phone penetration in these markets. The success of Kenya’s MPESA consumer payment system adds credence to this view – so retail banks need to adopt the same mobile banking technologies in tandem with geo-spatial data to reach their consumers – identifying and segmenting consumers on the ground, address verification using GIS technology, asset mapping, credit scoring and ultimately consumer banking processes become within reach for both banks and consumers.
What are the most important things banks should be doing right now, and why?
Tracy – Mobile banking technology coupled with GIS analytics needs to be introduced across all banking processes – the frontier market consumer has embraced the digital world. The frontier market banks need to do the same.