Typically, when digital banking is mentioned, it evokes pictures of pretty-looking mobile applications on smartphones. Either that or accessing websites from a computer via the internet. While those may be the common interpretations of the word, they couldn’t be farther from the reality for most Africans.
First, let’s start with the basics: What is Digital Banking?
Digital banking is the digitization (or moving online) of all the traditional banking activities and programs services that were historically were only available to customers when physically inside of a bank branch
As described by Temenos, one of the world’s most popular banking software providers, digital banking is the digitization (or moving online) of all the traditional banking activities and programs services that were historically were only available to customers when physically inside of a bank branch.
Basically, digital banking involves requires three things:
- Banking services.
- Delivery over the internet.
- Access via digital devices.
Access to the internet and a smartphone or internet-enabled deceive are must-haves for the conventional kinds of digital banking. However, for the average African, these are unattainable. For all the growth that Africa has experienced in recent years, it is still a largely rural population (>50% live in rural communities). For these people, fast internet and smartphones are not readily available.
Internet access around the continent stands at just below 20%, with rural residents being the most negatively affected. Even when accessible, internet access is way too expensive for the population. 80% of the globally poor live in rural areas. Therefore any solution for rural residents must take into account the cost. In countries like Chad, and Congo, citizens already have to pay more than 20% of the average monthly income to access just 1GB of data.
Feature phones also appear to be the device of choice on the continent, representing more than 53% of imports in the first quarter of Q1 2021. Lack of credit facilities and the huge cost of smartphones make them inaccessible for most of the population.
USSD-banking for feature phones
In rural Africa, USSD is King - helping users make payments, complete transactions, access credit, and a lot of other financial services. Tweet this
USSD is already one of the most popular options for rural African users looking to access banking services. These services are typically delivered over a mobile interface as a simple list of menu options. Also, although USSD does not require internet access from the user’s end, modern versions of it that are used to deliver banking services, still require internet access at the service provider level. If you’re confused, about that, you can read our explainer on explainer on how USSD works.
USSD works just fine on feature phones and without internet access on the user’s end. Also, considering that USSD costs are often tied to transactions, it tends to be cheaper than internet access for people with little disposable income.
In rural Africa, USSD is King - helping users make payments, complete transactions, access credit, and a lot of other financial services. Even smartphone users who have become accustomed to using USSD find it hard to break the habit as it’s quick, efficient, and trustworthy.
Acknowledging that USSD is digital banking is an important first step in building digital financial solutions for Africans. Although mobile application banking and online banking get all the accolades, USSD still takes the cake when it comes to transaction volume across the continent, powering more than 9 in 10 transactions.
So, maybe next time there’s a conversation about digital banking in Africa, the first image that should come to mind should be that of a feature phone with USSD options.