Financial technology – chiefly cloud-based services, have arisen as a revolutionary instrument that provides even the world’s most hard-to-reach communities access to world-class banking services.
Today, visionary financial institutions are bridging the digital gap by offering unbanked individuals their solutions – in the cloud. With even as little as a low-bandwidth Internet connection, underserved communities in frontier markets have the opportunity to better manage their day-to-day expenses and expand their often small but meaningful businesses.
Serving the underserved
According to The World Bank, there are currently around 1.7 billion people in the world without access to a bank account. Their Universal Financial Access programme (UFA2020) aims at guaranteeing adults who aren’t part of the formal financial system access to a bank account by 2020.
Frontier markets show enormous potential yet are still deprived of some of the banking services that individuals in developed countries are long familiar with. With a basic bank account and the ability to store, send and receive money, manage loans and provide financial security for themselves and their families – lives in developing markets change drastically.
Leapfrogging traditional systems
Microfinance banks usually have two options when challenged with changing customer demands for digital financial services: use on-premise systems from local providers – or partner with a fintech provider that offers banking software as a service. Without access to real-time data, local providers’ systems cannot guarantee microfinance institutions’ operations will continue running smoothly after an issue as usual as sudden loss of power supply.
Many financial institutions are leapfrogging traditional solutions and moving directly from custom-made solutions – spreadsheets or even using pen and paper as their main banking tool – to a fully digital, cloud-based core banking system.
In frontier markets, the arrival of cloud technology has been truly disruptive. Through collaboration with their core banking system providers, microfinance institutions can roll out cloud-based banking services to their clients, which changes the way financial institutions are servicing their low-income and unbanked communities.
Cloud is the key to security
Before cloud technology became the norm, financial institutions needed to store all their software and applications on their local computers and servers. As data and services became available in the cloud, all institutions need to provide secure financial services to their clients is access to the software, while Software-as-a-Service providers manage the rest.
In circumstances such as natural disasters or political unrest, it is crucial that financial institutions have control over their portfolios and the ability to mitigate market risks. Oradian’s cloud-based solution, Instafin, allows microfinance organisations to focus on their core business while outsourcing an infrastructure that is regularly maintained and secure.
Oradian’s digital toolset offers support through in-market teams available for training, implementation and assistance in daily operations. Ultimately, the technology, know-how and community – Oradian’s three-part digital toolset, cater to financial institutions’ growth.
With cloud-based banking software, more and more financial institutions are becoming future-proof. By improving data security, microfinance institutions not only reduce operating costs and gain instant access to real-time reports – the have the ability to mitigate the risks that businesses in frontier markets regularly face. Cloud-based toolsets improve the way financial services are provided, offering speed and convenience to existing operations, processes, products and services.
Preventing fraud with technology
According to the Nigeria Deposit Insurance Corporation, the number of fraud cases linked to internal bank staff increased substantially between 2016 and 2017. The Central Bank of Nigeria and Chartered Institute of Bankers of Nigeria are taking measures to protect individuals and their accounts from fraud across the Nigerian banking sector.
Visionary financial institutions are following the lead of key players by taking control of user rights within core banking systems, putting dual transaction approvals in place, and engaging clients with SMS messaging. With user groups, institutions can define access levels and control the data that each user group can access. This type of technology allows auditors, managers, accountants and staff to access the data that they need.
In the words of one of Oradian’s key customers who serves over 300,000 end-clients in Nigeria: "In the past, when fraud occurred, the damage would have already been done. But with Instafin, because of data being available, you can monitor any branch that you see is not performing. That gives you an alert that there’s something wrong and it helps our internal audit to use it as a tool for auditing." It is worth noting that with Instafin, this institution grew over 30 per cent year-on-year (Titi Yakubu, Executive Director of Development Exchange Centre, Bauchi, Nigeria).
Requiring multiple approvals on transactions or loans from managers can reduce fraudulent transactions, but also create bottlenecks. With digital financial services available at the tap of a finger, members of financial institutions can enable bulk approvals or require dual approvals on certain transactions.
With services such as SMS messaging, financial institutions' end-clients receive messages that confirm their account activity, thus the institutions’ clients play a role in fraud prevention.
Interoperability between fintech providers
Frontier markets such as Ghana and Nigeria aren’t averse to embracing the mobile revolution. Recently, the Bank of Ghana launched the country’s first Mobile Money Interoperability System, which enables mobile money users in Ghana to send and receive money to and from each other, regardless of their network providers. Before this, users were able to send a receive money only if they were using the same mobile money app and to facilitate transactions, users were dependent on third-party payment providers.
Interoperability – essentially when software such as mobile money apps exchange information and use it unrelated to third-party party services – is a revolutionary step forward, as it makes transactions more affordable. Rapid increase in mobile payment technology is one of the key factors towards the cloud, which offers even more convenience, speed and security for businesses.
Shared infrastructure, lower subscription fee
Microfinance institutions used to face barriers that prevented them from accessing the technology and resources they needed to grow. Oradian’s subscription model is tailored to each individual financial institution, eliminating those barriers.
The subscription model is like a yearly membership: a fee that gives financial institutions full access to the cloud-based toolset, for however many branches they operate in. This way, institutions pay as they go, committing to one year at a time. Based on an institution’s operations, location, and number of clients they serve, it’s much easier and more affordable for an organisation – no matter the size – to go fully digital.
Facing the future with confidence
Introducing cloud-based toolsets is shifting the way that microfinance institutions operate: resulting in operational efficiencies, increased security, live reporting and the ability to grow and serve more individuals. In developing countries, like Northern Nigeria and the Philippines, where markets are often unstable – cloud-based banking services are inevitable in becoming future-proof.
Marko Elezović, Head of Technology, Oradian
Image Credit: Cobalt