Open Banking and APIs: Emerging Opportunity in Africa

LAGOS (Capital Markets in Africa) – The terms Open and Africa has never been considered synonymous. With a linguistic diversity of almost 2000 languages, 3000 plus cultural identities and 55 currencies it is hard to image ever establishing an Open architecture on the second largest continent.

However, Africa is known for leap-frogging technology. We see solar cities being built instead of laying new power grids, rapid adoption of cellphones instead of landlines and gleaning first world information from sources such as 2Kuze and Wefarm instead of relying on traditions. Open Banking will allow Africa to leapfrog building branches in every town, reduce cash in the system and ultimately reduce banking fees.

What is Open Banking? 
Open Banking is possibly the most blatant mashing of financial services and technology we have seen yet. The concept not only commoditizes the banking industry, but technology is clearly starting to lead the way forward, providing product and service possibilities banking execs haven’t dreamt of. The concept establishes the consumer as the data owner and the bank as the data custodian. Like the US Health Insurance Portability and Accountability Act(HIPAA) of 1996, financial institutions just like medical institutions, will be forced under the second Payment Services Directive (PSD2) to provide access to customer data upon request. In a paper world the customer would provide proof of identity and receive a copy of their medical records. However, in the faceless digital world establishing a digital identity that can be verified across the transaction lifecycle becomes critical. Barring the obstacles, the availability and portability of customer data opens the door to a host of new opportunities, potential reduction in transaction fees and inclusion of underserved markets.

To promote and develop the use of online and mobile payments, in October 2015 the European Union ratified PSD2, the second revision of the Payment Service Directive.

The UK took a more modern approach in 2016 forcing banks to allow certain licensed start-ups to access customer transactional data, aligning with the notion that Open Banking is really Open Data.

An extract from the INTO AFRICA April 2019 Edition: Envision Africa’s Digital Revolution. The article is written by Ruan Wannenburg (Head of Technology, RMB International South Africa) and to read the full article, please download by clicking: INTO AFRICA PUBLICATION: APRIL 2019 EDITION.