Providers of financial services in Africa can significantly reduce costs for their customers if they adopted cloud computing solutions, a new report has claimed.
Cloud computing is a method of storing data and applications on the internet as opposed to traditional methods of saving a material on computer hardware.
The report, which was prepared by Genesis Analytics and Orange Business Services, claims that application of cloud computing can help financial services providers in Africa to rethink their technology spend and significantly reduce costs.
Genesis Analytics is a global African firm that provide research and consulting services in Africa and around the world. Orange Business Services, on the other hand, is network-native digital services company and the global enterprise division of the Orange Group.
Solving the cost problem using cloud-based solutions
As per the report, financial institutions in Africa are at a disadvantage when it comes to providing the same types of digital services as telecom companies or banks in other countries. This is mainly due their relatively smaller asset size—most banks in Africa have assets of less than $5 billion. As a result, banks are forced to charge high fees for financial services, which ultimately excludes millions of Africans from accessing banking services.
Solving that cost problem is critical if banks have to reach out to even poorer customers. As the report points out, adopting cloud-based solutions for financial services can help banks to significantly reduce costs.
For example, fixed costs can be converted into a subscription-based approach while upfront capital investments are translated into operational costs. This would allow banks to pay less for ICT infrastructure and services and achieve higher return on ICT investments.
Cloud computing is also lowering the operational costs for small-scale banks serving small markets, where specialised ICT skills are in short supply or too costly.
Other benefits of moving to the cloud highlighted by the report include operational flexibility, real-time analytic insights capability, data security, data resilience, among other gains.
African banks adopting cloud computing solutions
A number of international and African banks are already harnessing the power of cloud banking. For example, WeBank is China’s first digital bank that is completely based in a private cloud. The bank also employs innovative technologies, such as Artificial Intelligence and blockchain, to process high volume of transactions at a very low cost.
By moving to the cloud, WeBank has been able to run at 95% lower cost than that of traditional banks’ IT operations and has passed this cost saving onto their customers in the form of low account fees.
In South Africa, TymeBank is setting the pace by becoming the first digital bank that is completely based in the cloud. The bank leverages cloud services from AWS and has so far made a 56% cost saving compared to other startups.
Need for regulatory clarity on cloud technology
The report also urges African regulators to develop clear policy positions and regulations that would ensure cloud technology is harnessed more effectively within the financial sector.
This means providing regulatory clarity on issues such as data privacy, risk and security, data sovereignty, cybercrime, protection of intellectual property, vendor risk; and migration complexity and operational risks. Such regulations would also ensure that personal data is gathered legally and that consumer data is fully protected.