The growth of M-Pesa in sweeping the continent in Africa. It represents a cheap, convenient way to make payments and transfer money where a local banking infrastructure, or the means to access them, is largely limited. Here Chris Dutta, chief executive of Piccadilly Group, explains the back-office implications of operating in a cashless society and how today’s challenger banks can upset the status quo of the established ‘Big Four’ branch network.
Leapfrogging is a phenomenon where emerging countries embrace technological change more rapidly than developed countries Necessity is the mother of invention, as they say, so countries without a fixed line infrastructure are moving rapidly to a mobile payments model. It not only cuts down on crime, a big problem where cash exchanges are common, but also overcomes the lack of a structured bank branch system or the logistics required to reach one.
In Kenya, for instance, the migration to mobile has been underway for some time, with initiatives such as M-Pesa essentially leapfrogging the use of debit and credit cards. Mobile serves as a vastly superior and sensible payment vehicle to existing alternatives.
Are the so called challenger banks starting to shake-up the market in a similar fashion in the UK (Atom, Metro Bank, Shawbrook, Aldermore, One Savings, etc)? Typically, they benefit by operating without the high-costs associated with a traditional high-street banking infrastructure, such as bank branches or teller staff. They are driving more and more transactions to be conducted through on-line or through mobile banking services.
How do Challenger Banks establish themselves as safe, secure institutions that people can trust? How can established banks, with their legacy infrastructure and aging IT systems hope to cope with these young upstarts?
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