African Mobile Banking sector shows great promise


By Thandisizwe Mgudlwa

So James Alt, the risk advisory senior manager at Deloitte Cape Town believes that the big corporate companies utilise innovation to produce cutting edge solutions for new technologies in order to remain market leaders. Where development of these new technologies is outsourced to service organisations, corporates are faced with a set of risks associated with the outsourcing model that need to be managed.

Global research confirms that the growth of the African mobile communications market and the continent’s reliance on mobile telephone technology has opened up a market for innovative entrepreneurs to develop applications and tools to improve the lives of people and help companies reach their target markets. At the forefront is the leading role Africa is taking in developing mobile banking technology.”

And a special report on African Mobile Technology reveals that great strides are being made across the continent to make banking facilities available to those who, due to their circumstances, remain unbanked or have difficulty accessing mainstream banking facilities. Making this possible is a new breed of IT professional. Enter the mobile application (App) developer.

“With innovative entrepreneurs and long-term investment, Africa has started changing old-fashioned, passive approaches to development into dynamic, empowering thinking and action.

“To sustain the explosion in the mobile phone banking sector, cutting-edge developers are needed to keep up with rapidly growing and evolving mobile platforms. While these young, tech savvy entrepreneurs are developing the next generation in banking, they face the same legal compliance and corporate governance challenges as those of the banking sector. The specialist skills of these IT professionals have made them sought after, especially in the competitive banking sector. Despite the rigorous demands of regulatory compliance of the sector they are thriving, due to the innovative products and technologies they provide to banking institutions.”

Alt says: “A great deal of research, development and rigorous testing must be undertaken before a banking app can be launched. The appetite for this technology is high and there is a willingness to outsource large elements of software development to third parties. There are great risks associated with this outsourcing model. Deloitte is helping companies and banks bridge the divide between delivering innovative technological solutions and the demands of regulatory compliance and corporate governance.”

Owned and staffed by young entrepreneurs, software development companies are providing innovative business and technology solutions to the banking industry and are responsible for developing secure customer interfaces that allow clients to conduct their banking business wherever they are via their mobile phones.

While Deloitte’s risk advisory senior manager, Nicole Jamieson says: “Historically, third party service provider reviews provided companies with an understanding of the level of risk they are exposed to when using outsourced service providers. The outsourcing of business functions is popular in the financial services industry when traditional services like fund administration and accounting functions are outsourced. At Deloitte we are finding more specialist IT companies require audits to ensure they meet the internal control requirements of the banking sector to whom they provide services. Our dedicated IT risk consultancy has seen a significant increase in the number of requests to perform specialised reviews that are used by the banking institutions to assess the risk posed by the outsourcing of its mobile banking capability development to service organisations.”

Further noted is that the International Standard for Assurance Engagements (3402), Assurance Reports on Controls at a Service Organisation (ISAE 3402), is the globally recognised standard for assurance reporting on service organisations. Compliance with this exacting international auditing standard is required to gain greater clarity and transparency, allowing the banks and all intended parties to have greater confidence in doing business with their service providers. It is the best way to determine the risk the service provider poses to a well governed corporate entity while also assisting service providers with increasing their internal governance procedures and controls.

Africa is leading the way in mobile banking. The mobile phone boom and the large number of unbanked people in Africa have made ‘Ewallet’ services a huge success, with Kenya’s M-PESA the most successful. South Africa recently started pursuing Ewallet initiatives making it a very competitive market locally.

“The days of thinking consumers are too afraid of security issues to bank online or via mobile devices are beginning to wane. The developers are creating the useful, convenient apps and tools consumers need to make banking on the go easier than ever. Developers should carefully consider the corporate governance requirements of their clients as the compatibility of their products with their clients is an important part of being able to play in regulated industries,” adds Alt.

Even though these developments create opportunities for service providers, it should be approached as an ongoing issue of concern since a failure in their system that results in an unacceptable risk exposure for a big corporate can result in service providers closing their doors.

Alt also remarks: “These exciting times of introducing mobile banking to the South African population becomes a key enabler in improving the level of individual savings across the country and stimulating economic growth. The skills and expertise required to deliver these products into the market are locally driven and provide an integration opportunity for small and medium enterprises to do business with large corporate South African institutions.”

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