Bank on It

The banking sector in Zambia is currently experiencing unprecedented growth as commerce becomes more structured and the regulatory framework more formalized. Conversely, due in large part because of the lack of access to banking systems and institutions, the unbanked population in Zambia has remained high, as a large percentage of the country’s population reside in remote areas. Additionally, many banks throughout Africa—even the major firms—do not have a proper mechanism in which to offer lines of credit, which has hindered further growth and investment.

Both government and industry leaders are aware that the future of the banking sector will be entirely dependent on the implementation of digital platforms, especially as the market is being encouraged to supplement traditional methods of banking with innovation. Over the last few years, banks have been searching for ways to increase access and develop a sound market and have turned to mobile banking to help increase its numbers. According to the Global Findex Inclusion Database, 23% of adults living on less than $2 each day maintain some kind of account through a bank or financial institution, even as they are often reliant upon informal sources of credit and income, such as borrowing money from family. This could change, however, depending on if the mobile money market continues to perform as it has over the past several years.

Rapid growth coupled with expanding access and use of mobile phones throughout both rural and urban areas are two of the key drivers fueling mobile banking prevalence. This is in large part attributed to the operators that have made concerted efforts at attracting new customers from rural areas, increasing their customer bases significantly and diversifying the demographics of mobile banking users.

Official statistics from the Zambia Central Bank suggest that mobile banking has already eclipsed traditional banking, as mobile money accounts for as much as 3.4 million users, while traditional bank accounts are registering significantly less, only penetrating a market share of 2 million users. Globally, an average of 3% of the population are using mobile banking to pay bills and send and receive money, while regionally, the market size increases to an impressive 16%.

It is predicted that these numbers will continue to increase over the next two years, which would significantly change the banking landscape as unbanked numbers convert to banked in both Zambia and Africa on the whole. As a result, large banks and mobile operators are aggressively vying for their share of the market of these as-yet registered customers.

Mobile operators are wading in to banking industry territory as a result of the decreases in revenue that have recently hit the saturated, competitive market in the region. Key players in this emerging market are South Africa’s MTN, India’s Airtel, and Zanaco Bank among many others, and consequently, many Zambians are using their phones solely as a medium to pay their bills, buy goods and services, and send or receive money.

Mobile banking’s impact on the Zambian economy could reach beyond the sector, as mobile money throughout the whole of Africa is slated to grow exponentially over the next five years. According to the World Bank, a 10% increase in mobile broadband penetration has an immediate result of an average 1.4% increase in GDP. With the acceleration of adoption rates, it is very possible that mobile banking could do more than simply ease the way Zambians manage their finances; it could put the country on the cutting edge of the mobile banking trend that many developing countries are currently experiencing.