Fintech in Rwanda: the place where Telcos are surpassing Banks in the financial sector

Telcos dominate in the financial sector of Rwanda

Last week I participated in the leading fintech conference in Africa “Dot Finance”, which took place in Kigali, capital of Rwanda. The audience of 400–500 people mainly consisted of bankers, entrepreneurs and government officials from different countries of Africa, alongside with global fintech influencers and top-of-minds Chris Skinner and David M. Brear.

Discussing the future of fintech in Africa with Chris, Regis, John and David

It was a lot of discussions around the future of FinTech in Africa and Rwanda in particular, however the fintech boom and massive financial inclusion has already started there (they estimate that already 90–95% of population has already an access to financial services) and what is more interesting that it’s not driven by banks or payment companies.

Fintech development in Rwanda is driven by Telcos.

Major mobile operators MTN, Tigo and Airtel strongly compete in the mobile payment space

There are 3 major mobile operators in Rwanda and all of them successfully launched payments and remittance services (domestic and international) for their customers:

MTN (40–50% of the market) >> MTN Mobile Money

Tigo (30–40%)>> Tigo Cash

Airtel (15–20%)->> Airtel Money

I assume most of “fintechy people” knows how mobile money works, but for others I will shortly describe the user case:

Every sim-card holder in Rwanda can open a mobile wallet account and top-up it. In order to load funds to your account, you need to buy a scratch card from agent or at telco branch (agents are people, whom you can find near almost any bus stop or shopping centre). Furthermore you can also withdraw money from these agents, so basically they are “ATMs” of Africa.

“ATM of Rwanda”: Tigo Cash agent. You can top-up your mobile account or withdraw cash

After you wallet account is loaded, you can make payments or money transfers online (in the app or web site) or offline at point-of-sale where you can pay using traditional terminal or directly to the seller (smartphone to smartphone). If your smartphone doesn’t have an NFC chip, you need to buy a small nfc-tag which you stick to the phone (I saw it at almost each smartphone there)

Interesting that mobile wallets can be of different types: from so-called “unbanked” (with light registration requirements and limited number of transactions and amount) to “fully-banked” accounts which are quite similar to a bank current account.

Besides payments, you can make a p2p domestic transfers as well as even get international money transfer to your wallet (e.g. WorldRemit partners with MTN mobile money wallet)

Acceptance of MTN wallet payment at point-of-sale

Beyond payments: savings and loans

MoKash, launched by MTN in partnership with Kenya’s CBA bank (the name means “more cash”), is the extension of their product line: while MTN mobile money is the tool to pay and transfer money, MoKash is a complete banking product, which allows clients to save money with earning interests (7% interest for deposits) or borrow loans. Moreover it’s very convenient: fully digital, instant, you just dial *182#, follow the instructions, and your account will be quickly loaded with a small loan (up to $400 USD). Credit scoring is based on data from of MTN phone usage and Mobile Money usage history, which influence the amount of credit limits, so even unbanked people have an access to small loans. Btw the loan is provided by CBA bank, not by MTN itself.

The best offline promo places are taken by Telcos and their services like MoKash.

Other players (non-bank and non-telco)

While mobile operators compete with each other, Mobicash, which was launched in the mid of 2016 and already has several millions of clients, aims to complement all existing players like banks, payment switches, and mobile network providers and integrate them with MobiCash platform. Through 900 MobiCash agents located countrywide, people get an access to the following services:

  • Top-up mobile phone of any mobile network
  • Payments for utilities
  • Money transfers
  • Payroll service for SMEs
  • e-Government services
  • Tax payments

Will banks survive in this fintech red ocean? Only with open banking and BAAS approach

I believe that banks in Africa will survive only if they will cooperate with new players, not compete with them: with telcos (like MTN and CBA), fintech startups, ecommerce players etc. However existing infrastructure of most of local banks is not ready to be integrated with third-party players. Banks’ IT legacy, lack of resources, lack of security, overall bureaucracy and slowness are the real barriers for effective cooperation with new players.

The most effective solution to overcome these challenges is to create bank-as-a-service platforms with open APIs approach, how it was done in the US (Bancorp, BBVA,CBW), Europe (Wirecard, SolarisBank, Railsbank) and currently happening in Asia (Wirecard, BAASIS). Short description of bank-as-a-service you can find here:

During my keynote speech I was referring to SE Asia experience, challenges and barriers for fintech development here, and lessons that Africa should learn from Asian experience in order not to repeat the same mistakes. Chris kindly uploaded my presentation to his blog:

What should Africa learn from experience of SE Asian countries and why open banking and BAAS are crucially important.

p.s. Surprisingly I’ve got really bad experience with traditional banking in Rwanda:

  • ATM, which I found in the convention centre, has taken my card and than went out of service, so I waited several hours for support to come and return my card
  • When I went to famous “Gorilla tour”, i tried to pay with my card, but their terminal didn’t work because of connection failure
  • When I financially went to the bank and was withdrawing cash, my Singaporean banking card was blocked.. So in total I spent around 3–4 hours to make a simple transaction.
I’ve got not the greatest experience with traditional banks in Rwanda

Maybe it’s a sign to start using local fintech products? :)

p.p.s. Hope to come soon again to Rwanda — very unique and interesting country. It’s ranked as one of the safest country in Africa and N9 globally according to the World Economic Forum

While there are a lot of security people with guns on streets, in general you feel really safe and comfortable there. And natural parks are amazing, especially famous mountain gorillas :)

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