By opening up the telecommunications and internet sectors to private investors, African governments have given them the upper hand in the lucrative ... data market. If the continent is to regain control of its digital economy, countries need to rethink tax and regulatory policies, analysts argue.
There is “absolutely” a pipeline of demand from banks in French-speaking countries, Alexandre Menage, Temenos managing director for Africa, says from Cape Town. The plan is to open the office “in the very near future”, but no final decision has been taken, he says.
The COVID-19 pandemic has transformed Cloud-based software from a “nice to have” extra to a “must have”, Menage says. Cloud means that digital banking offers can be maintained without the risk of infrastructure such as data centres failing, he adds.
Temenos, which trades on the Swiss stock exchange, claims 3,000 clients globally, including 41 of the world’s top 50 banks. The company has 160 clients in Africa, the majority in English-speaking countries. Menage expects that a balance between English and French-speaking clients will soon be reached. The plan is to open the new office and then gradually increase the number of people. “The demand justifies it. It was only a matter of time.”
Orange Bank has been a Temenos client in West Africa since late 2019. The bank went live with a Temenos solution in July. African clients also include Sombank, an Islamic bank in Somalia, Libya’s Assaray Trade and Investment Bank, and Barko, a microfinance institution in South Africa.
Using Cloud-based software allows banks to spend more money on innovation rather than on maintaining legacy infrastructure, Menage says. Temenos keeps its own costs down by relying on client systems to implement software. That allows the company to reinvest 20% of global revenue in new products.
Cloud computing delivers services such as applications and processing power via the Internet. Companies which supply Cloud services have strong potential economies of scale if they can provide the same products to many customers. Clients pay for only what they use, and so cut costs by reducing the IT infrastructure that has to be maintained.
That looks like a tempting solution for African banks, which have cost-to-income ratios higher than their international peers. According to a report from Genesis Analytics and Orange Business Services, the average cost-to-income ratio for the best five African banks is 56%, while the average across the best five international banks is 43%. And African banks, which even when they can open their doors, still have the world’s sparsest branch networks, with just five branches per 100,000 adults.
But Cloud security still has a long way to go. According to The State of Cloud Security 2020 published by Sophos, South Africa and Japan have the world’s highest numbers of stolen cloud provider account credentials. Nigeria, meanwhile, has the world’s second-highest rate of users having suffered public cloud security incidents over the last year, on 86% versus India’s 93%.
- The Genesis-Orange report argues that security and compliance are major barriers to Cloud adoption for African banks.
- Banks using Cloud give up control to the provider over a range of security issues, the report says.
- They may also face the risk of being locked in if they rely on a single provider.
Cloud environments are vulnerable to attacks, both externally and from within the Cloud provider if an insider abuses their position to access client data.
- It’s difficult for banks to monitor whether Cloud providers are compliant with data protection legislation.
- Regulators have concerns about security of data stored in Clouds, and their ability to access and protect that data.
- Financial services providers also need to show that they can ensure service continuity if there are Cloud glitches.
Bottom Line: Security improvement will be a key factor in how quickly Cloud-based software is adopted by Africa’s banks.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.View subscription options