Three financial executives talk future of money, banking, and the economic promise of Africa

Joe Kornik: Welcome to the VISION by Protiviti podcast. I'm Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource looking to the future to examine big themes that will impact the C-suite and executive boardrooms worldwide. We're discussing the future of money and its implications globally. And today, we're focused on Africa. We have three outstanding financial executives from across the continent joining us today, and I couldn't be happier to welcome in Charity Chanda Lumpa, member of the Supervisory Board of Oikocredit Netherlands, and VP of the Institute of the Directors of Zambia.

Charity Chanda Lumpa: Thank you so much for having me. Thank you so much.

Joe Kornik: Also joining us today is Sepo Haihambo, executive officer of commercial banking, FNB Namibia, and former head of global markets for Rand Merchant Bank.

Sepo Haihambo: Thank you for having me. Excited to be talking about the future of money.

Joe Kornik: And we're joined by Faith Khanyile, director of companies, and former CEO of WDB Investment Holdings, as well as the former head of corporate banking at Standard Bank Group.

Faith Khanyile: Thank you very much for inviting me, looking forward to the discussion.

Joe Kornik: Well, we've got, believe it or not, more than 75 combined years of finance, banking and business experience on this panel today. So, I'm really excited to get started. I wanted to start sort of from the macro perspective and talk about where we are today, with the many disruptors facing the financial sector right now, specifically in the fintech space, with digital payments and cryptocurrencies, and now, even generative AI is into the mix. What do you think it all means for the future of the industry?

Sepo Haihambo: So, look, I think three things come to mind. I think one, as money becomes more digital, you're going to have greater integration in terms of people's everyday lives and how digital payments assimilate into that. Right now, a lot of it is maybe very business-to-consumer, but over time, it will also become business to business. This is going to mean that as banks, we're going to have to look at faster speed of integration as innovation continues into our existing business models, which means continuous investment and capital expenditure to make sure that we're ahead of the curve, maintaining the existing legacy models, but also building into the future with the investment in technology. So, expensive from an investment perspective, but really going to require faster adoption, given the speed of change.

Faith Khanyile: Maybe if I may add to what Sepo is saying, I also think there will be opportunities to promote more inclusive finance, especially in emerging markets, like, for example, in South Africa and African continent, where we still have the big part of our population having challenges accessing financing, accessing credit. But at the same time, we do have a high adoption of, for example, smartphones. And now, also data is becoming more accessible and more affordable. So, I definitely think that AI, and specifically, fintech, can promote more inclusive financing. And also specifically for small businesses, which require credit, and the old traditional way of accessing credit via banks has been quite expensive and also just not that friendly to small businesses.

Charity Chanda Lumpa: The future I have in mind is trending towards what I think Sepo talked about in terms of digitization. It's more about convenience, making it convenient. I don't know what paper money will look like in the future, if at all, but certainly, digitization is going to run out the number of ATMs that we have because of that particular instance. And even payment systems themselves will continue to be more and more cashless as we go, so that we can see that there'll be more focus on convenience, more focus on inclusivity, and that will also require much more security in terms of our banking systems or whatever system we're going to use, to use money on the global platform, even locally, domestically.

Joe Kornik: Right. And I heard you all in some way, shape or form, talk a little bit about equity. I think one of the promises of the future of money is that it perhaps will create a more equitable global environment for the financial sector. Do you see that as a real possibility and one of the opportunities in the future?

Charity Chanda Lumpa: I think it's a yes and no question, because basically, leveling the playing field would be tantamount to people having the same opportunities, equal opportunities, and equal access to finance. Yes, as much as the level playing field will be there in terms of the mode of using this money digitally, there will be some areas where there'll be less equity than others. And especially when you look at the South-South divide, or the first world and second world, definitely in more African countries, we'll see that cash is more of a leveler than it is elsewhere, where you find that you can't even pay using cash, you have to have a card. You have to have a debit card or a credit card. So, it's a yes and no question, depending on where you are.

Faith Khanyile: Yes. And I think to add, I think we do have to also deal with some fundamental issues around the allocation of capital, because I think right now, we do have issues around the diversity, sort of like the profile of the allocators of capital and then the managers of capital as well. And I guess also within this, we've got still, sort of like old ways of really looking at who gets capital. So, I think technology, fintech alone cannot solve some of those fundamental issues around who is allocating capital, and to whom are they allocating capital. Because I think one of the biggest challenges that globally we still have is that we have not really had the kind of transformation that we need at that level of capital allocation, and capital and fund management, which then can trickle down to making sure that we then achieve equity in the access to finance.

So, I think we do need to deal also with that issue, because then, if we can deal with that issue, then we can hopefully see more equity in who is accessing finance, be it women or small businesses. But I think as long as we don't have that, and then also if we don't deal with some risk appetite issues, I think we will have a challenge. But I think obviously, fintech and technology or the digital revolution will definitely open up opportunities, but we do need to deal with some systemic issues as well.

Sepo Haihambo: So, what I would say is I agree with Faith and Charity that at the end of the day, digital money is still money, so it must be earned. And if the earning potential of the individual, the company of the country isn't enhanced, then it doesn't necessarily increase access. However, having said that, I think with the increase in digital solutions, you're going to have more straight-through processing and real-time settlement of transactions. And this being done by people's cell phones, et cetera has led to new credit models that perhaps wouldn't have been used even five years ago. I've read case studies where they look at the behavioral pattern of when a person buys data for their mobile plan. Are they responsible? Do they wait until they finished every last bit of data and voice time before they top up? Are they very prudent, and like when they’re 50% utilization, they go and they top up, and they’re using alternative credit models that weren't available to us before we had AI as an input into credit models. But ultimately, we still need to solve in tandem, for the quicker, better, faster solutions. We need to, in tandem, solve for the income potential of the individuals, the companies, and the countries, et cetera. Otherwise, you build for a very limited market.

Joe Kornik: I think we're all in agreement that money is going digital. Clearly, the future is going to be some sort of digital currency, which opens up all kinds of new issues potentially. I mean, there are opportunities, certainly, but then there are also some challenges.

Sepo Haihambo: A hundred percent cashless society would need—for that to be adopted, you need that to be government led. So, I suppose there are valid concerns around the privacy, and the conversation will probably be based on the analysis of the positives and the negatives on a whole, and on a balance, what society seeks to gain if we go fully digital with no cash, globally. I mean, like, for example, I think enhanced revenue—tax revenue collection, could be one of the possible gains. But with regards to the privacy concerns, what I find interestingly enough, is that this tends to also be linked to generational concerns. You find that the younger generations from your Gen Z's and below are not as concerned about sharing their data. There's more of an interest in understanding why their data is being taken and what it would be used for, but happy to share the data if there's understood benefit for them at an individual level. So, I think as time moves on, the adoption of fully digital money will probably get easier as the younger generations come into the active economic workforce.

Faith Khanyile: Yes, I think one of the other considerations is obviously, on regulation. I think governments really need to get their heads around how do they regulate this new unchartered territory to protect the privacy of the individuals, as well as, obviously, the data that is being shared.

Joe Kornik:You've all touched on banking, and we have so much banking experience here on this call, I just wanted to ask a little bit about the future of that sector and what do you see as the major challenges in banking.

Charity Chanda Lumpa: I think for me, banking especially is a very highly regulated sector, and that always causes problems for banks, especially when it comes to meeting some regulations that actually negatively or adversely impact the ability to provide great service to customers. So, regulation needs to be measured, because keeping up with these regulations can be a challenge. It's a cost, especially for smaller banks. So to overcome this, a bank needs to implement really robust risk management systems, and also invest in technology that supports their regulatory reporting, but that tends to be quite high. And really, having a proactive stance when it comes to compliance; it's quite a cost in terms of a bank to meet all these regulatory requirements. So, yes, for me, that's one area that I see is quite a challenge for the banking sector in years to come.

Sepo Haihambo: I would add that the significant cost of compliance is definitely a key item, and I agree with Charity on that. And then, you also have the cost of guarding, protecting your client's money because of the cyber risk investment that has to happen alongside with a large capital expenditure, that banks will continuously need to plow into their systems to make sure that they've got fast adoption of new technology as it is developed. It's making the cost of doing business relatively high. So, what I expect you'll see in the next 5 to 10 years is a lot of consolidation. I think we're definitely seeing that in the African banking context. So, lots of consolidation, fewer players, but bigger players because of the cost of business in banking continuing to escalate with compliance and investment in technology required.

Charity Chanda Lumpa: We have seen changing customer behavior and expectations in the face of what we just discussed, security and cybersecurity threats. So, with the increasing trend of technology, digitization of financial transactions or banking transactions, the risk of cyber threats, even data breaches, becomes a really significant concern for banks. And to keep their customership, they must now continue to enhance their security stance, their security measures, and implement stringent cybersecurity frameworks that are not cheap, they're quite costly, and ensure that there's also a very robust, what I would like to call “incident reporting systems,” to allow customers feel that, yes, when it does happen, the bank will be there to help them. But all these are actually quite costly investments for the bank.

So, collaboration is going to be very key between the banks, between regulators, law enforcement agencies in terms of combating cybercrime. And then, customer behavior also needs to be factored in because the banks need to transform their experience of their customers by providing seamless, personalized, and omnichannel services, because really, it's not just in the good old days you go to the bank and then you get served. Now you have to get your banking wherever you are, and mostly, it's on your handset. So, banks now need to adopt a more customer-centric digital strategy when it comes to leveraging the data analytics to understand customer preferences, behaviors, whilst ensuring that they're protected.

Faith Khanyile: Yes. And also, I think the other one is that definitely banks are being disrupted by fintechs. I mean, it's that being disrupted left, right and center. Yes. And you can see, banks are now entering the fintech area, and they've got this legacy systems and costs that are just difficult to dissociate from. So, I think that's definitely—I think that trend has been going on now for the past five to 10 years. So, that is a real reality. But you see banks partnering with fintechs or investing in fintechs. It's actually fascinating to see what's happening in South Africa at the moment.

Joe Kornik: So, Faith, play that out for me, over the next three to five to even 10 years, how do you see that sort of—those partnerships and those collaborations, how do you see those impacting the sector, the industry?

Faith Khanyile: I think the industry is definitely going to be totally, totally different, because it's not just the fintechs that are playing in this sector, we also are seeing telecoms companies also. Because they've got the customer, they've got the data, they really have got the cream that you want, to then offer financial services into this huge untapped market on the continent. So, I think it's going to be a totally—I think over the next 10 years, your traditional banks, like your standard bank, your net bank, they are going to be—yes, I think it's going to be very tough for them because I think they're going to be meeting competition from all angles, from their own clients, from their service providers. So, it's going to be quite different, and I guess the regulations must obviously keep up with the changes. I think what we're seeing in South Africa is that the regulations are a bit sluggish, but that is not stopping innovation. I mean, even retailers are offering financial services to their clients. So, it's going to be a totally, totally different industry over the next 10 years.

Joe Kornik: I wanted to talk about Africa a little bit. It wasn't too long ago that some were predicting that Africa could be the next China, but economic growth has slowed post-pandemic. But key demographic changes still signify a lot of economic opportunity, and since we've got three different countries represented here, I did want to ask a little bit about, from a financial standpoint, from an economic standpoint and its positioning on the global stage, where is the continent today, and where do you three see it going in the future?

Sepo Haihambo: Africa is a very diverse continent. I believe at any given time, there's always pockets of growth in the continent. What you do find, though, I think there is still lots of potential untapped opportunity in the continent. I think following COVID-19, with the supply chain delays that were experienced globally, this trend towards reshoring is making a lot of manufacturers and countries reconsider how they acquire raw materials, which I think is creating more direct demand for a lot of the raw materials that are produced in Africa, and also the move towards renewable with these rare minerals that are required for batteries, like lithium, as an example. So, I think from that perspective, there's definitely another growth wave that will come through in the African context.

And then you've got the added complexity of these conversations around the dollarizing trade in Africa, which then could also be very beneficial towards the value of these African currencies. And then, at the same time, you've got African leaders coming together, having a conversation about the Africa free trade continental agreement, which would enhance trade, South to South trade on the continent. So, I think those opportunities do exist, but it would be irresponsible for me not to highlight, though, that the issues and the challenge in adopting new technology is being outpaced by the speed at which we're developing our skills and infrastructure to be able to support that future. So, it's almost like the two things need to happen in tandem for that full potential of the continent to be realized.

Faith Khanyile: Yes. I mean, I think, to say, first one, the opportunities are definitely still there. And I think if we look at the latest AFDB Africa economic outlook for 2023, it's very clear that Africa has definitely been resilient. Again, here, we need to understand that Africa is not one country, but just a macro. The continent has definitely been resilient post-COVID, and the economic growth has recovered completely. I think for 2023, the growth is still projected to be just close to 4%, actually—I have not seen the latest IMF outlook, but that was from the AFDB. And then, for 2024, the continent is projected to grow by 4.3%. And then, we talk about, obviously, the population and the youth dividend, those opportunities definitely have not gone away. But obviously, I think we've had headwinds due to the war in Ukraine, which has led to high food and energy prices. Most of the countries in Africa are battling very high levels of inflation, then we've had the increasing interest rates in the U.S., and the strengthening of the U.S. dollar have definitely impacted those countries that have borrowed heavily from, using U.S. dollars. But I think the key opportunities right now, actually, that we need to leverage as the continent revolves around what now is being termed the “green economy.” And then, I mean, the numbers are just staggering. I mean, apparently, the opportunity ranges anywhere between $2.6 trillion to $2.8 trillion that is required by 2030 to take advantage of this green economy. Anywhere from investing in renewable energy, investing in water infrastructure, obviously, health and education, are still big opportunities on the continent.

 

Charity Chanda Lumpa: Africa is the happening place. I think all major developments will take place in Africa, if I can say so. Why? Because we have a very youthful population in Africa, a growing middle class, and we have abundant natural resources, increasing urbanization, which may be good or bad, depending on how you handle it. All these actually are significant opportunities for economic growth in the next five to 10 years. We need to make progress as Africa at both country and continental level in terms of infrastructure development, because as we have seen across Africa, many countries are investing heavily in infrastructure development, which will include energy transportation, the green economy that I think Faith was just referring to, and telecommunications.

 

But we also need to improve connectivity to facilitate trade and ensure that we attract direct foreign investment. When you look at Africa right now, just across from Zambia to Malawi, I had to go to Johannesburg. Okay? So, that interconnectivity is not dead. For me, I cannot jump on a flight to then go straight to Nigeria, for example. I have to hop onto another flight, get to another airport, and sometimes even go to Europe to come back down to Africa. So, interconnectivity needs to be sorted out, especially when it comes to regional integration. In order to boost our inter-African trade and increasing investment flows, that will foster economic cooperation.

 

If we can also ensure regarding renewable energy investments, that this focus in Africa should be driven by the need for sustainable development in terms of wanting to mitigate adverse climate change developments. As you know, we have vast renewable energy potential, especially in solar, wind, and even hydroelectric power.

So, I think Africa is the happening place. Really, our economic trajectory is going to be influenced by a lot of combinations, such as domestic and global factors, and with the right leadership. I can't overemphasize that. We really need bold leadership that will look inside Africa for African solutions that will be provided by Africans within Africa, with as much help as they can get. But really, we can't keep running to the first world for help when we have significant resources, both human capital and otherwise, on the continent, that can come up with African solutions.

Joe Kornik: Faith, Charity, and Sepo, thank you so much for your time today. I really appreciate the conversation.

Charity Chanda Lumpa: Thank you, Joe. It was really good talking to you.

Sepo Haihambo: Thank you so much for the opportunity.

Faith Khanyile: Thank you very much for the opportunity. Thank you.

Joe Kornik: And thank you for listening to the VISION by Protiviti podcast. Please rate and subscribe wherever you listen to your podcasts, and be sure to check us out on vision.protiviti.com for all of our content around the future of money. Thanks for listening. On behalf of Faith, Sepo, and Charity, I'm Joe Kornik. We'll see you next time.