Many African countries have been positioning their economies as major fintech hubs that set them apart from their respective countries.
Thus, each country is trying to review its policy and regulatory environment, establishing a robust framework and supporting infrastructure with the benefit of fast opportunities in the sector. FinTech is the combination of technology and innovation to solve the needs of customers and firms in the financial space leveraging digital technology as an essential tool for financial inclusion. For instance, one of the most successful FinTech solutions is mobile money, which has played a significant role in Somalia’s economic development and inclusion.
Over two-thirds of all payments in Somalia are now conducted through mobile money platforms. Similarly, the banking sector has now seen a fast digital transformation in its digital platforms, mainly Master Cards and Mobile Payments, to better cater to customer needs. New e-commerce platforms have already been initiated to sell products online, and new payment wallets (vibrant innovation features) such as Premier and T-Plus wallets were made available to serve the customers. However, these innovative solutions have progressed, but it’s worth reminding ourselves to leverage further existing opportunities to expand economic opportunities in the FinTech industry.
I will highlight a few necessary steps to be taken which are essential for the development of the sector.
Firstly, fostering vibrant innovation hubs to encourage the prototype of the new products and services; these hubs will help Fintech ideas to test their ideas better to understand the business models of their fintech solutions. It may be useful to support the existing universities’ innovative labs to generate new ideas to reduce costs and improve consumers' lives. Moreover, the government should seek to bring all necessary infrastructure support to make sure the growth of the already thriving Fintech businesses in the private sector while boosting the financial access of small and medium Enterprise (SMEs) to meet their financing needs by coming up with an innovative public-private partnership to create more jobs for the young people.
Secondly, regulatory certainty for the FinTech industry ecosystem is essential. Clearer multiple cross-sectoral regulatory frameworks for FinTech industry-related areas such as Payments & Digital Banking, ICT, and Customer identification are essential in both regulatory and oversight aspects to achieve a well-coordinated national regulatory framework in the Fintech industry.
Nevertheless, to accelerate the pace of this Fintech development, it’s necessary to reconsider the structural and policy issues surrounding these existing national bodies, coordinate them more conducive way and guard against the risks resulting from the policy changes.
How FinTech Industry is being transformed
FinTech Industry in Somalia has taken shape for more than a decade. Still, industry transformation is inevitable as regulatory treatment and policy change across various sectors in the FinTech Industry.
Three essential vital drivers need to be transformed; mobile internet broadband penetration, big data deployment into the business, and the growth of platform ecosystems as a significant new business in FinTech. However, these three drivers reinforce each other as they will together transform the FinTech Industry.
In terms of mobile internet penetration, the latest data from the world bank in 2017 indicates that 73% of Somalia’s population above the age of 16 uses mobile money services; the biggest challenge for this industry is digital transformation, transitioning these large users from analog to smartphones. Therefore, it’s necessary to present how global governments have implemented their digital strategies, Top-down and Bottom-up approaches to digitalization. Some experts indicated that countries at the start of their digitalization journey have greater success if they digitalize top-down. In contrast, countries already down the path of digitalization are better at adopting a bottom-up approach.
The main reason the top-down is preferable in countries like Somalia is that the government creates a more straightforward regulatory framework for data exchange and provides citizens free, compulsory, and universal digitalization. ICT and National Digitalization lie under the responsibility of the Ministry of Telecom, Posts, and Technology and the National Communication Agency (NCA) simultaneously. This requires a national digitalization strategy, and infrastructural development coupled with data protection policies will improve the industry's current status. Secondly, Big data deployment in the industry allows the industry to store and retrieve large volumes of information at a low cost. Lastly, higher internet broadband penetration and big data coupled together should increase the growth of the new platform ecosystem, enabling the country to fully digitalize the consumer services in the current services while boosting new areas of industry demands in the market.
Finally, Somalia has a greater chance in the FinTech industry and presents itself as a country with more benefits for leveraging the existing opportunities in the sector.
Abdullahi Rage[email protected]