In recent years, mobile banking and mobile wallets have gained outstanding popularity in many countries in Sub-Saharan Africa. As the majority of the population in Sub-Saharan Africa is using feature phones – devices with no smartphone capabilities – banks in the region tend to offer USSD and SMS-based mobile banking and mobile wallet solutions, and do not treat smartphone banking as a priority.

Are USSD and SMS banking good enough for consumers in Sub-Saharan Africa, or should banks treat smartphone and tablet banking as a priority?

Digital banking for high net worth customers

Smartphone penetration is highest among the affluent and high net worth segments around the world, and the majority of bank customers in this segment in Sub-Saharan Africa already own smartphones. These customers are very important to banks, as they are more profitable for banks than the mass market customer segments. As affluent customers are more likely to switch from traditional banking channels to digital banking, banks have to make sure that they can offer a competitive smartphone banking solution to these customers. A well-designed and intuitive smartphone banking solution that reduces consumers’ time and effort carrying out tasks will improve customer experience among the high value customers. This translates into lower attrition rates, and can also be used to engage new affluent and high net worth individuals.

According to CEB, affluent and high net worth customers tend to purchase more banking products via online channels than other segments. As complex sales processes cannot be conveniently enabled on SMS or USSD banking, banks with no smartphone solution cannot maximize revenue coming through the online channels. However, banks offering a smartphone banking solution – incorporating seamless sales processes – have the potential to increase their revenue through their online channels.

Addressing the mass market

Trends also indicate that smartphone adoption and mobile broadband subscriptions will exponentially increase in the mass market segment in Sub-Saharan Africa. Smartphones are becoming increasingly affordable, and the number of mobile broadband subscriptions on the continent is expected to grow strongly. These changes will have a major impact on smartphone banking adoption in the mass market segment in the region.

To accelerate this process, banks can also provide microloans to enable their customers to buy or lease smartphones with the bank’s smartphone banking app pre-installed on the device. A good example is a microfinance organisation Grameen Foundation in Uganda that is leasing smartphones to local farmers so that they can receive information – such as seasonal weather reports and planting advice – on their devices.

Banks can also provide access to smartphone banking services to customers with no smartphones or mobile subscription by opening self-service areas in bank branches, using tablets installed with the bank’s smartphone banking application. This will enable any customer to get access to smartphone banking services and to perform transactions even after branch opening hours. Self-service areas can also help branch staff to focus on selling instead of servicing, as they can direct customers to self-service areas to perform simple transactions.

A successful smartphone banking strategy

To differentiate their solution from USSD and SMS banking services and to provide added value, banks deploying smartphone banking have to make sure that they offer outstanding usability and a range of innovative services – such as integration with social media – which cannot be achieved through USSD and SMS banking solutions.

Smartphone banking can become a primary sales channel for banks – both reducing cost-to-serve, whilst increasing customer satisfaction. If financial product promotion can be seamlessly integrated into consumers’ lifestyles – drawing on data analytics to promote the right product, to the right customer, at the right time – this will turn banks into useful and credible financial advisors. Banks can also generate leads for more complex products that can be handed over to the branch – e.g. gathering a lead for a mortgage application on the bank’s mobile banking solution.

The trends in Sub-Saharan Africa indicate that banks can benefit by developing a smartphone banking strategy. Early adopters of smartphone banking solutions will have first mover advantage and get a foot ahead of the competition, gain significant benefits in customer acquisition, retention and online sales.