Digitalisation of Financial Systems: An enabler to 4th industrial revolution in Africa

The contribution and role of Africa through the past three industrial revolutions might have gone unnoticed or ignored due to many factors. With the 4th Industrial revolution, it will be difficult to overlook the role of Africa. Because: 

• Of its potential skilled workforce
• Its growth in digitalisation
• Good governance structures
• Natural resources

The 4th industrial revolution is estimated to have started between 2015 /17 – to Present. It is mainly characterised by the Internet of things, Machine learning, Networking, Big data, Artificial intelligence, and Blockchain transactions architecture. Of importance to this article is the blockchain transactions Architecture. Africa’s contribution was ignored and went unnoticed. 

Africa had indirect contributions, such as the provision of the workforce, both skilled and unskilled. In the 4th industrial revolution, Africa seems to have caught up and is rising to the challenge. Their state leaders have submitted a report titled “The future we want for Africa 2063”, setting the pace for Africa. In this article, we will look at the role of Africa in the 4th industrial revolution. The major focus will be on the Digitalization of the financial sector in Africa. Emphasis will be on payments, E-commerce platforms, and digital currencies. 

Digitalisation

Digitalisation refers to the spread and use of digital technologies such as the internet and mobile phones to collect, store, analyse, and exchange information digitally. The two major aspects of digitalisation include; 

• Digital connectivity
• Digital depth

Firstly, digital connectivity includes accessing and using technologies to connect to the internet and share digital information. Secondly, digital depth means the extent to which economic activities, transactions, and policies are becoming digital. If we look at the use of mobile phones, it’s clear that there is significant growth in Africa, with a penetration of about 50%. This could explain why mobile payments quickly overtake traditional payment methods and most Africans remain unbanked. The traditional financial institutions have been forced to rethink and forge new ways to include the majority of Africans who want to remain incognito in their payment methods. 

The internet of things

The Internet of Things (IoT) was a major catalyst in the 4th Industrial revolution. The financial sector has revolutionised into easy ways for people to open and save with them. The use of Artificial Intelligence comes in to ensure that their potential customer data is correctly captured. Using biometrics, facial recognition, and speech apps, the traditional manual data capturing of information is done away with. 

Unlike the 2nd and 3rd industrial revolutions, the 4th industrial revolution is different as new markets are introduced. A potential customer can now open a bank account and deposit money from the comfort of their home. Moreover, fast and efficient payment methods and systems are also a result of digitalisation. The world is now a global village. This means that trans-border trade and transactions are becoming very common. How, then, does digitalisation come to solve the problem.? A look at business and trade as a unifying agent of globalisation concludes that having efficient payment methods and systems encourages trade. 

Trans-border Transactions

Think about a trans-border transaction that involves individuals in different parts of the world. One is a customer, and the other one is a supplier. To ensure that goods are delivered within the shortest timelines, the customer must look for the fastest route with the shortest customs clearing. On the other hand, the customer is looking for a supplier who will deliver their goods faster and in the most affordable way. 

They will therefore go for a supplier who has an online presence. One whose shop is re-known and has good customer reviews is a supplier who has embraced e-commerce. When they think about the payment, they want a supplier with multiple ways, i.e. cashless, to receive his money. We cannot talk about the digitalisation of payment systems without talking about cashless systems and Peer to Peer platforms. 

How can we talk about cashless transactions without mentioning the revolutionary mobile money in Kenya Mpesa? With the advancement of technology, financial systems have rethought the forms of payments that financial institutions can accept. Most critical and yet controversial are cryptocurrency and digital coins. While cryptocurrency and digital coins are widely used and accepted as a form of payment in the western world, Africa seems to be lagging. This is because of its policies and the slow speed of technological advancements. Its uptake and usage need to be further encouraged from a policy and governance point of view. Although the digitalisation of financial systems plays a major role in the 4th Industrial revolution, it also comes with numerous pros and cons. 

Cons side-walking digitalisation

The major cons of digitalisation include the following: 

• Data security problems
• Cybercrimes
• Social isolation
• Diminishing job opportunities as a result of automation
• Fourthly manipulation of digital media and data
• Plagiarism and copyright

In conclusion, African leaders are working hard to ensure that this time, Africa will be counted as an enabler of its disruptive nature to the economy; how they are doing this by first acknowledging and creating opportunities. Secondly, by strategically placing their countries as major beneficiaries of the industrial revolution. These will ensure that Africa will rise and thrive in a technologically-intense industrial revolution.