Barclays, a British banking giant, has exited the African market after selling its remaining 7.4% stake in Absa, a South African bank. It made a voyage into Africa about a century ago. While many interpret it that Barclays wants to refocus in the UK, Europe and the US, my thesis is simple: the African banking market is super-competitive for it. So, over the years, it has been cutting its footprints, including selling investments.
In the US, I do not have a banking app. Why do I need to install a bank app? To do what? The web app works perfectly and new innovations can only add marginal value. In other words, the system cannot be radically changed easily. But in Nigeria, changes happen quickly and can get a bank off the chart.
Diamond Bank pioneered mobile banking, it is no more. GTBank invented the web app banking, but that seems mundane when you look at the current numbers. My point is this: the rate of adoption of new technologies in Nigeria is so much that anything can happen.
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In that world, a bank with a British gene which like the US does not need that level of transformation will struggle. Refocusing means you are not doing well in your current place. Do not take for granted the changes which are happening in African banking. You cannot afford to sleep.
In the US, I am not aware of any USSD banking. And even if someone does it, it will not mean much since in the grand scheme of things, it would not add much value. But in Nigeria, if you do not have it, you would be scoring an own-goal.
Yet, for all the competitions in African banking, it is merely transactional. The real spirit of banking – lending – besides keeping deposits, must be elevated for banking to hold its space as an enabler of economic wealth.
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Comment 1: I agree. Banking in Africa is very competitive for traditional banks like Barclays to survive. Recall that in years gone, Barclays used to be an elite club, where you had to have someone with an account there refer you before you could open an account; this was the case at least in Kenya. Then came Equity Bank, and all the other banks that liberalised the financial landscape in Kenya and Africa, by providing access to everyone, including that initially forgotten street vendor. The African banking landscape is indeed very competitive for some of these western institutions to survive without a shift in mindset.
Comment 2: The transactional value of the African value as you noted does not amount enough that would motivate Barclays to remain in Africa.
We only hope that our banks would up their activities to what actual banks are supposed to be doing like in the US, EU and UK.
Comment 3: Barclays exited the partnership they had with Absa. Barclays is still in the African market, this time they are going it alone.
My Response: Maybe but even from your link, it does not seem so. You may still see Barclays logo but I am not sure. Check “Absa Group Limited’s Barclays-branded subsidiaries operate in seven Sub-Saharan African countries including Botswana, Ghana, Kenya, Mauritius, Seychelles, Tanzania, and Zambia.” Logic has it that if it has exited ABSA, that means it cannot claim ownership of those subsidiaries since they are owned via ABSA even though it is paid a fee for the use of its trademark, etc. If A owns 7% in B and B controls d, e, f, g. If A sells its portion in B, it cannot claim to own those d, e, f, g even though they operate with its trademark. Sure, I may be wrong but nothing in your link shows it is still expanding in Africa!
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Our banks are competitive in the tech side of things, but still lack capacity in the banking side of things. The banks are too small to get involved in big stuff, the balance sheet is not just there. Lending is also a function of deposits, so if the deposits are not getting fatter, the lending side will stall.
The more embarrassing side is settlement on international trade/transactions, their balance sheets put a cap on things they can participate in, even with presence of corresponding banks in other jurisdictions.
For now it’s still like esusu and money transfer services, we are yet to get a foothold in the real banking universe.