THE advent of technology has seen the cost-income ratios of financial institutions coming down significantly over the last five years from around 70% to 30%, a respected banking expert has said.

Presenting a paper at the International Association of Deposit Insurers (IADI) Africa regional committee conference and annual general meeting being held in Victoria Falls, Agrippa Mugwagwa — the managing director of Xarani Private Limited, an FBC Holdings subsidiary — said technology was the future.

“Technology changes customer experience. Obviously, we all pretty much now, I believe, are accessing services through our mobile devices because technology has enabled that. Costs are coming down,” he said.

“When you look at the cost-income ratios of our banks or financial institutions for the last 10 years we have seen them come down and they have been in the 60% and 70% (range) over the last five years but with the application of technologies and new channels we are seeing them coming closer to digitally native banks.”

Mugwagwa pointed out that digitally native banks and Fintechs are using technology exclusively to develop products and services and their cost-income ratio is below 30% and will further reduce as they apply more and more technology.

He said for the financial services industry, African countries had experienced the blurring of industries over the last 15 years.

“Whereas we have always known banking as a stable, slow moving conservative industry, well-regulated from the centre we  also saw adjacent industries coming through to participate in this lucrative industry which was also pretty much protected.

“The introduction of mobile money in 2007 starting off in Kenya and we also saw that coming down to southern Africa to Zimbabwe. We saw quite some significant progress in terms of embracing of these technologies changing particularly access to financial services.

“I think our average access in terms of banking services was somewhere plus or minus 20% pre-2010 and now we are definitely talking about 90% which is quite a phenomenal achievement," he said.

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