APIs Bridge FinTech Infrastructure and Bank Regulatory Expertise

Regulatory frameworks such as the European Union’s Revised Payment Services Directive (PSD2) have played a critical role in the implementation of open banking, forcing retail banks in the region to make customer account information available to FinTechs and nonbank third parties through the use of application programming interfaces (APIs).

But even without legal mandates like PSD2, banks are taking proactive steps to build win-win models for bank-FinTech collaboration through APIs.

Pan-African bank Ecobank is one of the financial institutions (FIs) in Africa working towards this goal, Djiba Diallo, the bank’s FinTech lead, told PYMNTS, by enabling FinTechs and other tech partners to access and experiment with Ecobank’s APIs through the bank’s pan-African Banking Sandbox.

According to Diallo, the sandbox is part of Ecobank’s open banking strategy, which wants to enable “FinTechs, third parties, telcos and any other company that would like to provide innovative digital payment solutions to their customers, to partner with us very easily.”

Related: How Telco APIs Are Enhancing Africa’s Mobile Money Ecosystem

And although much has been said about how the emergence of neobanks and new FinTech entrants is threatening the dominance of incumbent players with solutions that are often cheaper, faster and more efficient than traditional banking transactions, Diallo is of a different view.

“When the FinTech revolution started a few years ago, there was a lot of great talk about FinTechs being the main competitors of the banks in Africa and taking our market share,” Diallo pointed out, “but what actually happened, it’s a different story.”

She said Ecobank’s approach has been to view FinTechs not as competitors, but rather as partners in a win-win relationship where both sides leverage their strengths for mutual benefit.

For banks, they can extend the reach of their services through the wide reach of FinTechs,  while banks can provide “an umbrella that [FinTechs] need to operate in the [banking] field,” she explained.

Related: FinTechs Solve Nigeria’s Financial Inclusion Challenge

A Win-Win Bank-FinTech Model

Diallo pointed to a recent partnership between Ecobank and Togolese mobile money firm Semoa as an example of a bank-FinTech collaboration.

To allow its users to load and cash out their mobile money wallets, and to receive transfers from friends and relatives, Semoa operates a network of agent bankers — microentrepreneurs who have been critical to the success of African mobile money adoption so far.

But a significant limitation to the agent banking model is that it relies on people being able to reach an agent when they need to access financial services, not to mention the security risks of needing to withdraw cash at odd hours of the day, or even on a public holiday when Semoa’s agents are not available.

To work around this limitation, Semoa has tapped Ecobank for its Express Cash API, and with that integration is now able to leverage Ecobank’s infrastructure to offer withdrawal services to its customers at any Ecobank ATM or Xpress Point.

Beyond mobile money, using APIs to foster bank-FinTech collaboration is also contributing to the growth of a new generation of digital-first neobanks.

On this front, Ecobank has built the Express Account API which allows mobile banking apps to offer a range of banking services via their own platform at the front end, while Ecobank acts as the back-end account provider.

Related: Instant Payments Set to Boost Intra-African Trade by $5B Annually

Through this initiative, the pan-African conglomerate, present in 30-plus countries across the continent, is able to support the creation of local banks through its “banking as a platform” business model. This model, per Diallo, allows Ecobank to connect the dots between FinTechs in different localities and focus on its central mission of enabling intra-African trade.

Read on: Ecobank Says Africa’s Payment, FinTech Future is Bright

And with 10 APIs already live and counting, Diallo said she is optimistic about the future of the African FinTech ecosystem and Ecobank’s ability to support it.

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