This is an excerpt from the
Future of Embedded Finance in Africa 2025 report.
Embedded finance looks primed for continued growth throughout Africa. As it does, there will be increasing opportunities for financial services to personalise their services and give users the best financial products for their needs.
Personalisation is at the core of embedded finance. As its use becomes more commonplace, consumers will expect that products offered to them can be tailored to their personal financial requirements and wellbeing.
In this context, it is important to look at the different areas which can be used to bolster personalisation in embedded finance, namely data driven insights, artificial intelligence (AI), and digital IDs.
Data driven insights and African Open Banking
Data is at the centre of any form of personalisation within the financial sector. Outside of Africa, open banking legislation and infrastructure have been revolutionising the ability to shape financial products for customers.
Rajesh Savji Parmar, founder and CEO, Indelible Inc. commented: “Open banking can also aggregate and use data effectively to target customers with relevant products and services.”
However, open banking in Africa is still in nascent stages, faced with the distinctive issue of large sections of the population remaining unbanked. This varies dramatically by country, for example, the IMF found that in Sound Sudan only 6% of the population
have a bank account, while in Kenya it is 79%.
Despite this there are those which are attempting to drive open banking in the continent. Some countries are at the front of this effort, The Central Bank of Kenya included setting out standards for APIs in its
five year digitalisation plan and in Nigeria open banking is being advocated for by
Open Banking Nigeria.
There are also African fintechs which are driving open banking, such as Okra, Stitch, Mono, and OnePipe. Yet, there are also African companies who are looking to alternative data in order to provide personalised products to customers.
Parmar brought up the case study of Branch, a personal finance app which originated in Kenya but also operates in Tanzania, Nigeria, and India. Branch takes a somewhat different approach when it comes to their loan applications, Parmar noted the company
is “using social media to profile mobile users in order to understand if they are credit worthy.”
When applying for a loan with Branch you provide a national ID, a mobile money account, and your Facebook or mobile number. They will request access to an applicant’s mobile data determine eligibility. Further, on their FAQs, they state that if you are rejected
from an application they encourage users to continue downloading mobile data and apply at a later date.
This is an example of African fintechs being innovative in how they get their data. If this example were applied to an embedded finance context, Branch or others like it could be able to provide incredibly tailored products on third party platforms.
AI, generative AI, and personalisation
AI and generative AI add an important layer to personalisation in embedded finance. Data is the backbone for allowing this to work, but AI will be essential in creating real-time personalisation for consumers.
Parmar commented that AI can be used in embedded finance personalisation through “user habits and data farmed for better targeted marketing.” It would not be possible for financial services to offer analyse all customer habits and data – from whichever form
they are gathered – and be able to instantly offer them products which are best suited and tailored to them.
Given the sheer number of transactions, it will be essential for companies who wish to use personalisation in embedded finance to deploy some form of AI or generative AI across this.
However, adding to this is the possibility of AI and generative AI providing consumers with better financial decisions. Parmar noted that AI and generative AI can enhance embedded finance personalisation through its ability to offer “advise on how best to
manage finances and improve spending habits and budget.”
Digital IDs and verification
Digital IDs offer an additional layer of personalisation within embedded finance, as well as the ability to verify the identity of the customer.
During a
webinar for the United Nations Economic Commission for Africa (ECA), William Muhwava, chief of the demographic and social statistics section at the African Centre for Statistics, stated that about 542 million people in Africa do not have a formal identity
card. This means that the tracking of an individual’s financial data can prove to be even more difficult.
In the same webinar, Mactar Seck, chief of technology and Innovation, ECA stated that digital IDs can be used to make payments, and will increase financial inclusion by allowing greater access to financial services.
Nigeria is a country within Africa which has already begun the roll out of digital IDs throughout their population. The scheme is under the National Identity Management Commission (NIMC) and users receive a National Identification Number (NIN), which have
biometric details integrated.
NIMC report that they have issued over 109 million NINs to Nigerians and residents. However, the progress of this initiative has proved slow, having begun enrolling citizens in 2019, and marred by
data breaching allegations.
Parmar points to fintech companies which are creating solutions to fill the digital identity gap in Africa and aid in the number of unbanked people. He stated: “Companies like Paycode have already rolled out ID Verification (IDV) Cards with GhIPPS in Ghana
which enabled two million e-zwich cards to be distributed. IDV, as long as the fingerprinting technology can cheaply capture information especially in rural areas, is vital.”
Creating better client stickiness and loyalty
As fintechs in Africa continue to grow and expand, they will begin to see that the best things they can offer for clients is products which are malleable to their needs. This will encourage clients to become more loyal to their brand.
This is an issue identified by Rajesh Savji Parmar, founder and CEO, Indelible Inc., who stated that one of the ways African fintechs can improve personalisation in embedded finance is through “better marketing and UI/UX to address the issue of loyalty,
onboarding and retention needed.”