How Zambia’s Banks Can Thrive in Challenging Economic Times

By Mildred Stephenson, Chief Executive Officer TransUnion Zambia 

Zambia’s financial services industry is currently facing a perfect storm of challenges – and it’s increasingly turning to data and insights to not only survive the economic headwinds, but to thrive and deliver growth in the face of adverse conditions.

The industry continues to face challenges and economic headwinds. Growing revenues, reducing risk, managing a rise in non-performing loans (NPLs), accessing new audiences and driving greater financial inclusion, addressing the growing problem of fraud without affecting the customer journey are only some of the challenges we will continue to face as 2023 unfolds.

In the current economic climate, many customers are in distress. However, financial services businesses are still being pushed to deliver growth. The obvious pockets of growth are underserved markets and Small Medium Enterprises – but the problem is that not only is everyone eyeing the same market, but they represent elevated risk and higher cost of acquisition.

The answers to many of the current challenges lie in the data. It’s quite possible to grow your business, access new audiences, reduce fraud and manage NPLs at a time when the world is digitising. You just need the right analytics and insights. Data-driven lending and decision-making is essential to the success of any modern financial institution.

The age-old dilemma for banks in Zambia has been that while it is relatively easy to create a credit profile for someone who is employed or has a formal business or already uses formal credit products, many consumers are still operating in the informal sector. They have houses, and many have some money, but they are credit-invisible, to all intents and purposes.

The challenge lies in identifying the people who have been credit-invisible until now, and then putting a number in the form of a credit score on that person through the smart use of data, insights and intelligence. But this could be the biggest opportunity facing the sector right now. If we bring more people into the financial inclusion net, it doesn’t just change their lives, but it’s good business too.

Before they reach new markets, though, financial institutions would do well to get a better handle on their existing customers. Often, a consumer deposits their salary into Bank A, has a credit card with Bank B, and a car loan with Bank C, without any of the three institutions having a view into where they can cross- and upsell.

The most important channel to reach new and existing markets lies in creating products and services that can be accessed digitally, but this brings its own set of challenges. More than ever, Zambian financial institutions and businesses need to protect themselves and their customers from fraud, while continuing to provide a seamless customer experience.

As we accelerate the shift to transact online, fraud is shifting digitally as well. Businesses must give their customers the smoothest possible onboarding experience on digital channels, but traditionally fraud detection gets in the way of this.

Digital Onboarding helps businesses offer greater digital access to products and services, while addressing fraud threats. It delivers a friction-right experience that includes combining digital and physical identity establishment and verification, while increasing conversions and loyalty, reducing fraud, and improving operational efficiencies. The service is delivered via a single API that significantly reduces integration time and effort for financial institutions.”

In this new banking and credit landscape, risk-based pricing is becoming an industry standard. Lenders increasingly require deep insights into their customer base and general market trends to develop and implement appropriate pricing strategies across products and consumer segments. Identity verification, fraud prevention and collections solutions will assist in managing risk and optimising growth throughout the portfolio.

To adjust to the new market conditions, lenders must evolve their ecosystems and take a more insight-led approach to customer segmentation. Digital lending platforms allow lenders to automate the decision-making process and assess risk more accurately while creating a superior customer experience. A single integrated digital lending platform ensures lenders can run the customer application through background checks and verifications instantly, and auto-decisioning ensures customers can get a response almost immediately.

Source: Transunion