In banking, a payment solution is the one service that will have more impact on the day to day life of a client that anything else on offer. And yet because the business of electronic money is a complicated one, not all banks on the African continent offer this essential service to their clients. This is an omission that could prove costly.
While you’re reading this, electronic transactions are happening everywhere in the world. For instance, on the African continent, customers are withdrawing cash from Automatic Teller Machines (ATMs) or effecting Point of Sale (POS) purchases at this very moment. While there’s nothing extraordinary about this fact – ATMs and POS have become increasingly a part of our lives – what’s remarkable is that a number of those ATM and POS transactions are being processed in a data centre in Mauritius by the MCB Group. As we speak.
This is happening in 16 countries across Africa. 22 banks have so far outsourced their payment solutions to MCB Group’s International Card Processing Services (ICPS), a pioneer in processing payment solutions in the region. The number of partners – because the Bank of Banks initiative is after all about partnership – is set to grow as more banks make the choice of reducing their costs to allow for greater profitability.
ICPS was created in 2008 when MCB Group understood that more than 30 years of experience in the cards business had given its cards department an edge – a foolproof understanding of the payment ecosystem, the do's and the don'ts and especially how to make it work financially. It has also given them first-class know-how in secured back-end processing, which is now ICPS’ main activity. Today MCB outsources all its card processing activities to ICPS.
“We already had the system – the back office – and while this allowed us to deal with MCB’s transactions, we realised that there was so much more we could do”, Khevin Seebah, ICPS’s CEO recounts. So MCB Group, in line with its vision of openness, decided to leverage on the excess capacity it had in-house by sharing this experience with other banks while at the same time helping them avoid the pitfalls. The aim is to make the process smoother for them.
“Helping other banks avoid the pitfalls”
The offer is really quite unique because it makes the whole process easier; having an in-house card operation is expensive and if it’s not properly managed, the operations will eat into a bank’s profit.
Setting up a full-fledged in-house card processing unit is a complicated procedure; it requires investing in people, processes and systems.
“It also requires a deep understanding of the revenue and cost levers so as to run a profitable and sustainable payments business. And this is the business we’re into,” Stephanie Ng-Tseung-Yue, Head of Cards at MCB, says.
"Sounds too good to be true? It’s not!"
The best news? “We can do it all in Mauritius. Not only for a fraction of the cost but also by sharing our hard-earned knowledge, based on past experience,” Khevin adds.
And if that sounds too good to be true, Khevin says it’s not. It makes business sense for MCB Group to help its peers with readily available technology and know-how. The Group has never made it a secret that its ambitions to expand meant a stronger presence in Africa, a continent MCB Group knows and understands.
“Banks in Africa generally want to understand what exactly they will gain from using our platform. Our answer is straightforward: it brings them added value, economies of scale and more profitability”, Khevin says, adding that the situation currently in Africa is that while many banks don’t actually have card departments, “many that do, have units that aren’t profitable or that aren’t being managed properly. They can change that situation by using our system and letting us manage it for them”.
Stephanie explains that in retail banking, “an efficient payment solution is the one thing that has the most impact on the day to day experience of the client. People make payments every day and they need a simple and safe way to do that”. Adding that the emerging middle class in Africa is traveling more and more and that “their banks need to be able to provide them with an international mode of payment”.
“The same platform that processes card transactions, also processes other payment solutions”
And while the debate about how long “plastic” (cards) will be around goes on, Khevin maintains that the progress in terms of card usage will not go down for at least another 10 to 15 years, aligning with Stephanie’s view that ultimately, it doesn’t matter. “A card is just a unique 16-digit number, that allows you to make a payment. The front end can be a physical card, a virtual card or a card embedded in a phone but behind the scenes, the same payment rails are being used,” says MCB’s Head of Cards.
So this doesn’t change much to ICPS’s offer because payment transactions need processing and it’s the same platform that processes card transactions that also processes other payment solutions such as mobile ones.
“That’s why we call it payment infrastructure rather than just simply refer to it as cards. Payment solutions are something that banks can ill afford not to offer”, Khevin says adamantly.
He adds that some banks in Africa are only still offering proprietary cards. While this is a solution of sorts for banks, it hinders growth in the medium and long term because its usage is limited to ATMs and POS owned by those banks. “ATM cards do not bring money to a bank. In fact, it comes at a cost”, Stephanie points out.
“Security is a big component of our offer"
Khevin is adamant that “those banks will also have to migrate to a card network at some point, if they want to grow and we’ve got the right relationship with those card networks, something that they can also benefit from.”
And as importantly, digitalisation has come with its challenges, the biggest one to date being credit card fraud.
“A bank needs to be able to reassure its clients and make them secure in the knowledge that the processing system is foolproof. Security is a big component of our offer as are charge backs (dispute resolutions); those are important issues that can prove costly if not managed properly”, he says.
The business of electronic money is a complicated one. Especially, it is one that does not sleep. “It’s a 24/7, 365-day business. It’s a tough business. But we know how to do it. We process over 7 million transactions a month, we’ve got more than 100 trained people working for us and together we have issued over 5 million cards. So let us share our experience and see how we can do it together”, Khevin concludes.