Author: Mark Chirwa
Globally, digitalization has been the most significant change in the financial sector in recent years. Banks and financial institutions are increasingly offering online services such as mobile banking, e-wallets, and digital wallets like PayPal, Alipay, and Google Pay. These technologies have streamlined payments, reduced costs, and expanded financial inclusion by providing access to underbanked populations (Tuyon,2022)
In Zambia, the fintech ecosystem has not lagged behind. Several fintech startups have emerged, focusing on services such as digital wallets, peer-to-peer (P2P) lending, and remittances. The majority of fintech services in Zambia are concentrated on the following verticals: (i) developing enabling technologies for the financial sector, (ii) digital payments and money transfer, and (iii) digital lending. There are also emerging players offering services such as savings, microinsurance and asset or wealth management. After digital payments, the second largest fintech vertical is digital lending, with 18 fintechs having fully digitised credit processes (UNCDF, 2023). These startups are often seen as a means to increase financial inclusion by providing easy-to-use digital platforms that cater to underserved populations.
Technology Adoption in Financial Services
The adoption of technology in Zambia’s financial services sector has brought about significant changes that have affected various aspects of performance, including profitability, efficiency, customer satisfaction, and financial inclusion. As the country continues its push towards digital transformation, these technological advancements are reshaping how financial services are delivered and consumed, leading to improvements across the board.
Like many emerging markets, the country has been experiencing a rapid shift toward digitalization in its financial services sector. As the country undergoes economic modernization, the adoption of technology is seen as essential to improving financial inclusion, enhancing the efficiency of financial services, and contributing to overall economic growth. Key trends such as mobile money, mobile banking, digital payment systems, fintech startups, and government-driven digital transformation initiatives are shaping the financial services landscape in Zambia (Ulmasov,2024)
Zambia’s government has recognized the critical role that digital transformation plays in economic development. This is seen in the new legislation that mandates the country’s revenue authorities to tax transactions done on mobile money as a way of widening its tax revenue base.
For some time now, Zambia’s Central bank and other line ministries and stakeholders have implemented a series of initiatives such as campaigns on going cashless and phasing out of the cheque to promoting the use of electronic payment systems, Fintechs etc., All this is aimed at modernizing the financial sector which emphasizes the integration of technology into various sectors, including banking and finance.
The adoption of digital payments has been one of the most significant trends in Zambia’s financial sector. Platforms like Mobile money and mobile banking are allowing users to make payments, transfer money, and access a variety of financial services via their phones. According to the Central Bank of Zambia (2023), mobile transactions grew by 41.8% in volume and by 52.8% in value in 2023 alone. This growth is indicative of growing consumer confidence in digital financial platforms and their willingness to adopt mobile payment solutions.
While mobile phone ownership per household is relatively high, based on the 2022 National ICT Survey report, there is still a significant portion of the population in Zambia that lacks the necessary digital literacy to fully benefit from digital financial services. This includes both the older generation and people in rural areas who may not be familiar with mobile apps or online banking. Although internet penetration is growing, internet speed and connectivity issues still pose a challenge in some parts of the country, particularly in rural and remote areas. The successful implementation of digital financial services requires reliable and fast internet access, which remains a hurdle for many in Zambia.
Challenges and Opportunities for Technology Adoption in Financial Services
While there are substantial opportunities associated with digitalization, there are also considerable challenges that need to be addressed for successful and sustainable technology integration (Parida,2021). These challenges and opportunities are crucial for shaping the future of financial services in Zambia and enabling its integration into the global digital economy. One of the most pressing challenges for technology adoption in Zambia’s financial services is the relatively low level of digital literacy among large segments of the population. While mobile phone penetration is high, a significant portion of the population, especially in rural areas, still has issues of poor or inconsistent connectivity and limited exposure to advanced digital tools like online banking, mobile payments, and digital wallets especially that most of these digital platforms and other fintech solutions require robust infrastructure, including high-speed internet and reliable mobile networks. In areas where internet service is unreliable or slow, digital financial services may struggle to meet customer needs (Ulmasov,2024).
Inflation challenges
In addition to the challenges discussed above, consumer price inflation represents a significant hurdle for the adoption of technology in Zambia’s financial services sector. Inflation, which refers to the rate at which the general level of prices for goods and services rises, can undermine the effectiveness of financial services and complicate the overall economic environment for both consumers and financial institutions. One of the primary impacts of inflation is a reduction in consumers’ purchasing power. As the prices of goods and services rise, consumers may become more cautious with their spending and saving habits. This can lead to reduced demand for financial products and services, such as loans, investments, and savings accounts, which are essential drivers for the growth of financial institutions. In Zambia, where inflation has fluctuated in recent years, the growing cost of living can make it harder for financial institutions to attract and retain customers.
As inflation erodes disposable income, consumers may be less likely to invest in digital financial tools or services, limiting the overall adoption of technology in the sector.
However, it is important to note that inflation also presents opportunities. For instance, fintech solutions like digital wallets, mobile banking, and blockchain-based technologies could offer more cost-efficient and transparent alternatives to traditional financial services, potentially, providing consumers with better options for managing their finances in an inflationary environment. Similarly, digital platforms could be leveraged to offer real-time financial advice, budgeting tools, and inflation-indexed savings products, helping consumers navigate inflationary challenges more effectively even as they adopt digital financial services (Oziegbe,2024)
