Business and operating models

The complexities of doing business in Africa are stark in financial services. Faced with rapid technological change, growing competition from non-financial service providers, shifting national policy and regulation, and significant economic headwinds, retail banks and insurers have to work hard to create value for their stakeholders. A key to unlocking this value is to apply structured thinking to what business and operating models are best suited to the African context.

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Expertise Areas

Business model advisory

We have been assisting banks and insurers across Africa and the Middle East for over 20 years to make strategic business model choices in response to shifting market conditions. During this time we have learnt the importance of understanding what works in a given market, customer or industry context and applying this knowledge to help our clients approach new opportunities. Our approach to business model advisory is therefore to understand the suitability of our client’s existing business to capture value from new opportunities, or from industry and regulatory developments.

Operating model design

A complementary proposition to our business model advisory expertise is the support we provide to financial sector clients in identifying and developing responsive offer, operation and sell-and-serve strategies. Where we add value is in understanding the intersection between our clients’ current capabilities, the market context of financial services in Africa and the operational capabilities that are required for organisations to deliver on new opportunities.

Capabilities mapping

Our comprehensive understanding of value chains within financial institutions enables us to identify capability needs that are required to deliver on new businesses cases, value proposition designs or new solution architecture. We define all the required capabilities whether they are people, processes or systems based, and we are also able to provide investment advisory support to clients that are considering whether to build, buy or partnering to acquire these capabilities

Cost allocation models

We work in partnership with our clients to design, build and implement activity-based cost allocation models, ensuring that their businesses can effectively track profitability at all levels of their organisation. Our approach to cost allocation involves a combination of project management, focused on close engagement with stakeholders, and independent data analysis aimed at linking costs to specific activities and relevant cost-drivers.

Projects

Debunking financial and non-financial needs of MSMEs in Africa

Project name:
IFC MSME Insights Studies across the continent

Service:
Market analysis and positioning

Sector:
Financial services
Corporate and Investment Banking

Client:
International Finance Corporation (IFC)

Date:
2019 - 2020

Country:
Angola
Burkina Faso
Cote d'Ivoire
Kenya
Rwanda
Senegal


Micro, small and medium enterprises (MSMEs) are recognised across the world as drivers of economic growth and employment. It is estimated that MSMEs accounted for most businesses on the continent, contribute over 30% of total gross domestic product (GDP) and are the highest employers per country.

However, in spite of their economic significance, most struggle to obtain finance because of a combination of demand, supply and infrastructure constraints. Information and skill gaps, as an example, rule out MSME owners from accessing bank loans. Large commercial banks find it more profitable to serve commercial businesses and are hard pressed to extend finance without recourse to traditional collateral. Therefore MSMEs continue to lack sufficient access to finance, particularly to meet their capital needs.

The financing issues affecting MSMEs are not new and are well documented. The broad MSME landscape is also relatively well documented through national surveys by governments and/or development agencies - however patchy and outdated these may be. What is missing in the local literature is a deeper insight of the profile and behaviour of MSMEs, and of the constraints facing bank and non-bank financial institutions from adequately financing these riskier businesses.

In this context, the International Finance Corporation (IFC) identified a need for market-wide research on the MSME finance market and landscape in six countries on the continent. This would serve to ground its investment and advisory support to financial sectors. These countries were Angola, Burkina Faso, Côte d’Ivoire, Kenya, Rwanda and Senegal. To this end, the IFC commissioned Genesis to carry out this market-wide research of the enabling environment, market size, demand for MSME financing and constraints of financing in each country.

The review of the operating environments was carried out through in-depth political, economic, social, technological, environmental and legal (PESTLE) analysis in relation to their impact on business and financing operations.

Next the Genesis team developed demand-side insights on the structure of the MSME sector and MSMEs’ demand and uptake of financial and non-financial products and services. An example of non-financial products and services are business development training. These insights were developed mainly through primary research involving surveys with over 100 MSMEs per country, and additional in-depth interviews with MSMEs.

Lastly, the team estimated the current amount of financing to MSMEs by different financial service providers. This also involved identifying the key supply-side challenges limiting additional financing. This was carried out through evaluating central bank and financial service provider annual reports, financial service providers product and service catalogues, stakeholder interviews (with financial service providers, government agencies and development agencies) and secondary research.

The research findings were drafted into per country reports and presented to the IFC teams and other relevant stakeholders.

Cloud-based solutions could reduce banking costs in Africa

Project name:
Opportunity for cloud banking in Africa

Service:
Business and operating models
Financial inclusion
Digital financial services

Sector:
Financial services

Area of Expertise:
Tech governance and competition

Client:
The Bill & Melinda Gates Foundation

Date:
2019 - 2020

Country:
Pan-African


Genesis Analytics and Orange Business Services (OBS), with the support of the Bill and Melinda Gates Foundation, published a research report on Cloud Banking in Africa: The Regulatory Opportunity, which explores the potential for cloud computing to reduce the cost of technology for banks.

Traditional providers of banking services in Africa face unprecedented challenges in the digital era, principally from the expanding payment and financial service operations of mobile network operators. At a time when central banks across the world have committed to improving financial inclusion, the cost of the technology stack that banks operate and manage is a major impediment to reducing the cost of financial services.

Our research investigated how migrating some elements of the “technology stack”, and how it is supported by cloud technology, can significantly reduce the cost of IT infrastructure while allowing banks to take advantage of improved product development cycles, the most advanced security protocols and customer data analytics. This involved conducting a cost-benefit analysis on the different cloud service (software-as-a-service, infrastructure-as-a-service, platform-as-a-service) and deployment (private, public and hybrid) models.

The report explores the banking landscape in Africa, introduces key concepts on cloud banking technology, and discusses the role that regulatory frameworks (across different African countries) play in either supporting or discouraging adoption of this technology. Roadshows were conducted with stakeholders and regulators in several African countries to obtain regulators’ views on cloud banking.

Cloud-based solutions can reduce banking costs in Africa significantly

Framework for SME finance to support agriculture value chain in Africa

Project name:
Business operations for Agri-SME lenders

Service:
Business and operating models
Market systems development

Sector:
Agriculture and Agribusiness
Financial services

Area of Expertise:
Operating model design
Business model advisory
Cost allocation models
Capabilities mapping

Client:
Donor organisation

Date:
2019 - 2020

Country:
Belgium
Kenya
Netherlands
Tanzania
Uganda
United Kingdom (UK)
United States of America (USA)


The global population will expand considerably over the coming decades, with the world’s human population growing to 9.8 billion people by 2050, up from 7.8 billion at present.

A substantial portion of this growth will come from Africa, with 40 percent of all new births occurring on the continent by 2050. Using Africa’s arable land as efficiently as possible will be crucial if this expanded African and global population is to receive the required nutrition.

If this is to occur, African agricultural value-chain players will need financial support to scale their operations. However, these players often lack formal financial records, making it challenging for them to acquire this support from traditional financial institutions.

Due to challenges these players face, agricultural lenders have stepped in to fill the gap by extending the necessary financing to drive the expansion of agriculture in Africa.

Against this backdrop, Genesis partnered with an international donor organisation to compare the operational processes of a group of agri-SME lenders. The aim of this partnership was to identify ways of improving the operational efficiency of agri-SME financing to allow the lenders to serve the agricultural value chain more effectively.

The Genesis team developed a framework to assess the operational efficiency of the lender sample across the agricultural loan lifecycle, from customer identification through to loan repayment. At each stage, the team explored the challenges faced by the lenders and the impact of these challenges on turnaround times, cost structures and risk management.

The team also assessed the mitigation strategies that the lenders used to counter these challenges, specifically through the effective use of automation, decentralisation and outsourcing. The team dovetailed this analysis with an assessment of the lenders’ financial performance at each stage of the loan lifecycle, in order to draw linkages between their use of automation, decentralisation and outsourcing at various points and their financial sustainability.

Based on the findings of the analysis, the team developed a set of best practices for each stage of the agricultural lending process, split across automation, decentralisation and outsourcing interventions.

These best practices and the analysis pertaining to the lenders’ financial and operational performance were anonymised and collated into a report aiming to set out the most common challenges faced by agri-SME lenders and how best to address them. The insights from this report will be publicly shared across the lender group, thus aiding them in moving towards greater financial sustainability and profitability within their own operations while continuing to drive impact across agricultural value chains.

Strategy for mobile-wallet partnership opportunities in Africa

Project name:
Mobile Money Wallet Partnership Strategy for a Card Association in five African Markets

Service:
Business and operating models
Financial inclusion
Digital financial services
Market analysis and positioning
Strategy

Sector:
Financial services
Payments
Digital economy

Area of Expertise:
Segmentation

Client:
Confidential

Date:
2019 - 2020

Country:
Cote d'Ivoire
Ghana
Madagascar
Mauritius
Senegal


Africa’s growing and youthful population is increasingly digitally engaged. It owns mobile phones and financial accounts, and seeks to make payments electronically for a wider range of goods and services.

The payments market has become increasingly competitive through the introduction of digital channels and solutions where new players have entered the market to fill consumers’ unmet needs.

Mobile-money operators have already filled some of these needs by providing the opportunities for people to transact with other methods besides cash through digital solutions like MPesa. However, there is still a significant opportunity for card associations and mobile-money operators to form partnerships to fill the gaps in the market by offering digital financial products that reduce challenges and pain points that customers face on a daily basis.

Genesis Analytics was commissioned by a global card association to conduct a mobile-wallet partnership opportunity assessment across five countries (Cote d'Ivoire, Ghana, Madagascar, Mauritius and Senegal). This entailed assessing and mapping the payment landscape in each country and identifying key payment opportunities in the mobile money, card and digital payments space.

The study involved conducting desktop and primary research across the five countries. Each country study was split into three sections: external environment analysis, demand-side analysis and supply-side analysis.

The external environment section analysed the macroeconomic environment, social-demographic factors, technological influences, and legal and regulatory frameworks in each country and how each aspect influenced the payments landscape.

The supply-side section involved understanding who the main wallet providers were, volumes and value of all payment instruments (ATM, card, POS, mobile money, EFT, RTGS, cheques and others), the market landscape for banks and MFIs, and key value propositions of mobile wallet providers and other DFS operators.

The demand-side involved understanding how businesses and retail consumers in each market made and received payments, their pain points and challenges, the demand for digital credit and their demand for additional financial products. Genesis surveyed over 150 businesses and 150 retail customers in each market. The following payment flows in each market were also calculated and mapped:

  • Person to Person (P2P)
  • Person to Business (P2B)
  • Person to Government (P2G)
  • Government to Person (G2P)
  • Business to Business (B2B)
  • Business to Person (B2P)

The overall study provided recommendations for deepening and developing products that would adequately serve the market and inform the card association’s partnership strategy.

Helping South African bank to keep up with digital innovation

Project name:
Future of payments project

Service:
Strategy
Business and operating models
Digital financial services

Sector:
Financial services
Payments

Area of Expertise:
Market analysis
Segmentation
Competitive positioning
Customer value proposition (CVP) development and execution
Digital transformation

Client:
Large South African bank

Date:
2017

Country:
South Africa


The growth in non-cash payments has increased the revenue potential of the payment sector, making it one of the high-stakes sectors in financial services.

Until recently, banks were dominant but new players have successfully challenged this dominance. From MNOs to fintechs to third-party payment processors, increased technology has intensified competition. Improved speed, ease, security and cost of making payments are common in contactless payments to biometric authentication features, social-media payments and distributed ledger platforms.

Banks are faced with how best to respond to these developments. Genesis engaged with a large South African bank to create and maintain a market insights capability that would enable it to develop internal points of view on developments in the payments sector, allowing the bank to respond with appropriate short-term and medium-term strategies.

Genesis compiled a live database of developments within the payments sector and analysed them according to the payment flow, rail and theme. From this, we built a comprehensive as-is analysis of the payments space, identifying the ongoing technological developments as well as that of the competitors, both banks and other entities.

We formed our points of view on key issues that the bank needed to consider. These included, among others, the entry of Chinese payment giants into the South African market and innovations in the acceptance frontier. We outlined the main trends and analysed their impact, imminence and risk to the bank.

Our insights provided the bank with a comprehensive view of the trends and developments in the payments sector. Our recommendations included considerations for short-term tactical investments and also longer-term considerations of the direction of payments innovation.

Our insights were presented to the senior management and key stakeholders of the bank. These formed the basis for discussion on appropriate strategies the bank should take regarding its payment services and product offerings.

Business model for e-wallet customer payments

Project name:
Licence application and business model for an e-wallet and peer-to-peer lender

Service:
Business and operating models
Digital financial services
Regulatory economics and accounting

Sector:
Financial services

Area of Expertise:
Fintech market enablement
Digital transformation

Client:
A large provider of online retailing and services

Date:
2014

Country:
Nigeria


Genesis was commissioned by a large provider of online retailing and services to examine the regulatory regime of Nigeria, with respect to the launch of an e-wallet for customer payments and the launch of a peer-to-peer lending service.

The project involved the development of a detailed business plan for each business, and an assessment of the licensing options available for each business, as well as a review of the regulatory model that is evolving globally with respect to peer-to-peer lending.

Following the advice of the consultants, the business model was reconfigured to take advantage of the card eco-system which would reduce the complexity of operations and the need for additional licences.

Building a cost-allocation model for the JSE

Project name:
Building a cost-allocation model for the JSE

Service:
Business and operating models

Sector:
Financial services

Client:
Johannesburg Stock Exchange (JSE)

Date:
2015

Country:
South Africa


The Market Regulation Division of the JSE appointed Genesis Analytics to develop a cost-allocation model that defines its cost of regulating each of the JSE's markets. 

The principal objective of the project was for the model to function as a strategic tool for the division, informing strategic and tactical decision-making with respect to the JSE and regulated members as ultimate beneficiaries. The project was divided into two components, the first of which was a discovery phase that scoped what analysis had already been conducted within the JSE and then charted a way forward for the project.

The second phase required Genesis to develop an accurate five-year costing model that reflected direct and indirect cost associated with regulating each of the JSE's markets, and took into account evolving IT infrastructure projects.

Feasability of vertically integrated business model

Project name:
A business model review for a large financial services and insurance provider

Service:
Business and operating models

Sector:
Financial services

Area of Expertise:
Business model advisory
Operating model design
Capabilities mapping
Cost allocation models

Client:
A large South African financial services and insurance provider

Date:
2014

Country:
South Africa


Genesis Analytics was appointed by a large South African financial services and insurance provider to review the feasibility of an innovative, vertically integrated business model, connecting an independent distribution network to a large investment product range and manufacturing capability.

The business model was premised on anticipating and responding to several shifts in the investment industry, the most important of which was the Retail Distribution Review (RDR) programme implemented by the Financial Services Board (FSB). Within this context, Genesis conducted a review of the business model against key regulatory programmes such as the RDR and Treating Customers Fairly, as well as against the requirements of FAIS and the Long-Term Insurance Act.

Following this review, recommendations were made to enhance the appropriateness of the business model in anticipation of the expected content of upcoming reforms. 

These recommendations formed an integral part of the subsequent model design.

30 Kenyan banks adopt innovative payments infrastructure

Project name:
PesaLink Channel migration strategy

Service:
Strategy
Digital financial services
Financial inclusion
Business and operating models
Market analysis and positioning

Sector:
Financial services
Payments

Area of Expertise:
Market analysis
Financial modelling
Market entry and growth strategy
Digital payments

Client:
FSD Kenya

Date:
2017

Country:
Kenya


Kenya has been at the forefront of mobile payment innovation in Africa, primarily through the rapid growth of the mobile money ecosystem. Leading this are non-banks, in particular Safaricom, which pioneered payment solutions for consumers with little access to formal financial services.

With the banking industry facing a challenge of falling card transactions, banks needed a new low-cost payment solution to compete with non-bank payment providers.

MNOs have been the primary drivers of financial inclusion in Kenya. To improve the banks’ contribution to financial inclusion, collaboration between FSD Kenya and banking industry stakeholders led to the creation of PesaLink – a payment infrastructure that allows banks to offer real-time, person-to-person transfers at a low cost.

PesaLink met with some resistance from banks over concerns that it would cannibalise their fee revenues from existing payment products, without understanding that traditional banking products were declining in the face of Safaricom’s growing market share.

Genesis partnered with FSD Kenya to develop a business case to convince Kenyan banks of the value of joining PesaLink. Genesis carried out a series of stakeholder interviews with the banks to understand their problems. Incorporating these findings with historical payments trends in the market as well as bank data, Genesis developed a financial model to assess the impact of PesaLink on the banks’ existing product revenues.

The model incorporated the expected revenue diversion from existing bank products and illustrated the potential savings from the more efficient PesaLink infrastructure. It demonstrated the opportunity for increased transactions because of convenience to the client, resulting in raised revenues for the banks. The model was shared and workshopped with the banks.

Through Genesis’s work there was greater buy-in from banks to develop their unique products to be rolled out on PesaLink. Thirty banks now offer products on the PesaLink infrastructure, resulting in KSH15-billion transaction value flowing through the infrastructure in the first six months of its launch.

Meet the Team

Areas of Service Expertise

  • Business model advisory
  • Operating model design
  • Capabilities mapping
  • Cost allocation models

Related Sectors

  • Retail banking
  • Corporate and investment banking
  • Business banking
  • Payments
  • Insurance and asset management
  • Capital markets

Projects

Project

Debunking financial and non-financial needs of MSMEs in Africa

The International Finance Corporation (IFC) commissioned Genesis to do market-wide research on the MSME finance market and landscape in six African countries to ground its investment and advisory support to financial sectors.

View Project
Project

Cloud-based solutions could reduce banking costs in Africa

Genesis Analytics and Orange Business Services (OBS), with the support of the Bill and Melinda Gates Foundation, published a research report on Cloud Banking in Africa: The Regulatory Opportunity, which explores the potential for cloud computing to reduce the cost of technology for banks.

View Project

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Leading the team

Richard Ketley

Director (Financial Services Strategy and Infrastructure)

Richard Ketley
Director (Financial Services Strategy and Infrastructure)
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Bavani Naidoo

Partner (Financial Services Strategy)

Bavani Naidoo
Partner (Financial Services Strategy)
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