Bridging the Gap: Advancing Pensions and Insurance to Match Banking Sector in Africa

In Africa’s financial sector, banking emerges as a leader in distribution, customer relations, and market reach. However, pensions and insurance lag noticeably behind, raising the important question: What factors inhibit these sectors from achieving similar market penetration?

In a recent dispensation by the Chief Executive Officer, Awabah, Tunji Andrews, he asserted that the history of Africa’s financial industry is crucial to understanding this disparity. Banks have been present on the continent for a longer period, allowing them to build extensive networks and strong customer relationships. In contrast, the pensions and insurance industries face fragmented landscapes, regulatory challenges, limited public awareness, and resource constraints that hinder their growth.

While banking in Africa has undergone a significant transformation by adopting technologies such as ATMs and digital platforms, this shift was largely driven by owner-operators who collectively pushed the sector forward. Conversely, the pensions and insurance sectors often lack the flexibility and resources to keep pace, resulting in a stalemate where large organizations struggle to innovate quickly, and smaller tech entities lack the influence to drive major change.

Additionally, the complexity and perceived intangibility of pension and insurance products pose challenges. African consumers often prioritize immediate financial benefits, like credit access, over long-term savings or risk protection, making it difficult for providers to effectively communicate the value of their offerings.

Banking institutions have successfully adapted their distribution models to meet diverse consumer needs through physical branches, mobile banking, and digital services. In contrast, pensions and insurance firms have been slower to innovate and diversify their outreach methods, leading to limited access and customer interaction.

This gap between banking and the lagging pension and insurance sectors represents a missed opportunity for financial inclusion across Africa. To bridge this divide, stakeholders in pensions and insurance must invest in technology, training, and, more importantly, collaborations to expand distribution networks, enhance client interaction, and simplify their products. By doing so, these sectors can realize their potential as catalysts for financial inclusivity and resilience in Africa.

For example, Awabah introduced the Awabah-Pay platform (also known as PENPAY) to facilitate the industry. Beyond offering an easy-to-use channel for premium and contribution collection, the platform aims to create an integrated ecosystem that boosts collections and offers tangible benefits to customers. The goal is to seamlessly incorporate pensions and insurance into the daily lives of Nigerians, elevating these sectors to the banking level, which is in line with Awabah-Pay’s primary objective.

Ultimately, despite the high benchmark set by banking, pensions, and insurance sectors must endeavor to catch up to unlock their transformative potential in Africa’s financial ecosystem. By overcoming existing hurdles, embracing innovation, and exploring growth opportunities, these sectors can lead the way toward a more inclusive and prosperous financial future for all Africans.

In conclusion, collaboration between emerging pension tech firms and established insurance and pension companies is vital for industry progress because I believe neither is going anywhere. While tech firms bring agility, established companies can provide the scale necessary for significant change. Together, their cooperation can bring about substantial transformation in the continent’s financial landscape.