What is a Digital Ecosystem and the future of the World?
Imagine a reality world, all online, where you can interact with each other, shop, invest and even virtually play with the world and one another. A world like todays, but where everything is online. The high street, payments, books, movies, work and even friendships. This is the future of the digital ecosystem. Whether you like this idea or not, the trend has been set and we have seen a huge shift to a digital medium already over the last two decades. The digital ecosystem has been born but is yet still very much in its infancy.
A digital ecosystem, like any ecosystem, is made up of unique self-sustaining elements that interact with one another. The easiest way to visualize this, is to imagine having a bank, investment, savings account all rolled into one with the additional benefits of being able to message people, post pictures and also send money via your mobile phone. Everything that you use daily, under one roof.
Advanced digital ecosystems tend to have suppliers and retailers all able to trade with one another without having to interact with the main financial system. Ultimately, successful ecosystems ensure that the customers money never has to leave the ecosystem as they can acquire everything, they need in one place or App.
One of the most advanced ecosystems in today’s modern world is the Chinese company, WeChat, which adds the concept of a financial ecosystem to a message app. They thus created the concept of a Social Ecosystem.
History of the Digital Ecosystem (DE)
The concept of the DE was born out of the work of companies such as Paypal. The idea was that once funds were in a PayPal account, you could pay people or suppliers and shops via their PayPal account. Paypal would then ensure those funds got from A to B without having to go through the banking system.
Once a customer has transferred funds to their ‘digital wallet’, they are then able to transfer to other wallets using simple identity methods such as an email address or phone number rather than a having to have complex account numbers, swift codes and International Identifiers.
We can see that once both the user and the receiver have a PayPal account; they can easily transfer funds to one another.
The problem with PayPal’s business model is that it didn’t really encourage people to keep their funds within the ecosystem. They simply transacted and then immediately transferred funds out. You could not buy real-world goods either through the system and ultimately people still relied on cash and cards in the real world and had to ‘offload’ funds out of the ecosystem.
Alipay’s Digital Ecosystem
It was the Chinese company Alipay that decided to build on this payments ecosystem concept by adding an Interest-bearing Money market account. A simple partnership with a banking provider made all the difference.
Additionally, they teamed up with Ant Financial to extend the range of services and offerings for customers which included Investment products, Lending and Insurance. This all meant that there were fewer reasons to leave the ecosystem and more reasons to stay. The diagram below, from Michigan State University, details the AliPay Ecosystem.
AliPay also has been forward-thinking in the problem of handling ‘Offline’ transactions. This meant that retailer and customer could now effectively trade when they did not have access to the internet by using the simple Q-code system. This system also no longer required expensive hardware and card terminals and instead required to have codes physically available.
In the emerging marks such as Africa, this system will allow even more people to be integrated into the banking and payments system than ever before. Yes, the smartphone is required, but the process certainly opens up more doors than it closes.
Social ecosystems
No narrative about the history of ecosystems would be complete without touching upon the importance and potential of social ecosystems. WeChat is possibly one of the best examples. The easiest way to think of WeChat’s origins is as a combination of WhatsApp and Facebook.
What they ingeniously did was to create ‘lucky money’ as a form of reward and gift that was often given via ‘red packets’ or digital envelopes at important times like the Lunar New Year. These packets were then passed onto other people and became the basis of a new payment’s ecosystem.
In many ways, the social networks of today are perfect conduits for starting and expanding on digital ecosystems. In reverse, digital financial ecosystems can also become social networks…. Just think Bloomberg.
The Future direction of the Digital Ecosystem.
I see the idea of a social ecosystem, developing into a Gaming or digital world ecosystem. One where customers, suppliers friends and family all interact in an ecosystem created digitally. Shops, games, loyalty rewards, social networks all take place within these closed but transparent ecosystems.
The best business are those that attract the customer at a young age and harness their loyalty. This is how the old banking model used to work and worked effectively. I still think there is room for this concept, but target audiences are different. For example, I believe that the Gaming industry, the largest sector in the world, will be at the forefront of the next banking revolution and the next ecosystem.
I firmly believe that the future of the digital ecosystem will be a blockchain-based ecosystem, where social and payment rails interloop and where you can make a payment or even an investment as easily as you can send a message or post a photo and all in a virtual world.
The Banko digital ecosystem
Building on the concept of ecosystems but now advancing them into the new ‘digital era’, is the core philosophy of Banko. More than Banking, Banko intends to become the first banking one-stop-shop platform in Africa to help financial institutions underpin their main drivers of growth.
Banko enables financial institutions to access funding to manage liquidity and capital issues as well as government and risk management frameworks in line with international standards. In addition, it has a BaaS platform that connects then directly to FinTech’s, thus accelerating their digital transformation at less cost.
BANKO takes the idea of an ecosystem and plans to allow this model to transcend the whole of Africa. Imagine an ecosystem built on the very best of modern technology that could allow remittance on a global scale with other ecosystem partners and where the products and services were from global market leaders. Insurance, investments, blockchain, payments, lending, credit ratings all under one ecosystem. That is the ambition of Banko.
Integrating existing Banks/Payment providers under one ecosystem.
Rather than creating an entirely ‘new ecosystem’, Banko intends instead to unite Africans and African businesses by bringing existing entities and client banks into a ‘super hub’ and in essence magnifying the benefits that smaller ecosystems create.
Investing in Africa is a long-term commitment that requires resilience, specialized knowledge and expertise to navigate the risk complexity that usually surrounds fast-emerging economies. Access to capital and liquidity, dysfunctional governance and risk management as well as lack of trusted and credible advisers and partners, have become the major innovation and growth constraints for financial institutions in Africa. The industry keeps falling short on the promise of financial inclusion of individuals and business as 66% of the continent’s population is still listed as unbanked, according to the World Bank.
Today there is not a single solution that allows these financial institutions, in the foreseeable future, to remain profitable with capital requirements, driving down costs and yet having the ability to develop new products to meet the next frontier of customer needs.
Serving Africa
With the continent set to double its population in the next 20 to 30 years and become the largest and youngest workforce on the planet, it is critical to build and create tools that allow the new generations of Africans to become the author of their own narrative. This is the goal of Banko, to provide those tools.
