Malawi adopts high-tech banking, leapfrogs many countries

When Kenya implemented automated banking systems and regulation in 2000, it looked like Malawi would be stuck with ancient technology.

Fast-forward 10 years: Malawi has leapfrogged most African countries and is second only to South Africa in implementation of smart cards backed by biometrics technology.

Card users are allowed to authorize their transactions by scanning their fingerprints, an alternative to less-secure verification by PIN (personal identification number) or signature, notes a United Nations Environment Programme study of sustainable banking in Africa.

The system offers a majority of Malawi's population the chance to access banking services, as smart cards offer a secure and portable repository for cash, says Tryson Kalanda, operations manager at the Bankers Association of Malawi.

"The system has reduced fraud and crime because of the fingerprint identification requirements," Kalanda said.

Moreover, the electronic check clearing system has reduced clearance time to two days.

"The electronic check clearing system uses image truncation clearing," explained Paul Mbugua, general manager of Fintech, one of Africa's leading banking-software vendors. "Within a minute the check is scanned at the teller, and the image is relayed to the head office and pushed to the online clearing house. Every three hours the image checks are pushed to respective banks, and clearing is twice daily."

Fintech worked with the banks in Malawi and installed the systems for electronic clearance. Nine out of 10 banks are using the system, Mbugua noted.

"The technology has improved efficiency in our banks, which has a bearing on economic growth," Kalanda said.

This is in comparison to Kenya's system, where physical checks are sent by courier; clearance time is four days, and businesspeople are forced to wait nearly a week before money is available.

Kenya is bogged down by regulatory requirements that stipulate that all checks must be archived, Mbugua said. Previously, checks had to be photocopied, but the Central Bank of Kenya has begun to accept electronic archives.