Financial services as an emerging growth market - Rabobank

7 August 2015

The opportunities for mobile payments in emerging markets have become a platitude already. We live in a world that changes faster and faster. Obviously, big technological, economic and social changes affect the financial industry as well. This is why banks are getting more aware that they have to ‘reinvent themselves’. Hidde Bulthuis, Raymond Custers and Micheal Dooijes of Rabobank explore what this reinvention could look like if a bank focused on the opportunities of the current digital revolution.

Consumers are getting more demanding and no longer accept banking as usual. People expect the right offering around the globe and around the clock. This requires simple, easy to understand and transparent solutions. Clients of banks want influence on what a bank does with their money. If customers do not like the products and services they see, they could leave with just a click.

Asked what distinguishes them from previous generations, the younger generations mention the use of technology as a primary differentiator. Freedom and flexibility is the norm for them and they bring new values, attitudes and brains to the world. They use their devices to stay in touch with the globe and are connected to the cloud 24/7. That's the power of the connected generation.

These are the banks' future clients, leaders, colleagues and bosses. For them, openness and transparency are critical. They demand this. This is the 'outside-in' generation and they find things out by sharing, not by hiding, information. Knowledge and experience becomes less relevant in this new time and age. Skill and attitude counts in the future.

Changing competition

While customer expectations increase, competition is getting tougher. For banks, it is hard to differentiate with traditional banking products, which leads to increasing pressure on margins. While big banks struggle with the commoditisation of their products, new entrants create competitive advantages with value-added services and unique customer experiences. These new entrants see the real opportunity not so much in the transactions performed by banks but in the information acquired: understanding what customers are doing, where they are doing it, and then seamlessly providing services whenever and wherever they are needed.

The 'rails' or incumbent networks and infrastructure are exactly the layer of capability or functionality that enable these new disruptive payment technologies, or these new non-bank FIs to succeed. However, the need for auditability, security and cross-border interoperability means that complete circumvention of the banking system isn't likely to happen before 2020. But that's not the point. The point is that a new layer of value is being created on top of the existing infrastructure and its changing fast.

To add to the pressures, continued turmoil in the global banking industry and upcoming regulation, such as PSD II, create opportunities for new players to build innovative offerings in the market.

Technology is the driver

Most changes in the market are driven by the third industrial revolution: digitalisation. No industry will be able to avoid the impact of technological developments. Everything that can be digitalised, will be digitalised. For banks, this means that a part of a proposition that is not yet fully digital and STP will be under pressure.

Not just the impact, but also the speed of change in technology is increasing, making it hard for traditional players to keep the pace. Partnerships and co-creation will be necessary to improve the time to market.

Opportunities ahead

Looking at the future, every company has to ask itself some fundamental questions. In what market do we want to operate? What unique value do we bring to this market? What means do we need to achieve this? And most of all: how will this all lead to a sustainable competitive advantage?

Rabobank, founded as a cooperative bank for Dutch farmers, has a very strong and stable market share in its home market, the Netherlands. The bank is also active in over 40 countries, where Rabobank typically is praised for its in-depth knowledge of the food and agriculture industries. Despite this strong market position, Rabobank understands it has to adapt to the new reality to keep fulfilling its mission: helping people to achieve their goals by offering the best financial services.

Looking at the changes in the financial industry, Rabobank invested in a start-up company called MyOrder. This new venture has the vision to become an independent platform that brings merchants and consumers together.

Today, MyOrder is a leading m-commerce platform in the Netherlands, while still looking for global opportunities as well.

For completely different reasons, Rabobank and MyOrder are interested in the countries that are usually labelled 'emerging' or 'developing' markets. Rabobank is particularly interested in the food and agriculture industries because an important part of its 'banking for food' strategy is to enable developing countries to boost their food productivity. This will not only reduce world hunger and poverty, but is also a growth market from a business perspective.

MyOrder, on the other hand, is mainly interested in emerging markets because new technologies are picked up very quickly and people are more receptive to change because they are highly motivated to improve their standard of living. Long before smartphones became common, African fishermen used their basic mobile phones to check fish prices on local markets before they decided where they would bring the day's catch.

Where to go?

For obvious reasons, BRICS has been on the radar of western companies looking for growth opportunities for a while already. An interesting question is where the next frontier of rapid growth will be?

Recently, Africa has often been mentioned as 'the China of tomorrow' - ironically because of investments by Chinese companies. Over the past decade, Africa has made huge progress. Life expectancy rose noticeably thanks to improvements in the health care and the socio-political situation. Three decades ago, only one in 20 African countries was a democracy, now it is almost one in two. Trade has soared as well. This year, African countries will trade approximately €50 billion with China.

Africa is beginning to benefit from its huge commodity treasures, although corruption and exploitation are still on the rise. At this moment, Africa is the fastest-growing continent in the world. Within Africa - besides South Africa - Nigeria, Zambia, Tanzania and Kenya are growing rapidly.

On the other side of the globe, Latin American countries also benefit from the incredible growth Asia has shown. According to the Economist, trade between Asia and Latin America has quadrupled since 2004. At this moment, China is the biggest trade partner of Brazil, Chile and Peru. Trade between Latin American countries is improving as well. A nice example is the Pacific Alliance of Mexico, Colombia, Peru and Chile.

Of the other continents, there are still some rapid-growing economies. In Europe, Poland and Turkey are front-runners. In Asia, most countries will remain strong growers. According to the Foreign Affairs website, the south Asian countries such as Thailand, Vietnam and Indonesia are good bets.

Emerging m-commerce

Especially in emerging markets, mobile payments are a huge opportunity in which to get a foothold. In Africa, only one in five adults has a bank account but almost four in five have a mobile phone, which is a penetration level comparable to India. At this moment, there more people on earth that have access to a mobile phone, than have access to a toothbrush.

Kenya is leading the way with 26 million mobile money accounts representing almost half of its country's GDP. The well-known mobile payment system in Kenya, M-Pesa, was launched in 2007 and a year later it expanded to other markets such as Tanzania. With the widespread availability of mobile phones, mobile money services help to reach the unbanked, but usage is now common by higher and lower-income households in the country. Initially, it started with basic P2P financial transfer services, but today other organisations are using M-Pesa's payment infrastructure to provide cheaper access to essential services for the poor in energy, water and education. MyOrder is also leveraging M-Pesa's 'rails' for its SoilCares collaboration.

According to the Economist, mobile phones have already enabled poor countries to leapfrog a few stages of development in telecoms and, in some cases, finance. Cheap mobile payments will allow them to jump further.


The only way forward for the industry is to embrace change, and act its way into innovation through a collaborative model and active engagement with startup communities in the various markets. Important innovations launched in some of the developing markets pave the way, and can inspire traditional banks to reinvent themselves and come up with new business models that can create sustainable value and future-proof financial services for their customers.


Even in a rapidly changing world it is possible to make rough sketches of the long-term future based on megatrends. These trends help predict the future because they last for a long period, they are global and they have a high impact on every aspect of life. They cannot be avoided. Here are five megatrends happening over the next five years:

  1. Aging and diversity: global societies are changing in terms of demographics and values. Life expectancy increases rapidly and values become more pluralistic, because of migration and mixing cultures. Even identity is no longer defined by descent; the virtual community becomes the cornerstone of society.
  2. Power to the consumer: the ordinary person demands and gets more influence. Centralised and institutionalised power shifts to social networks. Customers have high expectations concerning the entire consumer experience. If these expectations are not met, they will turn to activism and often move to the competition.
  3. Fading borders: globalisation continues until there is a ubiquitous networked market place. Resources (raw materials and information) are at everyone's disposal. The borders between different roles of an individual become unclear; biology and technology mix as well.
  4. Risk and protection: in a world of increasing uncertainty there is more attention on protection against risks - this means the security of valuables, including personal data. Governments protect the interests of their electorate and taxpayers; regulation is aimed at transparency and protection.
  5. Specialisation and integration: thanks to technological developments, all kinds of production processes become affordable and accessible. Scale and location become less important. This leads to new business models, based on co-creation and the integration of innovative components.

MyOrder, Rabobank and SoilCares

MyOrder and Rabobank are delivering a serviced connection between the app of a Dutch agriculture technology company, SoilCares, and the Kenyan local m-payment method, M-Pesa. SoilCares wants to enable farmers all over the world to make better use of their land and improve their yield. Therefore, SoilCares has developed innovative and affordable methods to asses soil and crops combining revolutionary affordable tools with smartphone apps connected to updated reliable databases. Well informed, it makes better choices with regard to what cultivation and fertilisation methods to use, and obtaining improved and sustainable yields. Every country has its own m-payment challenges, and, together with MyOrder, Rabobank is able to help this Dutch company to reach out to Kenya, and be able to accept payments from local farmers without having to contact and contract them beforehand.

Hidde Bulthuis is manager strategy and innovation at Rabobank Netherlands, where he started in 2005 after moving from Robeco. He has over 15 years’ experience in marketing strategy, change management, innovation and banking.
As a mobile-payments expert, Raymond Custers currently serves as Rabobank’s senior product manager for m-commerce where he specialises in mobile payments, mobile value-added services and mobile banking.
Executive director, head of strategy and innovation at Rabobank Group and CEO of MyOrder, Michael Dooijes joined the company in 2007. Starting in 2011, he looks after Rabo’s strategic direction in transaction banking with a team of five professionals.