As more and more business is transacted online, enterprises in Africa, as in the rest of the world, have to manage an explosion of data, and nowhere is this more true than in the banking sector.\nBanking industry insiders are on the vanguard of business executives establishing the sort of modern tech infrastructure necessary to gather, input, store, and analyse this growing volume of data, all the while adhering to compliance with the confusing mix of data privacy laws prevalent through sub-Saharan Africa, as well as ICT infrastructure of varying quality throughout the region.\nBanking has a hard-earned reputation for stability and predictability. It\u2019s a necessary attribute to have when you\u2019re asking people to trust you with their money. So banks are thinking hard about how they use the data they are receiving, and how to store it safely and in line with stringent compliance regulations that are forcing some tough choices.\n Mark McChlery\n\nMark McChlery is chief data and analytics officer for PayJustNow.\n\n\n"Data is the lifeblood of any business," says Mark McChlery, CEO of PayJustNow, a Cape Town-based start-up that\u00a0 provides online shoppers with a speedy way to sign up for installment-plan purchasing while gathering valuable data that can be used to drive more purchases for retailers. The company uses AI, a progressive web app (PWA) and cloud technology to bring instalment plan shopping to shoppers into the digital age.\n"Data comes at you from every social media post, phone call, email and transaction. That will give you powerful insights to where things are working and, more importantly, cry out when things can be improved," McChlery says. "These patterns when explored will give you powerful insights to where things are working and more importantly cry out when things can be improved."\nDigital banks challenge the establishment\nNo longer just an idea for the future, the emergence of several credible online-only banks such as Bank Zero, Discovery Bank and Tymebank in South Africa have brought a new urgency to the question of data and what it is used for. And all this comes at a time when the pandemic has changed the way people interact with physical spaces such as retail banks, and are now more confident with conducting their lives online.\nCEO of newly launched Bank Zero, Yatin Narsai, says his bank "was made for a pandemic world as it has zero paperwork (registration and transactions), can be operated fully remotely (no visit to branches\/kiosks\/brokers required) and will bring significant savings to hard-pressed individuals and businesses."\nHe is confident that the bank's ability to "bring special functionality around social connectedness, transparency, control, advanced payments and features, and a focus on savings," that will attract a loyal customer base that lets them grow into a formidable force.\nData's role in business strategy grows\nData has an especially valuable role to play for banks that are competing to lure customers away from their traditional services and trying to attract the unbanked, who may want to start a new relationship with the formal financial sector.\nPhillip van Blerk, a data consultant at Poetry Consulting in Cape Town, offers a number of key requirements for a successful data strategy:\n\nData is captured about everything of value\nWorks in the background continuously\nData is complete and accurate\nIt provides a holistic view of objects within the business taking into account the different perspectives of stakeholders\nIs stored in a secure way that acknowledges different levels of sensitivity and privacy.\n\n\u201cData allows us to make better decisions and that will be true of a business as well. A business should be explicit about what it wants to measure and how it can be measured," says van Blerk.\u00a0\nMcChlery agrees with that notion, adding that "You can\u2019t rely on every bit of data you get, but when that data is explored in a cohort \u2014 reality emerges. Then from a business value perspective \u2014 the sum of its parts become greater than the whole."\nWhile new data strategies present excellent opportunities for knowing your customer better and providing more sophisticated products, Africa presents unique challenges.\nThere are two distinct approaches emerging between the new breed of banks, and the Big Four banks (Standard Bank, ABSA, First National Bank & Nedbank) who have dominated the sub-Saharan banking sector for so long.\n Yatin Narsai\n\nYatin Narsai is CEO of Bank Zero.\n\n\nBank Zero is all-in with emerging technology, particularly for security. "IBM has gotten the measure right when it comes to high-volume secure computing," Narsai says. "Based on their multi-decade server expertise and research, IBM provides Bank Zero with breakthrough enterprise-grade security on its open-source based LinuxONE enterprise server through its pervasive encryption technology. When such advanced high-performance secure servers connect to the incredible local processing power of smartphones, it creates powerful new possibilities for digital transformation."\nDigital migration faces legal, tech hurdles\nThere are legal and technology hurdles to digital migration, however.\n\u201cIn SA, we have big issues with allowing banks to move stuff into the cloud, for example AWS and Azure" says Bernard van Niekerk, the managing director of RadixTrie, a local business specialising in data and services management. Van Niekerk\u00a0 has a long history working with South African banks. "We work at two of the big four and they are not putting their general ledger on the cloud and there are no plans to do so. The legislation says you can move your stuff but the board is responsible if anything goes wrong. Usually, board members are not willing to take that responsibility."\nThe data-driven approach to banking runs into serious problems when banks think about expanding their footprint regionally throughout Africa. Two problems need to be solved in order to make it work: Legal and compliance issues, and infrastructure issues. They are inextricably linked and will need to be resolved together, say industry insiders.\n"In South Africa, we have a very regulated, mature industry. It may be too mature for the African market because when it comes to setting up banks in Africa from a market that is so mature, you run into a lot of problems," van Niekerk says.\nThere is more often than not a mismatch between the products and servers offered in South Africa, and what\u2019s required and possible in a neighbouring state. Radixtrie is experienced in dealing with these issues, and van Niekerk is firmly in favour of what he calls \u2018a federated IT model\u2019 for banking in Africa.\u00a0\n Bernard van Niekerk\n\nBernard van Niekerk is the managing director of RadixTrie.\n\n\n\u201cYou rely on the network but there is very little processing power in that (neighbouring) country. Which means all the transactions end up being processed here (in South Africa)," van Niekerk says. "Adding more countries means becoming more and more reliant on the network, which needs to be getting bigger and bigger as a result."\nAs a bank does business in more and more countries throughout the region, its IT footprint creates more and more overhead. "So you need to start billing these countries for the digital infrastructure,' van Niekerk says. "When you send an invoice to the country, it feels inflated to them. They reply \u2019What am I getting for it?\u2019 "\nThe other big problem when dealing with data internationally is that new compliance legislation laws present a whole new set of challenges.\nFor example, South Africa POPIA and the EU's GDPR data protection laws require businesses to process data locally (with certain exceptions).\nFederated IT model can solve legal, tech issues\nThe solution, according to van Niekerk is a federated model where "enterprises put infrastructure at branches, create best practices and blueprints that will satisfy this massive legislation overheard." There are issues around finding enough data administrators in each of the countries, the quality of networks, the availability of massive IT servers, but van Niekerk is fairly certain there is no other way to do it.\nHe offered the example of a conundrum where "one of my IT customers who services the banking industry has built one of the biggest data lakes in the world. They want to enable self-service BI \u2014 customers can simply feed your data in here and you can leverage it in whatever ways you want. But now they are stuck having to place it in-country where it's simply too high-tech, and the banks in the neighbouring states want a scaled down version which the customer can't really do."\nBanks are also very aware that financial options are opening up for citizens across Africa that are going to eat into their client base if they are not proactive. Cryptocurrencies are surging, particularly in Nigeria, while rewards programmes and global operators like Payal are finding new ways to build financial ecosystems that retain customers.\u00a0\nWhat is likely to emerge over the coming years in the financial sector are hybrid models where cloud and on-premises architecture share the data load for a bank, while massive efforts go into upskilling affiliated banks regionally so that they can take advantage of the best technology available globally, while remaining compliant and offering products that suit the local market.