Africa’s digital banking transformation: from an option to an imperative

Digital transformation is no longer an attractive option for African banks – it’s an imperative. Today, banks cannot procrastinate when it comes to advancing their technology while continuing to do business as usual. Instead, acknowledging and adapting to the digital revolution is a minimum requirement for staying competitive in a rapidly changing banking landscape.

And as banks look over their shoulder, it’s not just another bank in their rear-view. Numerous non-banking sector players have entered the race and are disrupting the market. These new participants are making full use of their digital capabilities, showing no signs of slowing down. The nature of the race has changed tremendously.

Findings from the Global System for Mobile Communications (GSMA) revealed that 469 million people in Africa had used mobile money services by the end of 2019 – a 12% increase from the previous year. The growing trend for adoption of digital services is a clear indication of consumers’ evolving demands.

As digital banking continues to take off in Africa, let’s take a look at some observations on the banking sector throughout the continent.

Erosion of branch banking

Historically, the number of bank branches present in a given region was indicative of the accessibility of banking services. However, this is no longer the case. The way people bank continues to evolve, with branches becoming increasingly redundant across many societies.

Furthermore, the Covid-19 pandemic has accelerated what was already an evident trend. Many customers have been required to bank online or with mobile devices as national lockdowns have forced banks to lock their doors for prolonged periods. Ugandan lender Stanbic Bank, for example, suspended digital transaction charges, incentivising customers to switch to digital banking platforms.

Still, banks must remember that there needs to be a balance between continuing to provide in-branch services and a wholesale switch to digital banking to avoid leaving customers behind. While the crisis has accelerated transformation, the key will be for banks to integrate physical and digital banking services efficiently, retaining the human touch when required.

A spike in mobile ownership

The rise in African digital banking has been a consequence of the uptick in mobile telecoms. The number of SIM connections is expected to reach one billion by 2025 from 747 million in 2017, according to GSMA. Clearly, an increasing number of people across the continent are accessing the internet via smartphones, causing a subsequent spike in demand for digital banking services. As a result, the onus is on financial institutions to adapt and meet shifting consumer needs.

Interestingly, 96% of 50 banks surveyed across the continent regard digital transformation as one of the three most important factors in their bank’s growth strategy, with 56% rating it as the most important factor. And promisingly, 84% of the banks surveyed already offer mobile apps, while 80% offer internet banking services to clients.

Similarly, digital lending will be crucial for customers – 64% of respondent banks cited this as the most important digital service for them to build in the coming years. For long-term customer satisfaction, banks must also prioritise the provision of mobile wallets as well as digital onboarding capabilities to ensure customers’ experiences are as seamless and as valuable as possible.

Hints of inertia

Technology advancements have clearly impacted banking services; however, we cannot assume all banks embrace change as passionately as others. While many banks are open to change in some capacity, there are often cases where traditional processes are too entrenched.

Still, it’s possible to attribute the slow adoption of digital by some banks to the fact the many customers have not yet used digital services themselves. In fact, 64% of banks surveyed highlighted that nearly half of their customers had not yet used digital services, hence banks’ lack of incentive to adapt.

Overall, increasing digital offerings can help grow the number of people with access to banking services across Africa. However, there’s more to do.

African banks must continue placing digital platforms at the core of their operations. This includes recruiting and inspiring existing staff to adopt a digital-first mindset. Banks must keep in mind that digital transformation is not a choice, but instead a must for those looking to remain competitive.

For further digital transformation insights from other banking leaders across Africa, as well as from me, you can download African Banker’s ‘The African Digital Transformation Report 2020’ by clicking on the button below.