Analysis in brief: Once a convenience and now a necessity, digital banking has become essential to conducting business in Africa. More notably, it is significantly empowering Africans by offering access to financial services that were previously unattainable to them.
What a difference a decade makes for Africa’s embrace of digital banking. In 2021 (the most recent year when complete data is available for the entire continent), 55.07% of Africans owned a bank or mobile money account, more than double the 23.33% who accessed banking services in 2011. The growth was not in traditional banking but was entirely because of online banking services. Consequently, more than three-quarters (76%) of African banks prioritise digital banking services, according to the 2023 edition of ‘The African Banking Digital Transformation Report.’ Because smart phones now use 75% of Africa’s internet traffic, half of all Africans have access to banking services online.
Data courtesy: The African Banker, 2023
Africa’s digital revolution has positioned the continent to lead in digital banking
A culture of online commerce has acclimatised Africans to accept digital banking like no other continent’s people. In Asia, Europe and the Americas, a vast majority of citizens have long enjoyed traditional banking services. After a lifetime of experiencing banking through the traditional methods of visiting physical structures and making cash withdrawals at banks or at ATMs, such consumers were psychologically slow to embrace online banking. This was not the case with a vast majority of Africans, for whom the traditional banking experience was never known. Since the inception of banks in Africa, these institutions were perceived as colonial appendages not designed for African needs. Indeed, the fact that a majority of African commerce is conducted in the informal sector was never appreciated by the traditional banking system, which never reached out to expand their customer base. Bank fees for everything from maintaining accounts to securing loans excluded many Africans who found such fees unaffordable and regulating, making traditional banking in Africa exclusionary.
Source: Hamza Izourane
That all changed with the online revolution. Business people and ordinary consumers who never stepped foot inside a bank began conducting sales, moving money and purchasing goods online. Financial services like loans, retirement accounts and insurance became available over the internet. Language used online by companies was written to be understandable to anyone. Materials written in specific languages also makes clearer information to those users. The 21st century began with mobile phone service providers offering financial services like the money transfer company M-PESA, who is now Africa’s most successful mobile money service.
Banks took notice and developed apps to take advantage of proliferating smart phones. Opening bank accounts could be done entirely online. Using the internet, Africans could open non-resident accounts in other African countries as insurance against financial turmoil in their home countries. Even small banking markets were expanded through the function of digital banking. In Eswatini, the Swaziland Building Society introduced an online banking app in October 2023. Because electricity is sold in pre-paid units in Eswatini, customers find themselves in the dark after hours when outlets are closed. However, this innovation from the Swaziland Building Society allows citizens to use the app to purchase electricity and pay water bills wherever they may be.
By the third decade of the 21st century, banks’ sales divisions became more important than ever. The result has been transformative, exemplified by Africa leading the world in the development of online finance services. In 2024, Oliver Wyman’s digital banking index (considered the digital banking industry standard) listed South Africa as the world’s second most-developed online financial services sector. Four factors were considered in the assessments: financial advisory and innovation, digital marketing, usability and customer service and sales capability. While South Africa performed well in three categories, its digital banking industry led the world by a considerable margin for sales capability. South African digital marketers know how to draw new customers. Only one country in the world performed better in 2024: Singapore. What is remarkable is that Singapore is a wealthy, culturally homogeneous if small first world nation, while South Africa is a relatively poor, culturally and racially diverse, large upper-middle-income country.
Data courtesy: The African Banker, 2023
Ease of use draws Africans to online financial platforms
The race in Africa’s financial sector to entice online customers has led to attention being given to customer service as never before. Large investment has been made in this field to achieve customer satisfaction. Most Africans engage in what is called ‘day-to-day banking’: the use of ATMs and digital banking services every day or on no particular day of the week. This requires digital banking platforms to perform with technical perfection all of the time. Additionally, today’s new banking customers have never heard of ‘banking hours,’ when financial transactions could only be done during bank’s abbreviated weekday schedules and shortened Saturday opening times. In point of fact, conducting online business today during what used to be banking hours would cripple online commerce and probably lead to economic recession, given the curtailment of commerce and the movement of money.
Artificial intelligence can overcome language barriers
Using artificial intelligence (AI) to translate digital banking platforms into dozens and soon hundreds of African languages is an example of an ongoing innovation that is expanding the pool of Africans able to use these platforms. This is just one use of AI that has convinced the African Development Bank that the promotion of AI is essential to the growth of digital banking on the continent. At the African Development Bank’s Annual Meetings in Nairobi in May 2024, a partnership was announced with the technology giant Intel to train three million Africans and 30,000 government officials to equip them with AI skills. Digital banking is embraced by all ages and genders and is oblivious to cultural and racial considerations. So, the African Development Bank seeks economic equality through digital banking, equality that is a long-running elusive goal in Africa.
The critical points:
- Digital banking has enabled more than half of Africans to have access to banking services that was previously beyond their reach
- African banks consider development of their online services to be their foremost priority
- Because online banking requires for its expansion more skilled African technicians, the African Development Bank and private banks are investing more in AI training