African banks making progress towards digitalization
African banks remain resilient and committed to invest in digitization to remain relevant in today’s competitive landscape, despite an adverse macroeconomic environment, according to a report.
The report was released by African Banker, in collaboration with banking technology developer Backbase.
Banking access across Africa has increased in 2022, with 48% of the continent’s population having access to banking services, compared to 45% in 2017, the report showed.
This growth can be attributed to the popularity of mobile money and digital banking. Approximately 50% of the continent’s population, however, remains unbanked, indicating significant potential for further growth in the sector.
McKinsey predicts a 10% annual growth rate in the African financial services market, generating $230bn in annual revenues by 2025.
Cash still dominates financial transactions in Africa, accounting for about 90% – while electronic or digital channels represent only 5% to 7%. In comparison, Asia and Latin America have a higher digital banking adoption rate of around 50%.
Nonetheless, a new generation of urban, middle-class customers is emerging, who prefer conducting transactions online. Younger people are more inclined to adopt digital technology than are their parents and grandparents, suggesting that the uptake of digital banking services will continue to grow.
The limited infrastructure for card payments and low usage of point-of-sale networks also contribute to the preference for digital banking.
Accessibility of digital banking is not solely dependent on the availability of digital platforms: it also requires potential customers to have the ability to access these, particularly through mobile phones. Mobile phones dominate online access in Africa, accounting for approximately 75% of all online traffic.
Consequently, bank digital platforms are designed primarily with mobile use in mind, although it is essential for customers to switch seamlessly between devices.
The main obstacles to accessing digital services include high mobile handset purchase prices and data charges. According to the World Wide Web Foundation, mobile internet costs accounted for 5.8% of average income in Africa in 2020, making it the most expensive region of the world for digital access.
The average costs of 1 GB of data and of smartphones have, however, decreased significantly between 2018 and 2021. This indicates a potential for increase in the number of people able to access mobile banking.
Source: African Business