The relationship between traditional banks and Fintech companies in Africa has witnessed great change. I’ve observed this shift firsthand. It’s interesting to see that banks no longer view Fintechs as competitors but as valuable partners in scaling digital banking. This is an important turning point in moulding the future of financial services in Africa.
There was a time when banks and Fintechs operated separately. However, over time, it has become clear that customers’ growing needs have shown the importance of working together. This shift is a major step toward expanding digital financial services (DSF) across Africa.
With the great progress in the DSF sector, we’ve achieved something significant. Digital financial services are changing how Africans access money. As of December 2022, Africa has attained huge success with mobile money and digital banks, which has been beneficial in driving financial inclusion across the continent.
Statistics from the World Bank Group show that in 2022, 28% of adults in Sub-Saharan Africa had a mobile money account. Compare this to the wage in the developing economy, and it’s clear that we’re driving change in financial inclusion.
What’s more exciting is the role that Fintechs are playing in this transformation. A McKinsey fintech report I recently came across revealed that fintech companies in Africa are providing financial services estimated to be up to 80% cheaper than traditional banks. Additionally, these companies offer savings accounts with interest rates up to three times higher than those given by conventional banks.
Beyond cost advantages, I’ve noticed many other factors driving the fast growth of Fintech in Africa. This includes the growing affordability of smartphones and better internet connection. These tools allow access to digital financial services like never before.
But it goes beyond just the technology. The people are just as important. Africa has a growing number of skilled tech professionals who are creating innovative solutions. Rising urbanisation also plays a role, as more people move to cities and demand more convenient financial services. All of these indicate that the fintech sector is now an important part of Africa’s economic system.
The McKinsey report further disclosed that cash still accounts for about 90% of transactions across the continent. This shows just how much possibility there is for Fintech to take over and change how people handle money. If the sector can reach the level of fintech adoption seen in Kenya, it’s estimated that African fintech revenues could grow up to eight times their current value in just three years.
There’s still more to be done. Reaching even more people and making a lasting impact requires smart strategies. These strategies must consider Africa’s diverse cultures and economies to be certain that solutions meet the real needs of the people they’re meant to serve.
Scaling digital financial services in Africa demands collaboration and commitment from everyone involved. I’m talking of governments, businesses, investors, and communities. The future of DFS depends on creating an environment where innovation and growth can thrive sustainably. Here’s how we can get there:
Digital services can’t succeed without reliable infrastructure. Many parts of Africa still lack consistent internet and electricity. If we truly want to bring DFS to everyone, stakeholders should invest in expanding connectivity and power to rural and underserved areas. Without this, millions remain locked out of the digital economy.
Furthermore, regulations should protect consumers and encourage growth at the same time. Governments and regulators are powerful enough to create an environment that supports innovation without stifling it. Clear rules for data protection, fraud prevention, and customer rights are non-negotiable. As someone who has observed this space closely, I believe collaboration between fintech providers and regulators is important. When the rules are clear, trust grows. And trust is everything in financial services.
In addition, education is at the heart of scaling DFS. Many people hesitate to adopt digital solutions because they don’t understand how they work or fear being scammed. To change this, we need to simplify things. Fintech companies should run campaigns that explain why digital finance is beneficial and how to use it safely.
Africa has a tech-savvy population full of ideas. If we support these talents, the innovation potential is endless. Stakeholders should focus on creating spaces where entrepreneurs can test and launch their ideas. When we invest in our people, we invest in the future of DFS.
Likewise, scaling DFS involves building something that lasts, something that involves making a profit and creating a positive social impact. Partnerships between banks, fintech companies, and mobile operators can lead to business models that work for everyone.
Finally, trust is the glue that holds the financial system together. Without it, people won’t use digital services, no matter how convenient they are. Stakeholders should prioritise transparency and accountability, working together to deliver reliable services.
Overall, scaling digital financial services in Africa goes beyond technology. It’s a way of creating opportunities for everyone. By doing what is necessary, we can transform lives and economies across the continent. There is immense potential out here, and it’s up to us to realise it.