43% of banks cited the rise of fintechs and challenger banks as the biggest threats to their business according to the third edition of the African Digital Banking Transformation Report released by The African Banker Magazine in which a record 153 banks across 33 countries on the continent were surveyed. This was further reflected in the priorities carried by the banks this year with at least 83% of the banks considering building digital payments mobile app or a mobile wallet app as a priority to stave off the competition from the fintechs.
However, there are possible synergies between fintechs and banks with the fintechs providing the technologies while the banks provide the market reputation. This has been done by the likes of Ecobank which launch the Ecbank fintech Challenge which identifies financial technologies that it can roll out in its 33 markets.
Other than the rise of fintechs and challenger banks, the rising costs of doing business were considered the biggest threats to the banks with 47% of the survey respondents considering it as their main threat. Other threats that ranked highly included an unfriendly regulatory environment (40%) and data sovereignty (38%). Environmental, social and governance (ESG) were considered the least threat with just 14%.
The majority of banks in Africa are not digital natives, but transforming into digital banks as a growth strategy ranks high on the priorities. 96% of the banks surveyed mentioned it was the most important factor or ranked it in their top three priorities.
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But the banks are not putting their money where their mouth is. Just 28% of the surveyed banks are investing more than $3m a year in digital transformation. This can be attributed to the varying sizes of the African banks, but last year 37% of them were spending at least $3m on the same, a drop of 9%. In the case of 35% of banks, the efforts to spend on digital transformation are being led by the CEO, Chairman, Managing Director or Vice President which is a rise from the 15% of last year.
Among the services offered by the banks, 79% of them offer mobile banking, more than Internet banking (68%). This isn’t surprising. Africa has seen a boom in mobile phone penetration. In 2020, Mobile penetration stood at 46% according to Statista. By 2025, this figure is expected to hit 50% which means at least 500m people across the continent will have mobile phones. Also, mobile phones account for 75% of all online traffic across the continent.
Also, the number of banks that offer digital lending jumped from 29% in 2022 to 48% in 2023. Digital lending is an area that banks will tussle with fintechs, who pioneered this service. The Artificial Intelligence(AI) bug that is sweeping across all industries has also hit African banks. 69% of the surveyed banks consider AI to be the most important technology trend in 2023, a far cry from cyber security which was the most important technology trend last year.
