African banker magazine, the best-selling publication dedicated to banking and finance in Africa, and Backbase, the leading engagement banking platform, have partnered to produce the 2nd edition of their comprehensive report on the ongoing African digital banking revolution in exploring the major trends shaping the future of banking and financial inclusion on the continent.
To understand the trends, the editorial staff of African Banker interviewed more than 100 banks through as many interviews asking them how they place digitalization among their top priorities, their digital development expenses, the impact of Covid, their digital offers for SME customers and their priorities within the digital space. Over the past year, we have seen a growing trend towards the digitalization of banking services. This is not surprising given the effect of savings and efficiency induced by digital platforms.
The report shows that the pandemic has largely accelerated the change of model for banks as it has highlighted the many limitations they faced. A whopping 49% of African banks said they had significantly increased the speed of implementation due to Covid-19. Some banks were already trying to switch from the traditional model before the pandemic, due to the emergence of new competition from African fintechs and pure digital players. In this context, it is not surprising that the need to transform banking practices seems widely accepted. Nearly 81% of respondents describe themselves as being open to change.
There is now an overwhelming consensus on the critical importance of digital transformation for the future of African banking. About 60% described it as the most important factor and 34% said it was among their top three priorities. There has also been a big change in the size of budgets allocated by banks to digital development since our last survey. A total of 39% of banks surveyed now spend at least $3 million a year on digital transformation and innovation.
Another challenge highlighted in this report is the lack of inclusion of African small and medium enterprises in new digital platforms and the banking system in general. Indeed, SMEs are often afraid of the huge fees that banks usually charge. Not being able to address these potential customers represents a missed opportunity for banks, even more so in the digital age where SMEs are attracted by new fintech players. Fortunately, some lenders have adopted strategies to address these issues, and their efforts could inspire the industry.
When it comes to the challenges facing the banking sector, the lack of skilled labor is seen as the biggest threat and is cited by 46% of survey participants. Perhaps surprisingly, telecom companies entering the industry to provide financial services are seen as a far bigger threat to banks’ market share than the rise of fintechs and challenger banks.
It is widely accepted that digitalization can solve many of the structural problems that exist in access to finance in Africa and banks still have a huge role to play in spreading financial inclusion, including in the B-to- B. This is why it is essential to create an optimal legal and technological environment to carry out this crucial mission.
The full research report, accessible here, offers a clear perspective on market trends, challenges, detailed analysis of survey results, and recommendations.
“We are delighted to have collaborated with IC Publications on this extremely important report as it describes the promising advances made as well as the challenges ahead. The ability to personalize banking experiences is a key expectation of banking customers today. and banks have understood this. At Backbase, we believe that the barriers to digital banking are falling but traditional lenders are still being left behind by extremely nimble and nimble fintech competitors. We are here to help financial institutions to exceed their customers’ expectations at every touchpoint and stay relevant in the new digital era,” said Matthijs EIJPE, Regional Vice President EMEA at Backbase.
“With demand for reliable and up-to-date information on Africa’s banking and financial sectors at an all-time high, we aim to provide the necessary support to businesses and individuals participating in an industry that is reshaping the future of Africa. economy of the continent. We are happy to have accomplished this important work with the help of Backbase. They have been an invaluable source of expertise to help us decipher the transition that is taking place within African financial institutions”, declares Omar BEN YEDDER, Group Publisher, and Managing Director, at IC Publications.