In Africa more than elsewhere, the low banking rate offers promising growth prospects for digital banks that will be able to identify the real needs of populations and adapt to local realities.
Although it currently has only 21 fully digital banks that serve 18 million customers, sub-Saharan Africa offers enormous growth potential for these new players who are disrupting traditional finance, estimated the consultancy Fintech Consultancy Group (Fincog ) and payment solutions provider Banking Payment Context (BPC) in a report published on March 17, 2022.
“These numbers are relatively low for a population of over one billion. But the number of banks offering their services exclusively through digital channels has been steadily increasing since 2017, thanks in particular to the positioning of Nigeria as a new hub of digital banking in sub-Saharan Africa”, underlines the report entitled “Digital banking in Africa sub-Saharan”.
Nigeria (10 neobanks) and South Africa (7) concentrate about 80% of active neobanks in Africa.
The report cites South African neobank TymeBank as a true African success story in fully digital banking. Founded in 2018, this establishment has succeeded in the space of three years in attracting more than 4 million customers in the most mature banking market on the continent, thanks to its offer adapted to local conditions.
In addition to opening an account in less than 5 minutes, TymeBank does not charge account maintenance fees and remunerates savings products at rates of up to 10%. The digital bank also offers its services online and offline, through self-service kiosks that open accounts and issue debit cards.
Fincog and BPC believe that the relatively small number of neobanks south of the Sahara is mainly due to the modest penetration of the Internet and the regulatory slowness noticeable in the overwhelming majority of countries in the region.
Six keys to success
Despite these persistent obstacles, sub-Saharan Africa offers promising growth prospects for digital banks. While internet penetration is expected to increase in the coming years, 57% of people in the region have no access to financial services, including mobile money accounts.
However, the study has defined six keys to success for neobanks in sub-Saharan Africa. This primarily involves targeting underserved populations and increasingly connected younger generations, particularly in highly populated countries such as Nigeria, Ethiopia, Tanzania, the Democratic Republic of Congo and Uganda, which still show banking rates ranging from 25% to 47%.
Digital banks wishing to establish themselves in sub-Saharan Africa would also benefit from offering very competitive cross-border fund transfer costs to grab market share from traditional banks. According to the World Bank, these costs amount to 8.2% in Africa compared to 5.6% in Latin America and 4.9% in South Asia.
Neobanks should also provide access to finance for micro, small and medium-sized enterprises (MSMEs), which remain underserved by incumbent banking players. Of the 44 million formal MSMEs operating in sub-Saharan Africa, around 52% face difficulties in accessing credit. The unmet financing needs of this type of company are estimated at $328 billion.
The study also recommends that digital banks comprehensively identify all major concerns of their target customers to meet their unmet needs, and focus on reducing the costs of various banking services to ensure their adoption. by a sufficient number of customers.
And last but not least, Fincog and BPC believe that regional and international players eyeing the nascent digital banking market in sub-Saharan Africa are called upon to put in place agile structures capable of adapting quickly to regulatory changes, change of customer behavior and economic upheavals.