Digital banking boosts financial inclusion, new business models in Africa

A fresh crop of fintech startups, investments in digitalisation by traditional banks, and new regulations in the wake of the COVID pandemic are further fueling a wave of innovation in financial services across sub-Saharan Africa.

South African currency / money / budget / finance / 5 Rand Nelson Mandela banknotes / 2 Rand coins
RapidEye / Getty Images

The digital transformation of financial services in sub-Saharan Africa has disrupted traditional banking, and the steady stream of fintech start-ups opening their virtual doors for business  — spurred by new, favourable regulations by governments — indicate that the wave of innovation will not subside anytime soon. 

Though the COVID-19 pandemic has hit Africa hard, it has also further fuelled the ongoing digital transformation of businesses, including the digitalisation of banking. Digital banking will buoy economies on the continent in the long run by bringing financial services to people who currently don't have access to traditional bank accounts, according to market observers.

The pandemic is forcing most African economies into their first recession in 25 years, according to an International Monetary Fund report in October 2020. But there is a silver lining.

Before COVID hit, African economies were already being transformed by, among other things, the digitalization of financial services.

"Together with the mobile money revolution, which now reaches 300 million accounts in Africa – the highest in the world –, these digital ecosystems had already begun transforming job markets (by creating direct and indirect jobs), modernising banking, expanding financial services to the underserved and unlocking innovative business models for local small and medium‑sized enterprises (SMEs)," according to a report from the African Union and the OECD entitled "Africa's Development Dynamics 2021:Digital Transformation for Quality Jobs.

To continue reading this article register now

Download CIO's Roadmap Report: 5G in the Enterprise