The Digital Shift In The Banking Industry

Digital transformation has had a profound impact on banks in Africa. However, while the term ‘digital transformation’ is widely used, it is often understood differently by individuals and companies. Digital transformation goes beyond implementing a single app or system; it’s a comprehensive journey of integrating digital tools across all business areas, reshaping core functions and enhancing customer value. The roots of digital transformation lie in the business need to adapt to changing market demands and customer behaviours. Initially, companies experimented with digitising operations and offering online services. This set the stage for the digital ecosystem we see today. The COVID-19 pandemic accelerated digitisation by forcing organisations to embrace digital-first strategies to meet consumer expectations and support remote operations.

The banking industry too has undergone a remarkable transformation. From the introduction of ATMs in the 1960s to telephone banking in the 1980s, internet banking in the 1990s, and mobile banking in the late 1990s, technology has reshaped how we interact with banks. Today, customers can seamlessly conduct transactions with just a tap of a phone, eliminating the need for physical cards.

It means African banks are navigating a complex digital transformation journey, shaped by the continent’s unique opportunities and challenges which include limited digital infrastructure, cybersecurity threats, data privacy concerns, regulatory challenges, a shortage of skilled professionals, and the integration of new technologies with legacy systems. Meeting these challenges has driven innovative solutioning and partnerships, showcasing the resilience and creativity of the banking sector.

Between 2016 and 2021, internet usage in sub-Saharan Africa grew by an astounding 115 per cent. 49 per cent of Africans joined formal banking between 2011 and 2022 and 160 million Africans gained broadband internet access between 2019 and 2022. Mobile money has become a lifeline, with Africa now one of 12 economies where more adults have mobile money accounts than traditional bank accounts. According to the African Digital Banking Transformation Report 2024, approximately 76 per cent of surveyed banks consider digital transformation a top priority, with 60 per cent reporting that most of their operations are now digitally transformed. This shift is driven by the need to enhance customer satisfaction and financial inclusion.

Driving Digital Transformation Through Technological Advancements

The potential to create a universal and inclusive banking system is massive. Financial inclusion can unlock opportunities for millions currently excluded from formal financial services. Innovations in mobile money, digital payments, and fintech solutions are already making a difference. A significant force for change, the emergence of alliances between conventional banks and mobile network providers (MNOs) has helped close the accessibility gap in finance. Absa’s partnership with Safaricom in Kenya, for example, serves as an illustration of how banks and MNOs can work together to solve issues related to access and infrastructure. Through this arrangement, customers can conduct banking operations straight from their mobile devices, improving financial access for Kenyan SME’s and individuals. For individuals without conventional bank accounts, enables transfers straight into beneficiaries’ mobile wallets.

We recognise that the future of banking in Africa lies in addressing these challenges head-on. Mobi Tap, available in Kenya, Botswana and Zambia is a standout example of digital innovation tailored to address a critical pain point for small business owners. By leveraging NFC enabled smartphones, it offers an efficient and modern solution for accepting card payments. Unlike traditional methods that rely on POS terminals and complex setups, Mobi Tap digitises the process in a mobile app, making it significantly more accessible and user-friendly for small businesses. This is particularly impactful in underserved areas, where the cost of customer acquisition and service delivery has historically been prohibitive.

Towards A Collaborative Future

The reality is that no single entity can solve Africa’s digital transformation puzzle. Collaboration across industries, governments, and communities is essential. Ecosystem banking represents a strategic approach that goes beyond traditional banking services. Investing in and partnering with FinTech companies is key for Absa to bolster technological capabilities and tap into FinTech’s expertise in areas such as digital lending, payment solutions, and financial management tools. This is not just about improving banking; it’s about unlocking economic potential, fostering entrepreneurship, and ensuring that Africa’s digital transformation benefits everyone. Looking ahead, we are excited about the emerging trends that will continue to reshape our business landscape.

Tamu Dutuma is the Head of Technology, Strategy and Transformation at Absa Regional Operations.