The global financial landscape has changed profoundly after the COVID-19 pandemic, with digitalisation being a key driver. During their post-pandemic routes to recovery, banks around the world have increasingly moved away from conventional banking methods toward more data-driven, digital business models. This has come in response to the growing demands for instant and personalised services, with many consumer touchpoints becoming online-only. While these changes have been in motion for several years, the pandemic is viewed as a catalyst driving the availability and appetite for digital financial services, stated Bongiwe Gangeni, Head of Consumer, Private and Business Banking, Africa & Middle East, and Europe at Standard Chartered, in an article in International Banker.
This shift has been particularly pronounced in Africa and the Middle East, where many banks have digitally upgraded a significant share of their operations, with tech-rich countries such as Kenya, South Africa, Nigeria, and the United Arab Emirates (UAE) adopting holistic omnichannel strategies encompassing both digital and physical channels.
This widespread adoption of digital financial services has not only allowed banks to streamline their operations and enhance efficiency but has also been instrumental in expanding financial inclusion. By breaking geographical barriers and reaching previously underserved communities, digitalisation has democratised access to financial products and services, fostering economic growth and social development in the region.
Across Africa, the acceleration of access to banking services continued in 2022, largely due to the popularity of mobile money and digital banking. Nearly half of Africans had access to digital banking last year. Notwithstanding, much of the population remains unbanked, even as the financial-services industry is expected to grow rapidly, generating $230 billion in annual revenues by 2025.
Expanding access to financial services can support a more inclusive economic recovery and speed up innovation in the industry, especially in Africa. The World Bank supports this view, urging policymakers to foster innovation within and outside the banking sector by creating headroom for new players and products. This needs to be backed by an open regulatory framework and expanding traditional infrastructure, such as credit registries and payment systems, beyond banks.
Kenya is an illustrative example of this. In 2022, the Central Bank of Kenya (CBK) operationalised the Digital Credit Providers Regulations, expanding its mandate to include Digital Credit Providers (DCPs). These regulations apply to all entities wishing to carry out credit facilities or loan services through digital channels in Kenya, including the previously unregulated non-deposit-taking microfinance institutions. So far, close to 10 percent of the 288 existing digital lenders have been cleared to operate in the country, providing instant loans to borrowers who may not otherwise have had access.
Join us the Banking Transformation Africa Summit to hear more about digitalisation in banking.