African banks in panic mode as fintech and telcos gain ground – Cryptopolitan
The banking landscape in Africa is at a crossroads, with almost half of the continent’s financial institutions identifying fintechs and telecommunications companies as significant threats, according to the latest African Banker annual report.
With the rapid digital transformation across industries, the continent’s banking sector is being forced to adapt or risk being sidelined.
Disruptions in the African banking landscape
The survey included 153 African banks, with approximately 40% signaling high concern over the rise of fintechs and telecoms in the financial ecosystem. Meanwhile, a significant 69% saw artificial intelligence (AI) as the most critical technology shaping the future of the banking industry.
Despite acknowledging the looming revolution, just over a quarter of banks reported spending more than $3 million annually on digital transformation and innovation.
This year’s report revealed that 74% of banks considered cyber security one of the defining trends for the future. However, it seems that the disruptive potential of fintechs and telcos is now becoming the focus of their concern.
A statement from African Banker Magazine highlights the pioneering role fintechs, digital-first banks, mobile money and agency banks are playing in the continent’s banking sector.
The magazine underlines the prominence of fintechs in the industry, supported by their share of the total capital raised by African technology startups in 2022.
The rise of fintech in Africa
A February report published by Bitcoin.com News revealed that African fintechs had raised $1.45 billion in 2022, an increase of about 40% compared to the $1.04 billion raised in 2021.
Fintechs also represented just under half of the total of 5,200 companies, according to a quote from the management consultants McKinsey in the African Banker’s report.
Despite the majority of banks recognizing the essential role of digital technology, few seem to be developing strategies centered around it.
The report pointed out that while only 4% of banks saw digital technology as just one factor among many or unimportant, only 51% considered it the most decisive factor.
This lack of action was underscored by only 28% of respondents confirming that their institutions invested more than $3 million annually in digital transformation and innovation.
Apart from grappling with competitive pressures from fintechs and telcos, African banks are also grappling with hostile regulatory environments, data sovereignty issues and skilled labor shortages, which they identified as significant threats.
In this digital era, the banking sector in Africa appears to be changing, pushed by the rising tide of fintech and telecommunications. As traditional banks on the continent grapple with this new reality, it remains to be seen how these institutions will respond to remain relevant in this rapidly evolving financial landscape.
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