Africa’s overall banking market is the second-fastest-growing of any global region, says a McKinsey & Company report.
While the global banking industry is facing sluggish growth, Africa’s banking sector provides a refreshing contrast, thanks to factors such as a digital-first approach, simpler, leaner banking models and compelling price offers.
This is according to a new report on the African retail banking sector titled: ” Roaring to life: Growth and innovation in African retail banking ,” released by McKinsey & Company’s global Banking practice.
The survey of 2 500 banking customers in six African countries, including SA, found that 40% of respondents preferred using digital channels, while 25% of customers choose price as the most important factors in choosing banks. Equally important is convenience, also cited by 25% of customers. Service is the third most important factor, selected by 12% of customers.
According to the study, nearly 300 million Africans are banked today, a number that is likely to rise to 450 million in five years. The continent’s overall banking market is the second-fastest-growing and second most profitable of any global region, and a hotbed of innovation, it adds.
McKinsey found that Africa’s top quintile banks – the so-called “winners” in SA, Egypt, Kenya, Ghana and Cote D’Ivoire – are simultaneously four times more profitable and grow more than twice as fast than the bottom quintile banks. The key findings are that these “winners” are defined by employing one or more of five winning practices, which include a digital-first approach; innovation on risk; drawing on the middle segments: simpler, leaner banking models and profitability based on geographic footprint.
“Around 40% of the African banking customers in SA, Nigeria, Kenya, Angola said they preferred to use digital channels for transactions. In four of the continent’s major banking markets, the share of customers who prefer digital channels is significantly higher than the share preferring the branch channel. Banks can adopt one of four distinct digital strategies: The first is to digitally transform their existing operations, to increase their share of digital sales and transactions to beyond 60 to 70% on each measure, as Kenya-based Equity Bank has done.
