Historically, many individuals have been excluded from formal financial services due to inadequate infrastructure, limited access to traditional banks and low-income levels. The narrative is, however, changing with the emergence of modern technology.
Key developments include:
Introduction of ATMs: Provided basic banking services outside traditional bank branches, but were limited to urban areas.
Mobile banking: Allowed individuals to perform financial transactions using mobile phones, increasing accessibility and reaching remote populations.
Mobile money services: Revolutionized banking by turning phones into digital wallets, enabling deposits, withdrawals, transfers and addressing barriers to financial inclusion.
These developments have transformed the financial landscape and provided opportunities for financial inclusion with respect to the previously unbanked populations. The emergence of digital banking further changed the dynamics with the application of modern technologies and platforms to provide financial services. Digital banking also known as neo banking includes various online and mobile banking services, digital wallets, and electronic payment systems. Unlike the traditional brick-and-mortar branches, a digital banking platform allows a customer to perform basic online banking activities without necessarily visiting a physical bank branch.
A customer can open accounts online, pay bills, transfer money and access financial information through a digital platform. Digital banking aims at providing a more convenient, accessible and user-friendly banking experience by leveraging on technological innovations.
Indeed, digital banking services have witnessed remarkable growth over the period. One of the reasons is the growing tech-savvy population and their changing preferences for banking services. Thus, the increasing penetration of smartphones and internet access by the young and other digitally engaged population is driving the demand for digital banking services. Indeed, many millennials and Gen Z prefer to use digital channels for their financial transactions. Other reasons stimulating the growth of digital banking include:
- The Need to Deepen Financial Inclusion: Digital banking can play a significant role in promoting financial inclusion by reaching unbanked and underbanked populations. There is an opportunity to leverage digital channels and innovative solutions to provide basic banking services to individuals who lack access to traditional banking facilities.
- Competition: Banks and financial institutions are investing in digital transformation initiatives to stay competitive and meet evolving customer expectations.
- Customer-Centric Approach: Prioritizing customer needs and delivering personalized experiences through digital channels. It includes providing support through various channels including helplines, chatbots and in-person assistance.
- Digital Transformation: Embracing emerging technologies such as AI, blockchain and automation to enhance operational efficiency and improve customer service.
Growth Statistics
Statista highlights these market insights on digital banks/banking in Africa:
- The Digital Banks market is expected to witness significant growth in terms of Net Interest Income. By the end of 2025, Net Interest Income in this market is projected to reach $4.19bn.
- It is anticipated that the Net Interest Income will experience a compound annual growth rate (CAGR 2025-2029) of 6.31%, resulting in a market volume of $5.35bn by 2029.
- When compared globally, China will generate the highest Net Interest Income in 2025, amounting to $528.8bn.
In a related development, Mordor Intelligence in its 2025 global Digital Banking Platform report provides these insights:
- The Digital Banking Platform Market size is estimated at $ 11.56 billion in 2025, and is expected to reach $22.30 billion by 2030, at a CAGR of 14.04% during the forecast period (2025-2030). The digital banking platform involves the deployment of cloud technology, artificial intelligence (AI) and blockchain technology. The outlook further highlights the main drivers of growth. These include:
- Many banks prefer to reduce the IT infrastructure costs associated with on-premise set-ups by leveraging cloud-based services. These services enable them to quickly deploy new products, scale infrastructure, cater to a broader customer base with diverse needs at an accelerated pace, and manage rapidly increasing real-time payments while maintaining compliance and security standards.
- The use of cloud technology has also helped mobile banking platforms to offer a responsive user interface (UI). It supports customers’ entire banking journey from onboarding to transactional banking requests on their mobile devices.
- Adoption of third-party applications for real-time payments such as WhatsApp Pay and PhonePay, has led to increased demand for reliable infrastructure by the banks to carry out UPI transactions smoothly. For instance, Visa recently completed a $5.3 billion acquisition of Plaid, a fintech startup that allows applications to connect with customers’ bank accounts easily and instantly.
Key Strategies
The banking industry is going through a digital transformation and enabled by holistic strategies including:
- Government Initiatives and Regulatory Reforms: Government is playing a crucial role in creating enabling regulatory environments with supportive policies and guidelines. There is therefore a striking balance between innovation and consumer protection (data security, and interoperability). Examples include simplified know-your-customer requirements, streamlined licensing procedures for fintech start-ups and regulatory sandboxes. Regulatory frameworks enable the licensing and regulation of electronic money issuers and payment service providers, encouraging the growth of digital payment solutions and expanding the digital banking ecosystem.
- Partnerships and Collaborations: Collaborations between governments, financial institutions, and fintech companies facilitate the rollout of digital banking services to underserved communities, by leveraging on each partner’s strengths.
- Digital Payment Systems and Infrastructure: Mobile money services, digital wallets, and QR code-based payment systems have proven effective in promoting financial inclusion, especially in communities with limited access to traditional banks.
- Digital Connectivity & Access: The increasing availability and affordability of mobile phones and internet connectivity has and continues to contribute to the adoption of digital banking services in both urban and rural areas.
- Expansion of Agent Networks: The growth of agent networks is facilitating cash-in and cash-out services, improving accessibility and customers’ convenience.
Emerging Risks
The digital banking ecosystem brings numerous benefits with associated risks that need to be minimised. Some of the risks include:
- Data Privacy Concerns: Digital banking involves the collection and storage of personal data. Data privacy breaches can result in significant reputational damage, legal penalties, and loss of customer trust. It is important to protect customer privacy and maintain regulatory compliance.
- Operational Disruptions: Technical glitches or system disruptions can impact the availability and reliability of digital banking services. Downtime disrupts service delivery and cause customer dissatisfaction. Robust business continuity plans and disaster recovery strategies can mitigate these risks.
- Fraud and Identity Theft: Digital banking platforms are susceptible to diverse types of fraud like phishing and social engineering with resultant financial losses. A robust transaction monitoring and fraud detection systems can help minimize these risks.
- Cybersecurity Threats: Hackers target digital banking platforms to gain unauthorized access to sensitive customer data or disrupt banking services.
- Technology and Innovation Risks: The need to innovate in the digital banking space to meet changing customer preferences bring in its wake risks in the adoption and integration of modern technologies. Poorly executed technology implementations can result in operational inefficiencies. A robust technology governance framework and thorough risk assessment processes are critical to manage these risks.
Key Takeaways
- Expanded Access: Digital banking can reach remote or underserved areas and improve financial inclusion. It can stimulate inclusive growth, reduce poverty, promote gender equality and rural development. It can empower women economically, supports SMEs and enhances resilience to economic shocks.
- Cost-effective: Reduces costs associated with traditional banking, making services more affordable. Financial institutions can design products suited to specific customer needs. Digital banking platforms can streamline transaction by way of quicker processing, loan approvals, and account management.
- Financial literacy: Many potential users lack understanding of financial products and digital literacy. Disparities in access to digital devices and internet connectivity remain a significant barrier to digital banking and financial inclusion.
- Regulatory complexity: Fintech start-ups drive financial inclusion with innovative solutions. But stringent or outdated regulations can stifle innovation.
- Cybersecurity Threats: Ensuring the security of digital banking platforms is critical to protect users from fraud and data breaches. Encryption, multi-factor authentication, intrusion detection systems and regular security audits can mitigate those risks.
- User /Data Privacy: Digital banking providers must be transparent about data practices and obtain informed consent from users.
Conclusion
The growth of digital banking services is transforming the financial landscape and providing opportunities for financial inclusion, convenience and cost-effectiveness. With the increasing adoption of smartphones and internet access, digital banking is poised to continue its remarkable growth. As the digital banking ecosystem continuous to evolve, it is essential to prioritize customer needs, address emerging risks, and ensure transparency to build trust and confidence.
BERNARD BEMPONG
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
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