Brian HungweBy Brian Hungwe|April 26, 2022|16 Minutes|In Opinion


Could Africa Wave goodbye to the banks? 

COVID -19 presented the worst business disruptions in decades due to sustained lockdowns. On the other side of the coin, it proved a business boon for the Fintech revolution as online transactions they now pose a threat to the future of banking.Due to often tight regulatory and licensing systems, some Fintechs are for now strategically cooperating with commercial banks, particularly in Senegal, to establish trust with the central banks.

Once that trust is established, they wean off, targeting new growth prospects independent of their banking partners. In East, Africa regulators have allowed the Fintechs to flourish, with little regulatory oversight. This may be a hint of what the future may hold.  With governments eyeing huge tax returns from this flourishing frontier, economists predict less stringent future regulatory frameworks.

Fintech combine finance with digital technology, providing remittances, asset management, electronic digital payments, and traditional banking activities.

For most West African Fintechs, the COVID-19 pandemic provided scope for that unprecedented online boom.

David Cracknell, a director at First Principles, a consulting firm assisting financial institutions rethinking digital age financial services in Africa and Asia, said that COVID-19 has accelerated the move from cash to digital transactions in most markets in Africa.

“There has been an extension of fintech facilitated payment services, merchant services, and e-commerce. The wider impacts are that with more funds held digitally, the available market for other fintech services has increased, and there have been faster progress with regulators and policymakers – you can see this with the widespread adoption of sandboxes and even in interest in central bank digital currency,” says Cracknell.

The Francophone hub for Fintech is Dakar, Senegal, and the most preferred popular unicorn is the Wave, which was backed by Silicon Valley venture capital.

The Wave is riding high on a  mobile generation that was previously excluded from the financial mainstream.

Wave is ranked 209th by Findexable Limited. It’s a beneficiary of the disastrous COVID-19 disruptions.

“In the case of Wave, our growth trajectory was already showing an upward trend along key metrics like new users, and transaction volume before COVID restrictions hit. While COVID could have accelerated user adoption due to restrictions on in-person cash-based transactions, Wave’s massive success over the past two years in West Africa cannot be attributed to COVID alone,”  says Rashmi Pillai is the Wave’s Head of Public Policy.

The Wave, had such phenomenal growth, it  became  a magnet for $200m investments from the Silicon Valley venture capital last September. Its valuation surged to $1.7bn, making it the first enviable unicorn company in the Francophone sphere following its acquisition by World Remit, a global payments firm.

Last year alone, five other African Fintechs raised over a billion US dollars between them, providing accelerated growth pattern that may double this year, making it the most active financial sector. This renders Africa a productive playground for unicorns. The sudden accelerated huge Fintech success and  interest, eats into bank’s financial domain, and provides huge returns in shortest space of time.

“A good way of comparing this would be against similar wallet or mobile money providers on the continent. While all wallet providers saw an increase in transaction volume, very few have seen such a rise in user-sign ups and new payers as Wave. Wave was built with two fundamentals in mind – a. Customer Centricity and b. Technology First – to address the needs of millions of underbanked on the African continent.”

COVID-19 kept people indoors, forcing them to embrace online transactions. Traditional banks stood by like a stopped grandfather clock. This gave Fintechs a perfect opportunity to tap on the financial orphans.


Stefan Nalletamby, is the African Development Bank, Financial sector Development director.  He says : “The Covid-19 crisis has accelerated the digitisation of Africa’s financial sectors. In response to the pandemic, many policymakers pushed for digital payments to reduce the use of cash and to enable businesses and households to cope with restrictions on movement and economic activity. This accelerated the move towards cashless societies, which was already ongoing,”

As  a result, he says that banks such as the Central Bank of Kenya lifted the cap on digital transfer volumes and the Bank of Ghana launched a universal QR code payment solution, connected to customers’ bank accounts, for making payments in shops, while the Central Bank of the Republic of Guinea eased the identification requirements for opening electronic money accounts and recommended reducing electronic service fees.

Many African financial service providers have also made adjustments during the crisis to promote and facilitate the use of digital channels.

As Fintech’s phenomenal growth plays out, the future of the commercial banks remains bleak, with digital financial consultants predicting a slow death, which may be averted through strategic partnerships or mergers and acquisitions.

Traditional means of providing loans by banks – in which paperwork and accompanying due diligence is key, Fintech revolution expedites client profile due diligence by establishing a huge online data trove that surpass original information contained in banking records, checking any online relevant profile data. As such, it is more effective that traditional banks.

Banks could still retain their strong asset base and maintain its depositors base, but warnings are that they should adjust to new technology, provide technically accessible credit platforms with digitally efficient systems with similar easy loans, and low interest online. The traditional banks had clung to their rigid and strict loan disbursement control approach, that took time to respond to credit requests because of a tight due diligence exercise.

Nalletamby says banks are already adjusting to new digitisation realities expanding their digital offerings, this representing almost 90% of surveyed banks that reported that the pandemic had accelerated the digital transformation of their internal processes, and 89% believe that the customer shift towards digital channels will persist after the pandemic ends. These findings are consistent with those of other recent surveys, in which bank executives in Africa and across the globe have indicated their belief that digitisation is a key factor that will shape the industry.

“Fintechs are only a threat to traditional banks if the latter refuse to digitise, which does not seem to be the case, based on the above. On the contrary, fintech offers traditional banks opportunities to expand by offering new services to existing customers and the previously unbanked, an opportunity the banks seem to be seizing. We are also seeing an increased drive by regulators to integrate traditional and digital banking across the continent as a means to drive financial inclusion,” says Nalletamby.

The Fintech lenders have access to a more wide-ranging online profile of borrowers, providing low interest rates in sharp contrast to commercial banks. With such a huge treasure trove of a huge clientele profile data, it provides scope for managing lending risk. As such, cashless online transactions are providing scope for greater online transactional financial activity, with rapid digital financial activities accelerating the West African Fintech hub, signalling traditional banks to change their rigid banking customs.

The Fintechs spectacular growth and profits, are posing a threat, which are facilitated by seamless digital transactions away from the corridors of banks. Statistics provided by Digest Africa, a database of early-stage investments, provide a progressive growth path for Fintechs. It reports that Fintech firms raised over $906 million in the last quarter of 2021, representing over 60% venture capital African investments.  West Africa, long regarded as an economic unit, has suddenly become the hub Fintechs, with traditional powerhouses, Senegal, and Nigeria grabbing the bulk of the 60 per cent inbound fintech investments. Nigeria is hugely entrepreneurial with a 200m population, the largest of any country in Africa. Half that Nigerian population have no bank accounts, providing a perfect ecosystem for Fintech growth.

Mobile phone penetration has created huge platform for Fintechs to jump on as they bridge the gap..

The Fintechs spanning the Anglophone and Francophone African region, have attracted huge foreign capital, with a host of the foreign entities funded by Japan and China, and Jeff Bezos backing Chipper Cash, a peer-to-peer payments operator operating in at least eight African countries.

The commercial banking sector’s future, with biting Fintech competition is now a subject of financial prophesies. The Fintech revolution is predicted to consume banks, as West Africa is increasingly narrowing the digital financial interaction. The region is known as a huge trading centre for goods and services, that operates as an economic unit.

With banks, there is some reluctance to embrace change, given the rigidity of risk averse shareholders, who will wait until the systems have been tested before jumping the bandwagon. Already, payments systems are digitised, with crowd funding and data analytics, providing more efficient business relationships that operate at the click of a button.

The Fintechs revolution is difficult to ignore, with mobile payments in West Africa reenergising the financial sector. GSMA, a global organisation investing in the mobile ecosystem research, predict that West Africa will have about 240m mobile subscribers by 2025, largely driven by young consumers, generating economic of $70b from mobile technologies.

The growth Fintech is foreseeably guaranteed, given that half the African population have no infrastructure and access to banks. The mobile phones are expected to break digital divide. The Fintech revolution has begun reaching these people.  So, do traditional banks face demise like VHS cassettes’?

“Yes, and no,” says David Cracknell.

“Banks are changing, those that fail to change are unlikely to survive, those that take too long to change will not survive,” he says.

However, the strength of the banks will lie in the fact that they have capital and the ability to invest. This, Cracknell says ‘is far more so than your average fintech. Just as financial technology has forced disintermediation of financial services, comparative advantage will lead to reintermediation of financial services for the best banks.’

Hua Wilfried Serge Koffi, an economist, researching on the future of banks, says :”Looking at the development of Fintech in the world and its impact of Fintech solutions in Africa, it is important to notice that in more than fifteen African markets, there are now more mobile money accounts than bank accounts. Therefore, Fintech in developing countries is not only about making existing services more convenient, it is creating new infrastructure and providing for greater inclusion of millions of people in the real economy.”

Cracknell says: ”People need banking, but they don’t necessarily need banks.” However, he believes, ‘Banks will continue to hold value because they are trusted. Faceless services are useful, but often underfunded fintech’s can suffer with challenges with service resolution, with irate customers left at the end of an unanswered telephone line or email.” He also says there is also a short-term price to pay in embracing Fintechs, and abandoning banks, given concerns around unethical practices, fraud and cybersecurity.

Despite these fears, Wave’s dream is rolling ahead.

“Wave’s vision is to make Africa the first cashless continent. As a company, we are all about building compelling financial products for customers – beginning at the bottom of the pyramid (which are a large majority in Africa). Wallets and domestic remittances i.e. person to person payments are only tip of the iceberg. Like in Senegal we plan to offer all types of payment solutions – bill payments, merchant payments, bulk payments, international remittances and more – targeted both at consumers and businesses,” says Pillai,

Watch the Fintech space.