According to the findings of KPMG’s inaugural Southern African Banking Survey that was recently released, Artificial Intelligence (AI) and Digital Innovation are poised to play a crucial role in shaping the future of banking in Africa.
The survey suggests that technology-driven advancements will continue to drive transformation and growth within the banking sector throughout the African continent.
According to respondents, this growth would be driven primarily by opportunities in investment banking, corporate banking, and transaction banking, followed by retail and wealth management, underpinned by innovation that enables more customers to access banking services through mobile banking.
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Speaking on this, Auguste Claude-Nguetsop, a partner and head of Banking Advisory at KPMG in Southern Africa said that the integration of AI in Africa’s banking sector, as well as digital innovation, will be crucial for financial inclusion, improved customer service, amongst several others.
In his words,
“One need only look at the remarkably quick uptake of mobile payments across Africa, and then compare it to the more legacy systems still prevalent in the developed world. AI and digital innovation open further opportunities for financial inclusion, personalization, and customer service.
“The arrival of digital-first banks in Africa, and their easily understood customer offerings has proven this. Challenged by legacy infrastructure and technologies, skills shortages, and regulatory requirements, traditional financial institutions have a longer adoption curve”.
However, the survey highlighted key challenges that would limit such technological advancements which include, the existence of a reliable regulatory framework, solid governance and transparency across the industry, as well as considerations around anti-money laundering and compliance, as well as currency and political risk.
In the survey, 38% of participants confirmed that between 21% and 30% of their IT budget was devoted to these priorities. However, 54% of survey participants indicated that the primary factor preventing the adoption of AI and digital innovation lay within budgetary constraints. 50% outlined that they had, or intended to deploy AI technologies to reduce the costs associated with compliance.
By embracing technological advancements, banks in Africa can unlock new opportunities for innovation, drive financial inclusion, and pave the way for sustainable growth in the digital era.
At least half (51%) of the 153 African banks surveyed in the African Digital Banking Transformation Report 2023 consider digital transformation to be the one most important factor in their growth strategies.
Also, with Al becoming increasingly important, overtaking cybersecurity as the most important trend, Al-powered tools are enabling these banks across the continent to engage with customers effectively, build local natural languages into interactions, and improve credit scoring.
Overall, the findings of the KPMG survey underscore the pivotal role of AI and digital innovation in shaping the future of banking in Africa.