A new report authored by The Mckinsey Global Banking says Africa’s overall banking market is the second-fastest-growing and profitable of any global region, with over 300 million Africans banked.


According to the report, the number could rise to 450 million in five years.

The report highlights four segments of African markets – from the advanced markets like South Africa and Egypt, to fast-growing transition markets such as Kenya, Ghana and Cote D’Ivoire; sleeping giants like Algeria, Nigeria and Angola to the nascent banking markets like Democratic Republic of Congo (DRC) and Ethiopia.

The report says that Africa’s top quintile banks – the so-called ‘winners’ – are more profitable and over two times faster growing than bottom quintile banks.

Seventy percent of revenue pool growth will occur in the middle segments, defined as earning between USD 6,000 and USD 36,000 in annual income. The mass market – individuals earning less than USD6, 000 per annum – accounts for 13 percent of the growth, but is the fastest growing segment.

Whichever segment banks choose, having the right proposition is key. A survey of 2,500 banking customers in six African countries found that 25 percent of customers choose price as the most important factor in choosing banks. Equally important is convenience, also cited by 25 percent of customers.

Service is the third most important factor, selected by 12 percent of customers. We also find huge cross-sell opportunities – while 95% of Africans have transaction products, fewer than 20 percent have lending, insurance, investment or deposit products.

Forty per cent of Africans prefer to use digital channels for transactions. In four major African countries – South Africa, Nigeria, Kenya, Angola – a higher proportion of Africans prefer the digital channel for transactions to the branch channel.

Given low branch density in Africa, banks need to employ a digital first approach. The report hones in on four themes of innovation emerging in Africa on digital – end-to-end digital transformations (e.g. Equity Bank); partnering with telco companies (e.g. CBA in Kenya or Diamond Bank in Nigeria); building a digital bank (e.g. ALAT in Nigeria); and building an ecosystem (e.g. Alipay in China).

However, it says African banking still has the second highest cost of risk in the world. Poor data availability is part of the problem, with 11 percent of Africans are on credit bureaus, compared to in excess of 90 percent in advanced markets.