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Analysis · Fintech · For Individual members

Can Neobanks solve the financial inclusion problems in Africa?

Farai Mudzingwa · 1 January 1999 · 6 min read · Nigeria, South Africa

neobanking

Africa's 350 million (est.) financially excluded adults present a unique opportunity for financial service providers on the continent. One of the technologies that is rising up as a solution is Neobanking. This is a direct banking service that operates exclusively online with no physical branch network. The biggest Neobanks in Africa currently include TymeBank (South Africa), Kuda (Nigeria), Chipper (Nigeria) and Payday (Nigeria).

The unique problems being solved?

Compared to banks and mobile money, Neobanks have proven to incorporate technology and move quickly to add highly demanded features.

  • For Kuda this meant deploying a smart budgeting feature with clear visual analysis to help Nigerians manage their finances effectively.
  • One of PayDay's highlight features is the ability to open a multi-currency account which receives different currencies (£,$ and €). This eliminates need for PayDay users to open traditional bank accounts to transact locally and another MasterCard/VISA for global transactions.

Beyond the agile and highly-focused feature set, Neobanks tend to offer lower charges than traditional banks. The money saved by not having branch networks & ATMs is passed on to the customers.

You may be wondering how a physical presence is established with branches. TymeBank achieved this by partnering with two retailers; Pick n Pay and Boxer Super Stores. The two retailers have a combined 2474 stores across South Africa (2204 and 270 respectively). By comparison, Standard Bank (established in 1862) has 370 branches in South Africa.