South Africa’s major banks are stepping up their push into the rest of Africa as many Western lenders exit or scale down operations, but the race for new customers is increasingly being driven by fintechs and mobile money operators.
Keagan Higgins, investment analyst at Anchor Capital, says players like M-Pesa and MTN Mobile pose a serious threat to traditional payment networks. They dominate peer-to-peer and merchant transactions across East and West Africa, offering millions of unbanked Africans access to digital finance.
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“Fintechs matter more in Africa than anywhere else in the world. They are the payment rails. Banks will have to integrate mobile money players and not compete with them,” he says.
In a recent report on African banking, Moody’s noted that the exit of groups such as Standard Chartered, HSBC, Barclays and BNP Paribas has created “a vacuum being filled by an expanding cohort of pan-African banks”.
Local lenders, the rating agency added, are well placed to grow retail and SME businesses, finance infrastructure, and strengthen corporate offerings, given Africa’s rapid population growth and low banking penetration.
However, itwarned that digital competitors are already eroding banks’ market share.
“For African countries lacking comprehensive banking networks, mobile banking has become an easy alternative for money transfers and an important vehicle for increasing banking penetration … offering a wide range of financial services to underserved individuals and new markets like the microcredit segment.”
From cash straight to mobile
Higgins says Africa has effectively “leapfrogged” traditional banking infrastructure. “Africa went from cash to mobile … millions of people use mobile banking to store their value, send money and pay bills.”
South African banks are investing in digital solutions to keep up, though at different speeds.
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Still, Higgins stresses the urgency: “Fintechs fill the gaps that banks hadn’t quite reached or built out yet. They are a serious threat to income from payments, and it would be good to partner with fintechs, rather than compete with them.”
Moody’s warns that banks expanding further into Africa face high compliance costs, currency volatility, and political instability.
Higgins believes South Africa’s majors are relatively well shielded.
“They are well capitalised and have healthy balance sheets to even fail there for a few years,” he says.
All of the big banks except Capitec are pushing to expand their African footprint. Capitec is focused on Eastern Europe and the Americas through Avafin, the digital lending business it acquired in 2024.
CEO Graham Lee told Moneyweb the lender will eventually look to Africa, but “not soon”.
“The reason is simply that we have still so much to do here [in South Africa],” he said.
Expansion plans
Standard Bank, active in 21 markets, is regarded by Higgins as “the poster child” for African expansion.
“They have had decades of presence in Pan-Africa and good governance and strong compounded returns across all of their African regions.”
Standard Bank CFO Arno Daehnke says the group balances expansion with rigorous risk management, including country risk assessments and stress testing. “Our risk appetite framework ensures that sovereign exposures are within acceptable thresholds, and we balance opportunity with prudence.”
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Absa, present in 10 markets, is refining its retail strategy to “unify” operations and ensure investments in smaller countries are scalable.
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“Some markets face headwinds, such as sovereign risk or inflation, but we are committed to building franchises that can weather volatility and deliver consistent returns,” says Daniel Munslow, Absa’s head of communications.
Nedbank, with operations in five markets outside South Africa – Namibia, Mozambique, Eswatini, Lesotho and Zimbabwe – is more selective.
“We do currently have smaller representation across Africa, which in itself has some positives as we look to scale up,” a spokesperson notes. The bank wants to grow its Africa Regions’ contribution to group earnings significantly over the next decade.
FirstRand is taking a circumspect approach. CEO Mary Vilakazi recently told Moneyweb the group would not expand simply for presence. “We do not intend to get a greenfield licence just to have a footprint somewhere,” she said. Instead, the focus is on building scale and integration in existing markets.
Read: FirstRand sees opportunity in Kenya as capital rules tighten
FirstRand operates in eight African countries, with strong franchises in Botswana, Namibia and Eswatini, and smaller operations in Mozambique, Zambia, Lesotho, Ghana and Nigeria.
The bank has indicated plans to strengthen its positions in Zambia and Ghana, while monitoring potential opportunities in Kenya, where new minimum capital requirements may encourage consolidation.
Diversification
Higgins says diversification into Africa can be highly beneficial for South African banks, provided it is managed well. “If it’s poorly managed, it can multiply risk,” he cautions.
In Standard Bank’s case, earnings are spread across 21 markets, reducing dependence on a single jurisdiction. “Diversification needs to be supported by robust risk systems, which our banks luckily have,” Higgins adds.
New entrants that pursue acquisitions without the “home market buffers” of South Africa’s big banks, could however be far more exposed.
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