Ambitious digital banks find footing in our region

Ultimately, the path to long-term profitability still needs scale and expanding across borders
While traditional banks still dominate the global banking sector, digital banks have been gaining popularity and growing rapidly over the past few years.
A 2019 Accenture report found that digital-only banks in the UK were set to triple their customer base from 13 million to 35 million in just 12 months, accelerating customer acquisition at a growth rate of 170% as they launch new products, widen their customer base beyond millennials and expand into new markets
Alongside, the global market size of neo and challenger banks is also gaining momentum, estimated at nearly USD 35 billion in 2020 and predicted to reach USD 722.60 billion by 2028, with a CAGR of 47.7% from 2021 to 2028.
But even as these new digital-only business models show great promise, the harsh reality is that the majority are not yet profitable and are still a long way from winning enough trust in the market to convince customers to switch to using them as their primary bank with larger balances.
Ultimately, the path to long-term profitability still needs scale, and expanding across borders is no mean feat.
For neobanks and challenger banks especially, overcoming barriers to entry and the strong reach of traditional banks make it difficult to start from scratch in a new market, particularly in an overbanked region such as the GCC.
Further, ambitious digital-only financial start-ups aiming to expand in the Middle East and Africa (MEA) region often find themselves overwhelmed by the intricacies of regulations and access to resources such as infrastructure and security.
Yet, as Covid-19 continues to drive the adoption of digital banking, there is tremendous potential for growth, especially in the MEA region because of its low financial inclusion and high population of young, digital-savvy consumers.
For these new business models to succeed, it’s important to understand that it’s not just about using technology to replace legacy systems and processes with more convenience, improved user experience, and better rates in comparison to conventional banks,
To strengthen their presence within a competitive financial market also requires finding the right partners to help navigate the complexity of the local payments ecosystem.
A partnership approach is exactly how South Africa’s leading digital-only bank TymeBank enabled small and micro-businesses to accept card payments in 2020.
Following their successful entry into the South African consumer banking market in partnership with Network International, TymeBank now also has plans to build accessible and affordable payment solutions for the small and micro businesses market.
Similarly, Togo-headquartered Orabank also signed us as a key partner last year as it embarked on an ambitious program to lead digital banking innovation in 12 countries across West and Central Africa.
Meanwhile, earlier this year, NBS Bank, a leading commercial bank in Malawi, launched its state-of-the-art e-commerce platform, powered by Network International, enabling the bank to offer Malawian small and medium enterprises, large corporations, public institutions, and individuals a fast and secure way to enter Malawi’s growing e-commerce market.
Given that our service pans across more than 50 countries in the Middle East and Africa, we are uniquely positioned to support the unit economics of digital banks and fintech in this dynamic payments landscape.
Digital banks deeply value that we share their burden of regulatory adherence through our platforms that are fully compliant with more jurisdictions in the Middle East and Africa than any other payment partner. That, and our platforms are robust, scalable, cost-effective, and therefore enable our clients to stay focused on developing innovative products and services instead.
Otherwise, with their own overheads and limitations, new-age banks may struggle to scale fast enough as traditional banks race to update their legacy systems too.
According to a study by UK-based Juniper Research, it’s expected that almost 53% of the global population will access digital banking by 2026.
So, to digital banks that want to get ahead quickly and expand their presence in the Middle East and Africa, I say: if you’ve got the ambition, we’ve got the infrastructure.