Traditional banks across Africa are facing unprecedented pressure as fintech companies rapidly expand, forcing a fundamental rethink of the region’s financial sector. At the same time, regulators are increasingly opening the door to innovation, creating both challenges and opportunities for conventional lenders.
Speaking at the Inclusive Fintech Forum in Kigali, James Mwangi, CEO of Equity Group Holdings, warned that the balance of power in financial services is shifting. “What is certain is that financial services will be required. Who will provide them is what is debated,” Mwangi said, highlighting the growing prominence of digital lending and payment platforms that bypass traditional banks entirely.
Across Africa, fintech firms are carving out major positions in services historically dominated by banks, including payments, small loans, savings tools, and insurance products. Leveraging lower operating costs and faster digital infrastructure, these companies can serve customers more quickly and often at lower fees, intensifying competition in the sector.
Digital Transformation Becomes a Necessity
The rise of fintech has made digital transformation a top strategic priority for banks. According to the latest African Financial Industry Barometer by Deloitte, financial institutions across the continent now rank innovation above profitability and customer experience.
In Kenya, one of Africa’s fintech hubs, data from the Central Bank of Kenya shows that the proportion of banks using technology to digitize operations jumped from 60% to 79% in 2024, with credit, deposits, and capital-raising functions leading the digital adoption curve. Similarly, Rwandan and Ugandan banks are launching technology-driven initiatives to compete with agile fintech firms.
For example, Bank of Kigali recently rolled out an API platform, enabling third parties to integrate banking services directly, a model pioneered by fintech startups. Equity Group, meanwhile, is investing in an AI innovation hub in Kigali and exploring the development of an African stablecoin.
“This is survival mode,” said Desire Rumanyika, Chief Digital and Retail Officer at Bank of Kigali. “The cost of not innovating is deadly. If you don’t innovate, others will come, disrupt, and you’re no longer relevant in the market.” as reported by BIA
Regulators Play a Key Role
Regulatory changes are accelerating the shift. Countries like Kenya have enacted the Virtual Assets Service Providers Act, giving legal recognition to cryptocurrency firms, while Rwanda and Uganda are pursuing similar frameworks. Central banks are also cooperating across borders: the National Bank of Rwanda and the Central Bank of Kenya recently agreed to mutually recognize payment service provider licenses, allowing fintechs licensed in one country to operate in the other.
Experts believe these policies will intensify competition, forcing banks to innovate while ensuring consumer protection. “It’s not about protecting one interest against another,” said David Porteous, CEO of Integral Governance Solutions. “Regulators must ensure an even-handed approach that promotes national public interest while protecting consumers.”
The Road Ahead
As fintech companies continue to expand and digital technologies spread across Africa, traditional banks face a stark choice: adapt or risk irrelevance. From investment in artificial intelligence to open banking platforms, East African banks are accelerating their transformation in a bid to remain competitive in a rapidly evolving financial landscape.
