Rapid changes in the payments landscape across Africa are challenging traditional banks, which are being forced to adapt quickly to new modes of facilitating transactions such as mobile money and cryptocurrencies.

This is according to the Standard Bank Corporate and Investment Banking (CIB) Payments in Africa white paper released last week, which found that increased competition from fintech companies and a rapidly evolving regulatory landscape are among the many challenges faced by traditional banks across the continent.

“The increasing prevalence of digital technologies, including mobile money and fintech solutions, is driving financial inclusion while simultaneously disrupting existing payment systems,” said Theresa van der Klooster, senior manager for strategy enablement at Standard Bank CIB Africa, in the white paper.

“The emergence of non-bank competitors, particularly fintech companies, is intensifying competition and potentially disintermediating traditional banking services. The agile new entrants often operate with lower overhead costs and are adept at tailoring solutions to meet specific customer needs, putting pressure on corporate banks to innovate and enhance their digital offerings.”

According to the white paper, some 80 billion mobile transactions were processed in sub-Saharan Africa in 2024, reflecting the increasing importance of alternatives to traditional banking models in the region.

New types of transactions bring with them new regulatory requirements that make compliance even more complex for all players in the financial ecosystem, including banks. Initiatives such as the introduction of open banking regulations, updated know-your-customer requirements, the use of regulatory sandboxes and the introduction of digital currencies add a regulatory burden that banks must adapt to quickly to thrive.

Evolving landscape

“The evolving regulatory landscape, particularly regarding open banking, cryptocurrencies and data privacy, poses a significant compliance challenge for the corporate banks. Navigating these complex and often fragmented regulations requires significant investment in compliance infrastructure, legal expertise and ongoing monitoring of regulatory developments. Failure to comply can result in substantial penalties,” the report said.

Banks are not the only entities burdened by shifts in the regulatory landscape. Many governments across the continent are working to deeply integrate non-banks into the core of their financial systems. In South Africa, the Reserve Bank has unveiled plans to add non-banks, including mobile network operators and retailers that offer financial services to their customers, into the core payments and settlements system.

Read: Work under way to make Sadc payments faster and cheaper

The move is aimed at driving financial inclusion, but it also threatens to overload the incoming fintechs, for whom the financial services they provide may not be their core business, with an outsized compliance burden. As sector regulator, the Reserve Bank has adopted an “activity-based licensing” approach that places different types of financial institutions into different tiers of regulatory intensity depending on the extent of their financial activities. This aims to make the regulatory requirements of a telecommunications operator offering a mobile wallet less onerous than those of a bank offering a larger and more complex set of financial services.

Responding to questions from TechCentral at the launch of the white paper, Nthabiseng Mohale, head of interbank and domestic payments at Standard Bank Group, said the upcoming regulatory changes also offer traditional banks and fintechs an opportunity to collaborate on compliance.

Standard Bank CIB’s Theresa van der Klooster

“Where you find a mobile network operator, for example, that does not require a bank to process a certain transaction, that operator can outsource the compliance and risk capability from the banks because the banks have been doing it for years. Fintechs will have to define what their core operation is and then figure out how they partner with the existing banks – or other participants that are already present in the ecosystem – to deliver that service,” said Mohale.

Another regulatory challenge highlighted in the white paper is the fragmentation of financial regulation across markets in sub-Saharan Africa. This is problematic for two reasons: firstly, Africa has a large remittances market driven by a massive migrant worker population sending money to relatives back home; and, secondly, a lack of regulatory harmonisation slows down the speed at which money flows between different countries, restricting intra-regional trade.

The Reserve Bank and its counterparts in the Southern African Development Community have responded to the harmonisation problem by developing working groups aimed at aligning financial legislation across the region.

Additionally, the region now makes use of PayInc’s – formerly known as BankServAfrica’s – Transactions Cleared on an Immediate Basis system to facilitate real-time cross-border payments across Sadc. Similar projects are in development in East Africa through the East African Community and West Africa through the Economic Community of West African States.

“The payments sector in Africa is currently experiencing rapid evolution, creating both exciting opportunities and significant challenges for corporate banks. For banks to succeed in this dynamic environment, they must carefully navigate key regulatory and risk considerations,” said Van der Klooster. –© 2025 NewsCentral Media

Get breaking news from TechCentral on WhatsApp. Sign up here.