Digital-first banks are gaining ground across Africa, offering smartphone-based services that bypass traditional branch networks. These neobanks are unlocking financial inclusion for millions while attracting record investment, even as profitability remains a challenge.
Reaching the underserved
Neobanks such as Moniepoint, Kuda, Umba, Carbon and TymeBank are targeting populations historically excluded from formal banking. From informal traders in Lagos to smallholder farmers in rural Kenya, their services—low-cost accounts, instant payments, and micro-loans—are expanding access in ways traditional banks have struggled to achieve.
Strong capital inflows
Investor appetite underscores the scale of the opportunity. Moniepoint of Nigeria recently secured $110 million from Google and others, pushing its valuation above $1 billion. In South Africa, TymeBank has reached nine million customers and broken even, while preparing to raise an additional $100 million to fund expansion into loans and insurance.
Innovation through mobile-first models
PalmPay, with more than 35 million users, has pursued a smartphone-first distribution strategy, pre-installing its app on Transsion devices. East Africa’s M-Kopa has bundled affordable smartphones with digital wallets and micro-loans, disbursing over $1.5 billion in credit to five million users. Such strategies are proving critical in capturing new customer segments.
Profitability challenges
Despite rapid growth, most neobanks remain unprofitable. Lending and micro-credit are increasingly viewed as the path to sustainable revenue. Kuda, for instance, has turned to overdraft facilities and small loans to strengthen its balance sheet, reflecting a broader shift in strategy among digital banks.
Outlook
The rise of neobanks is reshaping Africa’s financial sector. By combining innovation, mobile-first delivery, and inclusive services, they are positioned to challenge legacy players and accelerate digital transformation. With investor backing and rising adoption, neobanks could become central to Africa’s economic development, though their long-term success will depend on regulatory adaptation and proven profitability.
REFH – Newshub, 1 September 2025
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