So Telcos might want to become banks: What is the threat to banks and how should banks rethink the future of retail banking in Africa?

If dominant telecom companies like MTN enter banking, it will disrupt African retail banking. Their scale and digital expertise could make traditional banks obsolete.

This paper examines this shift. It discusses what banks might lose and how they can adapt. It combines traditional ideas with innovative strategies and real data for future banking.

The Rise of the Telco-Bank Hybrid

By 2023, MTN Mobile Money had over 63 million users in Africa. With licenses in Nigeria and Ghana, MTN offers full financial services without branches. This poses a serious threat to traditional banks.

Why MTN (and Telcos) Are Perfectly Positioned

MTN has over 290 million subscribers across Africa. In Ghana and Uganda, over 70% of adults use mobile money. Only about 40% have bank accounts (World Bank Findex, 2021).

Telcos have built trust at scale, unlike many banks in rural areas.

Infrastructure without the Overhead

Setting up a bank branch costs over $200,000. In contrast, MTN can onboard thousands of customers cheaply using USSD and agents. For every bank branch opened, MTN can activate 10,000 mobile agents.

What Banks Risk Losing

MTN could attract significant deposits by offering savings accounts. They can also provide nano-loans using mobile data. For instance, M-Pesa’s M-Shwari disbursed $3 billion in microloans in Kenya last year.

With cheaper mobile payments, banks risk losing transaction revenue from low-to-middle-income customers.

But It’s Not the End: A New Banking Imagination

Conventional Strategies That Still Work—If Reimagined

Investing in AI/ML can help analyze customer behavior effectively. Capital One uses behavioral data to suggest budgeting habits and savings plans.

Banks should transform branches into advisory centers for small businesses. Santander Bank’s “Work Café” combines co-working spaces with banking services.

While telcos dominate individual wallets, banks can focus on SMEs with tailored solutions. There is a $331 billion credit gap for African SMEs—a huge opportunity.

Out-of-the-Box Strategies for Competitive Reinvention

Banks can offer APIs to fintechs and startups as "Banking-as-a-Service." Sterling Bank Nigeria's platforms enable third-party service innovation.

Instead of competing with telcos, banks should partner with them for layered services. A joint credit scoring system combining mobile and bank data could be beneficial.

Develop interoperable digital ID and wallet platforms for various sectors like education or government services.

Launch gamified banking apps targeting youth where users earn rewards for saving or budgeting skills.

Integrate banking services into ride-hailing or e-commerce platforms to reduce friction for users.

The Future of Retail Banking: Reimagined Personas and Journeys

Old Persona: A man depositing a cheque at a branch.
New Persona: A female SME owner applying for a loan via WhatsApp.
Next Persona: A young adult building credit through digital course payments using a mobile wallet.

Retail banks must prepare for non-linear customer journeys that are app-native and embedded within daily life.

Conclusion: Survive or Shape the Future?

Telcos like MTN are not just tech threats; they signal major changes ahead. The cost to serve has decreased significantly while customer expectations have evolved towards access over architecture.

Retail banks need to rethink their approach towards telcos as partners rather than competitors. Successful banks will not only digitize but also platformize their offerings while personalizing customer experiences.

The choice is clear: become invisible or essential in the new financial ecosystem.


### Key Stats Recap

- MTN Subscribers (Africa): Over 290 million
- Mobile Money Users (Ghana/Uganda): 70% of adults
- Traditional Bank Account Penetration: ~40%
- Credit Gap for African SMEs: $331 billion
- Average Branch Setup Cost: Over $200,000
- M-Shwari Loans (Kenya, 2022): $3 billion disbursed