Digital fraud pushes African banks to retreat from cross‑border growth ambitions

The sixth African Financial Industry Barometer, unveiled at the Africa Financial Industry Summit in Luanda, placed digital fraud at the centre of a growing operational crisis for banks and fintech firms across the continent. Eighty‑eight percent of the commercial banks and fintech operators surveyed reported a rise in electronic financial crimes, a trend that is compelling many institutions to abandon cross‑border ambitions and concentrate on consolidating within their home markets.

Compiled jointly by Deloitte and Jeune Afrique Media Group, the barometer gathered responses from senior financial leaders in twenty African nations. While the overall confidence score for the industry held steady at eight out of ten, matching the previous year’s rating, the same optimism did not extend to cross‑border activities. Respondents indicated a sharp increase in caution as they grappled with the challenge of securing digital channels against fraud that easily jumps borders.

Domestic consolidation emerged as the most common growth strategy. Forty‑nine percent of participants said they would focus on strengthening their existing national markets, a choice that reflects a desire to avoid the unfamiliar legal and regulatory terrain of other jurisdictions. Regional partnerships were the next most popular option, cited by 42 % of respondents, while only 37 % favoured organic expansion into other African countries. Formal cross‑border mergers and acquisitions attracted 32 % of the sample, and a quarter of institutions reported no plans for regional growth at all.

The split in strategic preferences mirrors the differing risk appetites of various sectors. Commercial banks and insurance companies leaned heavily toward home‑market consolidation, seeking to shield themselves from unfamiliar legal risks and potential counterpart liabilities. Fintech operators, despite bearing the highest exposure to digital fraud, displayed a greater appetite for regional expansion, often favouring organic growth or alliances that require less capital than outright acquisitions. Established pan‑African banking groups continued to pursue selective acquisitions to protect their multi‑market footprints, while purely local players favoured low‑capital bilateral alliances as a cautious entry point into neighbouring markets.

These retreat patterns are having a noticeable impact on continent‑wide integration initiatives. The African Continental Free Trade Area (AfCFTA), designed to deepen intra‑African trade, showed only seven percent of respondents reporting tangible commercial progress. A majority, 69 %, described its implementation as moving too slowly, and another 24 % deemed the agreement stalled. The African Exchanges Linkage Project (AELP), which aims to interconnect stock exchanges and facilitate cross‑border investment, fared even worse: merely four percent reported concrete progress, while 53 % said the pace was too slow and 43 % considered it at a standstill.

The Pan‑African Payment and Settlement System (PAPSS), the African Union‑backed network intended to streamline cross‑border payments in local currencies, also struggled to gain traction. Nineteen percent of institutions acknowledged operational progress, but 57 % labelled the rollout as slow and 45 % indicated they had no plans to connect to the network. Overall, 41 % of respondents said they derived no commercial benefit from either AfCFTA or PAPSS, citing concerns over counter‑party liabilities, unclear clearing mechanisms and a lack of harmonised dispute‑resolution frameworks.

Security concerns underpin these integration challenges. Cybersecurity now ranks as the primary operational threat for 51 % of surveyed institutions, rising to 79 % among commercial banks and 63 % among fintech firms. Digital fraud was reported to have increased across 66 % of the broader industry, climbing to 88 % among banks and fintech operators. While 85 % of respondents recognise the potential of artificial intelligence for fraud detection, deployment is hampered by data‑privacy constraints, talent shortages and uneven infrastructure across the continent.

José Barata, Managing Partner and Banking Sector Lead at Deloitte Angola, warned that “software and infrastructure cannot bridge regulatory gaps; regional integration requires more than a stated intention to operate across borders.” He stressed that effective cross‑border transactions need interconnected payment networks, practical settlement protocols and stronger regulatory cooperation. Without these foundations, even sophisticated AI tools cannot fully protect institutions from the rising tide of digital fraud.

The operational pull‑back also highlights a larger capital mobilisation gap. Estimates from the African Financial Markets Initiative place institutional assets held by pension funds and insurers at roughly $775 billion, yet these savings remain largely disconnected from long‑term real‑economy financing. While 64 % of respondents report active financing of small and medium‑sized enterprises, 41 % say they are not involved in affordable‑housing projects, underscoring a mismatch between available capital and sectoral needs. Barata concluded that the continent does not lack savings but lacks functional channels to direct them toward productive investments. He called for deeper bond markets, credit guarantees and clearer regulatory frameworks to make long‑term projects more investable.

The survey also revealed divergent confidence levels among different types of institutions. Multinational and regional banking groups scored an average confidence of 8.53 out of 10, while capital‑market firms saw their optimism rise to 8.57. In contrast, purely domestic institutions recorded a drop to 7.33, and the insurance sector fell by 0.90 points to 7.45. Barata noted that scale heavily dictates sentiment: larger groups with established cross‑border structures feel more assured, whereas smaller, locally‑focused players perceive higher risk and therefore favour domestic consolidation.

Regulatory misalignment adds another layer of complexity. In the absence of harmonised anti‑money‑laundering, customer‑verification and capital‑repatriation rules, cross‑border operations face higher administrative costs and longer approval times. These frictions deter institutions from committing resources to regional projects, reinforcing the trend toward home‑market focus.

Looking ahead, the barometer’s findings suggest that without decisive action on digital fraud and broader security issues, African financial institutions are likely to continue prioritising domestic markets. Such a trajectory would further stall the implementation of AfCFTA, PAPSS and the African Exchanges Linkage Project, limiting the continent’s ability to reap the economic benefits of deeper financial integration.