East Africa’s commercial banks are facing simultaneous pressure on deposits, lending, and fee income as fintechs, mobile money operators, and embedded finance platforms expand aggressively across Kenya, Tanzania, Uganda, and Rwanda, forcing a strategic rethink at institutions that built their franchises on branch networks and relationship lending. The competitive shift, accelerating in 2025 and 2026, is structural rather than cyclical.
- Mobile money platforms led by M-Pesa in Kenya and MTN MoMo across Uganda and Tanzania have moved far beyond person-to-person transfers. They now offer savings, credit, insurance, and merchant payment services that directly compete with core banking products, reaching customers that traditional banks have never been able to serve cost-effectively through branch infrastructure.
- Digital lenders including Tala, Branch, and M-KOPA have built credit portfolios using alternative data, disbursing loans in minutes via mobile without the collateral requirements or branch visits that traditional bank lending demands. M-KOPA alone has disbursed over $2 billion in credit to 7 million customers across Kenya, Uganda, Nigeria, Ghana, and South Africa, reporting its first profit in 2024 on $416 million in revenue.
- Foreign banks have already begun to respond to the squeeze. A Moody’s report in late 2025 noted that rising fintech and mobile money competition, combined with currency weakness and compressed margins, has prompted several global lenders to exit or scale back African operations, selling to local banking groups.
- East Africa’s embedded finance market is growing at a compound rate of 15.7% annually, with Kenya and Uganda among the highest-activity markets on the continent. By 2030, Africa’s embedded finance market is projected to reach $18 billion, up from $11.9 billion in 2024.
- Regulatory asymmetry remains a structural advantage for fintechs: mobile network operators are not subject to the same capital adequacy, provisioning, and KYC obligations as licensed banks, allowing them to operate at lower cost. East African central banks have adopted a test-and-learn approach to fintech regulation, prioritising financial inclusion over bank protection.
Kenya is the most advanced case study. M-Pesa’s integration with the government’s Hustler Fund created an embedded microcredit channel tied directly to mobile usage patterns, bypassing the banking system entirely for millions of borrowers. The Kenya Bankers Association has repeatedly flagged the uneven regulatory playing field, but regulators have been reluctant to constrain platforms that have demonstrably expanded financial inclusion. The same dynamic is playing out in Tanzania, where mobile money interoperability launched in 2014 accelerated uptake to the point where mobile transaction volumes now rival formal banking channels. In Uganda, Airtel Money and MTN MoMo together hold a combined customer base that dwarfs the deposit base of most mid-tier banks.
Bigger Picture: The banks that survive this disruption will be those that move from competing with fintechs to embedding fintech capability inside their own distribution. Equity Bank’s acquisition of a telecoms licence was an early signal of this logic: if the mobile channel is where customers live, the bank must own the channel or partner with those who do. KCB, Equity, and Absa Kenya have all invested heavily in API-based digital banking infrastructure in recent years. But the challenge is speed: fintechs iterate in weeks, banks in quarters. The deeper structural issue is that East African banks derive a disproportionate share of revenue from transaction fees that mobile money has largely eliminated for everyday customers. Rebuilding that revenue base around credit, wealth management, and institutional services requires a different kind of bank, and a different kind of talent, than the branch-heavy model that dominated the last two decades of East African financial services.
Source: The East African
