More banking clients in Africa prefer digital channels for their transactions, amid an increase in bank-telco relationships as well as between finance and FinTech firms.

This is according to a McKinsey & Company report African retail banking's next growth frontier, released this week, which found that clients are leaning more towards digital and mobile banking channels - and this offers banking institutions an opportunity to reduce costs and factor in efficiencies to improve margins and add convenience for depositors.

The report surveyed approximately 2500 respondents and suggests that Africa has a diverse banking portfolio. Banking models include indigenous banks, pan-African Banks, regional and international banks, among others, with cash usage and banking hall visits still prevalent.

"Among the digital channels, the future is clearly tilted towards mobile. Two to three times as many clients prefer mobile to internet channels. For example, in Nigeria, fifty-nine percent of customers prefer digital, compared to fifteen percent that favour branches," states McKinsey.

The report adds that the majority of South African banking clients prefer digital channels to branches for transactions. About 56% of SA depositors prefer digital platforms compared to 27% who prefer to visit branches for transactions.

In Angola, about 45% prefer digital platforms while in Kenya 43% are more for the same service delivery channels. However, cash is still king in Africa and banking halls still have wider relevance in several key banking markets.

"Conversely, customers in Morocco and Egypt show little preference for digital," the report continues.

About 50% of African banking executives cited digital as their number one priority, while an additional 40% cited it as 'very important'

Experts believe Africa's rising mobile and internet penetration will boost digital banking delivery channels with operators in countries like Zimbabwe already witnessing a surge in internet and mobile banking transactions.

Banks in Africa are now expected to "digitally transform their existing operations, to increase their share of digital sales and transactions to beyond 60 to 70 percent".

As regulators exert pressure on financial inclusion, banks have been partnering mobile money platforms for ease of transaction, with EcoCash in Zimbabwe already integrated on the cross-banking platform in the country.

Africa's banking market is worth an approximate US$86 billion in revenues before risk cost, according to McKinsey. The research firm predicts that this will rise at a rate of 8.5% per year over the next five years to approximately US$129 billion.