ABA Editorial Board · Dec 29, 2025 · 9 min read
Kuda has a national banking license. FairMoney is a licensed microfinance bank. TymeBank is profitable and expanding into Indonesia. These are not neobanks anymore. They are banks. Continuing to frame them as disruptors misreads what has actually happened in African consumer financial services, and it leads investors and regulators to the wrong conclusions.
The word "neobank" made sense in 2018. It described a wave of digital-first consumer financial services companies that were not yet banks in any legal sense but were building products that looked and felt like banking. The word still had meaning in 2021 when most of these companies were running on various workaround licenses, relying on partner banks for regulatory coverage, and pitching themselves to investors as the future that would displace traditional incumbents. In 2026, the word has stopped meaning anything useful, and continuing to use it is actively misleading.
In January 2026, the Central Bank of Nigeria upgraded Kuda Microfinance Bank's license to full national banking status. FairMoney is a licensed microfinance bank with deposit insurance coverage and a lending book that paid NGN 7 billion in interest to savers in a single year. TymeBank reached profitability in December 2023, closed a USD 250 million Series D led by Nubank, is valued at approximately USD 1.5 billion, and is actively building retail banking operations in Indonesia. Carbon has been operationally profitable for years and sits on a microfinance license.
These are banks. They have bank licenses. They have compliance officers. They hold deposit reserves. They are subject to bank supervisory regimes. Regulators treat them as banks. When a Nigerian customer opens a Kuda account in 2026, she is opening a bank account, and Kuda's legal position in her transaction is identical to the position her commercial bank would have occupied. The only distinction left is that Kuda has a better mobile app.
Practitioners who have watched this transition from inside African financial services consistently make a point we agree with: calling these companies neobanks leads to three specific analytical errors that distort how the sector gets discussed and capitalized.
The first error is that it makes the companies sound like consumer technology startups when they are actually regulated financial institutions. A consumer technology startup can pivot, experiment, raise growth capital at frothy multiples, and treat regulatory compliance as an operational overhead. A bank cannot. A bank has capital adequacy requirements, supervisory relationships, and legal obligations that structurally limit how fast it can change direction. Valuations that make sense for the first kind of company make no sense for the second.
The second error is that it frames these companies as disruptors competing against incumbents, which suggests a zero-sum fight in which the newcomers win by taking customers away from legacy banks. That is not what is happening. What is happening is that the boundary between "newcomer" and "incumbent" has dissolved. Equity Bank in Kenya operates with more fintech-like product velocity than some nominally fintech operators. Standard Bank in South Africa has API integrations deeper than several challenger brands. The category that matters is not newcomer versus incumbent. It is well-run bank versus poorly-run bank, and several of the best-run African banks in 2026 started their lives as neobanks.
The third error is that it obscures what the category is actually competing on. If these are technology companies competing on app quality, then the winners will be the ones with the best engineering teams. If they are banks competing on deposit trust, product breadth, and cost of capital, then the winners will be the ones with the deepest customer relationships and the most disciplined balance sheets. The evidence from the 2024-2025 profitability data is that the second framing is closer to reality.
There is a more accurate name for what Kuda, FairMoney, TymeBank, and similar operators are becoming: the pan-African retail bank. This is a category that did not exist five years ago and that may define the next decade of African consumer financial services. It combines three things that were previously held by different kinds of institutions: the technology-first customer experience that came from Silicon Valley consumer fintech, the balance sheet and regulatory standing of a commercial bank, and the geographic ambition of a pan-African trade bank like Ecobank.
Senior bankers who have been watching TymeBank's Indonesian expansion with interest have pointed out that if Tyme successfully operates a retail bank in a Southeast Asian market using the same operating model it developed in South Africa, the conventional wisdom that African banks cannot export beyond Africa will have been disproved. The same is true for Kuda's multi-country license acquisitions. The end state is a small number of pan-African retail banks that operate across ten or more African countries with a consistent product, consistent technology, and consistent regulatory discipline. That is not a neobank. That is the next form of African banking.
Drop the word. Call them retail banks, digital-first banks, or pan-African banks. Evaluate them on the metrics that matter for banks: deposit growth, net interest margin, non-performing loan ratios, capital adequacy, and regulatory standing. Compare them against other banks in the same countries rather than against a vanishing category of "traditional banks" versus "fintechs." The best of them deserve to be taken seriously as financial institutions, and the worst of them will be exposed faster when they are compared against banking benchmarks rather than against consumer technology benchmarks. Both outcomes are good for the sector. Continuing to call them neobanks produces neither.