INTRODUCTION

We live in the digital era where every area of our lives is being digitalized, from communication with the rise of social media to money with cryptocurrencies to digital banking taking over the financial services sector. With traditional banks and financial institutions being largely unprepared for the new wave of competition from financial technology (fintech) companies who are offering better cost-effective ways to send money internationally much more efficiently, cutting down business cost while making money transfers, with digital remittances increasing from $60.57bn globally in 2017 to a projected $319.10bn by 2029, according to Statista.

Traditional money transfer services have often relied on the “wire transfer” method and have been problematic for several reasons. They tend to rely on having shops in different locations around the globe, so the recipient has to travel to their local store to receive the payment, which may be inconvenient for many people.

The Rise of Fintech

Fintech began in the late 1990s when the Internet and e-commerce businesses emerged. Since then, Fintech has been shaping the landscape regarding international money transfers over the last couple of decades and will continue to do so into the next. Even though it began in the late 1990s  used in the backend system of financial institutions, it has shifted its focus to more consumer-oriented services used in various industries, including retail banking, investment management, financial services for individuals, and cryptocurrencies like Bitcoin, which are also part of fintech development.

The African financial landscape has also witnessed a transformative shift in recent years. Traditional bank transfers, once the dominant method for moving money, are now challenged by fintech services that promise cheaper, faster, and more accessible transactions.?

The Evolution of Digital Payments in Africa

Africa has seen significant fintech growth, driven by mobile money, blockchain-based transactions, and digital wallets. Countries like Kenya (M-Pesa), Nigeria (Flutterwave), and South Africa (Ozow) have revolutionized payments, reducing dependency on cash-based transactions. However, traditional banks still play a role, especially for high-value transactions and business payments.

As more people embrace digital payments, the key question arises: which is the most cost-effective solution in 2025? This comparison examines bank transfers and Fintech services across key factors like fees, speed, accessibility, security, and overall convenience.

UNDERSTANDING THE COSTS

When comparing traditional bank transfers to FinTech services, FinTech solutions are generally more cost-effective for several reasons. Here’s a breakdown of the key differences:

Bank Transfers

Traditional banks in Africa impose multiple costs on money transfers, which often include:

High transaction fees – Banks charge a significant percentage for domestic and international transfers, international transactions, and currency conversions. For example, some African banks charge between 5% and 10% on cross-border transfers

 Exchange rate markups – When sending money across borders, banks often offer unfavorable exchange rates, increasing the overall cost. A markup of 2-5% is common. 

 Maintenance fees – Some banks require users to maintain a minimum balance or pay account maintenance fees, adding to long-term costs.

  Slow processing times – Transactions can take days; domestic transfers can take 1–3 business days; international transfers may take up to a week, leading to potential financial inefficiencies for businesses and individuals.

Limited banking hours – Many banks operate only during business hours, restricting access to services when needed urgently.

Fintech Transfers

Fintech companies, including mobile money providers and digital wallets, offer an alternative with typically lower costs:

  Lower transaction fees – Most fintech solutions, such as Yogupay, offer reduced transaction fees compared to banks, making them more attractive for small transactions. Some charge as low as 1% to 3% for money transfers.

Competitive exchange rates – Many fintech firms offer better competitive exchange rates than banks, particularly for remittance. Our competitive rates and automated currency management at yogupay ensure you mitigate FX wastage, thus growing your bottom line 

 No hidden costs – Digital-first services often eliminate extra fees like account maintenance costs. No hidden fees or deductions, just competitive exchange rates at yogupay what you see when transacting is what you get

Instant transactions – Money transfers are often completed within minutes, boosting efficiency for individuals and businesses.

  24/7 availability – Unlike banks, fintech services operate around the clock, allowing users to send and receive money at any time of the day or night

5 REASONS WHY FINTECH SERVICES SAVES YOU COST

The following are particular services that make Fintech services more cost-effective compared to traditional banking

 Accessibility

Bank transfers require users to have a bank account, which remains a barrier for many Africans, especially in rural areas. According to the World Bank, nearly 57% of Africans remain unbanked due to limited access to financial services in rural areas. On the other hand, fintech services like M-Pesa in Kenya or Flutterwave in Nigeria leverage mobile technology, allowing anyone with a phone to send and receive money. This adoption of Mobile money has skyrocketed across Africa, offering financial inclusion to millions without requiring a traditional bank account, giving access to the unbanked and the underbanked. This is very important in developing nations because it allows the exchange of digital currency for goods and services, building the overall economy.

Global Reach and Cross-Border Payments

Being able to make cross-border payments easily and quickly without the red-tape and obstacles that traditional banking has imposed has led to a rise in the global transfer of money from the wealthier countries to those in the developing world. With the African diaspora currently consisting of more than 30 million individuals living outside their countries of origin according to the International Fund for Agricultural Development (IFAD) statistics, it also estimates that these migrants jointly contribute about US$40 billion in remittances to their families and communities back home every year making fintech cost effective services such as lower transactions fees and instant transactions using mobile money and digital wallets very convenient facilitating the money transfer process.

Customer experience and Convenience

Fintech companies are agile and accessible. They work virtually, so consumers don’t need to be physically present to transact or partake in financial services. This makes Fintech a convenient option. Users can register on their computers or, in most cases, via an app on their mobile devices. FinTech offers 24/7 access, remote account opening, quick consultations, and better overall communication with customers. They have grown due to their focus on user experience, which is where banks have fallen behind.

Less Regulation Policies

Fintech companies don’t have one particular regulator. Without strict regulation, these companies can change their business and do what they want without strict guidelines, working faster and adapting to their users’ needs, giving FinTech services a clear advantage.

In conclusion, as we mentioned above, the fintech market is expected to grow more than 25% each year, surpassing $400 billion by 2027, due to Fintech’s ability to cover a large number of different innovations that are often used in conjunction with each other, such as cryptocurrencies, blockchain, peer-to-peer (P2P) payment systems, and the ability to send money home digitally (digital remittances), as well as pre-paid financial technologies.

Also, due to a more optimized business structure, fintech companies can offer products and services that are up to 10 times less expensive than traditional banks. They are making technological leaps that are bringing costs down for everyone while making the system more efficient and the transactions much easier and more transparent, with fewer mistakes, higher quality service, and faster service in a shorter amount of time . This trend is set to continue.

Adoption and Future Trends

Africa’s fintech market is expected to grow significantly in the coming years. The GSMA Mobile Money Report states that mobile money transactions in Africa exceeded $800 billion in 2022, demonstrating the increasing reliance on fintech solutions.

With rising smartphone penetration and internet access, fintech adoption is projected to increase. Some governments are also pushing for digital financial inclusion, creating policies that encourage fintech growth while maintaining regulatory oversight.

Conclusion 

In conclusion, as we have seen throughout this post, Fintech wins, but banks still play a role. Fintech services outperform banks in cost, speed, and accessibility, making them the best choice for everyday payments, remittances, and e-commerce. However, banks remain crucial for large-scale business transactions and long-term savings.

Considered as the future of banking and financial institutions, fintech leverages new technologies like artificial intelligence (AI), big data, and cloud computing to give customers a unique experience, seamless delivery, personalization, speed, and relevance. Because of the flatter organizational structures in fintech, it’s easier to change, innovate, and rebuild systems that aren’t working Fintech is innovative, customer-centric, and streamlines complex financial processes, making it more accessible to people, particularly millennials and younger generations especially in Africa where Africa is the continent with the youngest population worldwide

For most Africans, especially those engaged in small-scale businesses or remittances, fintech services offer a more cost-effective and accessible solution. They reduce transaction fees, provide better exchange rates, and facilitate faster transactions. With Africa’s fintech revolution, digital payment solutions are increasingly proving to be the best value-for-money option for everyday financial transactions.

As Africa’s fintech ecosystem expands, hybrid solutions—where banks and fintech collaborate—could offer the best of both worlds. In 2025, choosing the right payment method depends on transaction size, urgency, and accessibility.