Africa's $107 billion financial services industry will log impressive growth for the rest of the decade as more banks target the continent's emerging middle class, a study by consultancy Bain & Company found.

Retail banking will see the biggest growth, and will account for nearly 40 percent of the continent's banking revenue by 2020, helped by rapid adoption of mobile phone banking, Bain said in the study released ahead of next week's Reuters Africa Investment Summit.

The opportunities and challenges presented by this bourgeoning African market will be addressed by executives, investors and politicians at the summit, being held March 7-10 in Johannesburg, Nairobi and Lagos.

Africa is home to a billion people, vast commodity wealth and rising disposable incomes -- as well poor infrastructure and often shoddy corporate governance -- making the continent both a substantial opportunity and challenge for regional and global financial firms.

"The prospects for banking on the African continent are tremendous," said Sim Tshabalala, deputy CEO of Standard Bank, Africa's largest bank by assets, in an interview with Reuters on Thursday.

"But to be able to compete in Africa you need people on the ground who know the terrain."

Bain Partner Andrew Tymms said the continent's financial services industry will continue to grow at a compound annual rate of 15 percent to 2020, outpacing gross domestic product growth.

"Retail banking will grow faster than corporate banking ... to make up 38 percent of banking revenue by 2020, bringing in the previously unbanked population and shifting the experienced to sophisticated products," Tymms said.

The study, "Financial Services in Africa: A Decade of Opportunities" reckons financial firms will make up 19 percent of Africa's gross domestic product by 2020, compared with 11 percent in 2009.

CAUTIONARY TALE

While big Western financial firms are keen to talk about trade between Africa and Asia, and their desire to win more Africa deals, the study is also a cautionary tale for overly optimistic bankers.

The biggest opportunities will be in the "mass retail segment", serving customers with low incomes and the rural poor, many of whom did not previously have bank accounts.

That is not a high-margin business, nor an easy one for banks unfamiliar with local markets.

Nevertheless, regional lenders such as South Africa's Standard and Togo-based pan-African lender Ecobank Transnational are rolling out services such as kiosk banking and community lending programmes to widen their reach.

But the biggest opportunity for retail banking may be via mobile phones. On a continent where Internet access is rare and millions in live in rural areas, banks are increasingly turning to mobiles to reach customers.

Africa will add an additional 224 million mobile users over the next five years, Bain's Tymms believes, bringing mobile phones to 68 percent of the continent's population.

That will help spread the adoption of banking services among the hundreds of millions of African currently without bank accounts.

The M-Pesa mobile money transfer service from Kenya's Safaricom has helped drive customers to more sophisticated banking products.

"With increased adoption, customers demand broader banking services," Tymms said in the study.

"M-Pesa launched its service in March 2007 and within 18 months, customers started to demand a broader range of products."