David Mouko Elizaphan Omaanya has extensive experience of the fintech sector, having previously served as director at Flutterwork Inc. In addition, Elizaphan Mouko also has an in-depth understanding of the commercial banking sector, which he acquired through his work with United Bank for Africa, Imperial Bank, Equity Bank Group, Guaranty Trust Bank and K-Rep Bank.
This article will look at Africa’s ever-increasing fintech market and how technological advancements are revitalizing the continent’s financial services sector, making banking more inclusive and improving the financial prospects of underserved communities.
Despite significant global economic challenges triggered by the COVID-19 pandemic and latterly the war in Ukraine, the African fintech ecosystem continues to expand at an impressive rate. As an investment segment, fintech accounted for over 25% of all venture capital rounds on the continent in the last few years, with South Africa joining other regional leaders such as Nigeria, Kenya, and Egypt. Of the nine notable African tech unicorns, seven are fintech companies.
A recent study by Mastercard indicated that African fintech start-ups increased in number from 311 to 564 between 2019 and 2021. The Mastercard study also revealed that of the $2.7 billion in VC funding deployed across the African continent in 2021, 61% went to fintech start-ups. Furthermore, the study showed that sub-Saharan Africa had one of the highest year-on-year growth rates in the world, with fintech start-ups in the region recording a colossal 894% year-on-year growth in funding in 2021.
In the last few years, a sizeable proportion of investment in African fintech companies has come from offshore money markets, including China, the United Kingdom, and west-coast United States. Third-party payment and mobile money systems in particular are currently seeing huge growth in Africa, with the continent accounting for more than half of all mobile money customers globally.
With a relatively high proportion of Africans lacking adequate access to financial products, digital deployment of solutions is ramping up at quite a pace as mobile and internet access increases. For example, a disconnect between the Africa’s huge migrant labor workforce and cross-border banking infrastructure has created a clear need for solutions to enable migrant workers to transfer money across regions securely. Serving the underbanked migrant workforce has created huge opportunities for innovative financial start-ups across Africa, where potential user markets are vast.
Since its inception, Kenya’s fintech industry has primarily focused on mobile money transfer services, riding the wave of skyrocketing market adoption since 2007. Major players in the market have built on technological advancements, expanding their offerings to users who own a basic mobile device and have access to cellular phone towers but lack a data or internet connection.
Between 2006 and 2023, financial inclusion in Kenya rose from 26% to 83% of the total population. This shift resulted in an increasingly diversified, rapidly expanding fintech ecosystem, with a large proportion of the country’s GDP flowing through fintech services. To facilitate increased innovation and economic growth, Kenyan regulators are becoming more co-operative and fintech friendly.
Three of Africa’s largest unicorns are based in Nigeria, a country that continues to dominate the continent in terms of fintech VC investments. With 38 million Nigerian adults still financially excluded, particularly in terms of credit access, an uptick in VC funding is creating the perfect conditions for dynamic fintechs to connect with a huge potential market.
Having raised more than $1.3 billion in 2021 alone, Africa’s fintech sector is its fastest-growing start-up industry. The sector is poised to experience rapid growth as the continent’s global competitiveness increases. Growth in Africa’s fintech market is driven by a variety of different trends, including expanded network coverage, increased smartphone ownership, decreasing internet costs, and a young, increasingly urbanized, rapidly growing population.
According to a report by McKinsey, fintech sales across Africa are predicted to grow by 10% annually through to 2025, with digital wallets and transactions becoming the fastest-growing products. Although less than 15% of African monetary operations are currently digital, by 2020 African fintechs had generated somewhere between $4 billion to $6 billion in revenue collectively.
Following its current trajectory, the African fintech sector is predicted to improve the continent’s global competitiveness by exporting fintech services abroad. A previous McKinsey report suggested that opportunity for growth in African fintech primarily focused on 11 significant markets, namely Kenya, South Africa, Egypt, Cameroon, Ghana, Côte d’Ivoire, Nigeria, Morocco, Senegal, Tanzania and Uganda. Collectively, these countries account for half of Africa’s population and 70% of the continent’s GDP.
Numerous fresh and creative fintech solutions have emerged in Africa in recent years, marking the start of a trend that is tipped to increase exponentially as we move through the 2020s. Experts predict seeing fresh and exciting innovations evolving in the African fintech ecosystem, fueled by advancements in big data, artificial intelligence, IoT technology, and many other upcoming trends and technologies.