Here’s why FinTech is one of Africa’s fastest-growing sectors

By Puja Sharma

Africa has been at the forefront of financial innovation, developing use cases such as mobile money and using fintech as a vehicle for financial inclusion. Bringing millions of previously unbanked people into the financial mainstream has resulted in creating data footprints that can streamline financial lives, provide access to funding and financing, and introduce predictability, According to Mastercard‘s white paper ‘The Future of Fintech: Rapid Growth Attracts Smart Capital‘.

Commenting on the findings of the report Ngozi Megwa, senior vice president of digital partnerships at Mastercard said, “It is encouraging to witness the growth of the FinTech landscape across the region, creating multiple opportunities for start-ups, scale-ups, enablers, and micro, small and medium enterprises to bring more people into the digital fold.

“At Mastercard, we are helping to fuel FinTech acceleration by offering access to our expertise, network, and technology. We provide a portfolio of technology solutions, APIs, developer tools, partner networks, startup programs, and a community experience for every fintech company and payments developer, helping turn their bold ideas into reality.”

This has remained one of the crucial factors in regulators and central banks facilitating fintech in Africa. Combining finance and technology with innovation and creativity has resulted in the financial technology, or fintech, sector witnessing accelerated growth on the global and regional startup scene in the past five years. FinTech, which the International Monetary Fund (IMF) likened to a “brave new world for the financial sector,” comprises “products, developers, and operators of alternative financial systems.

Africa’s domestic e-payments market is projected to see 20% revenue growth per year (compared to 7% globally), reaching around USD 40 billion by 2025. Kenya, Nigeria, and South Africa are among the countries leading the transition to digital payments, with infrastructure and policy frameworks that enable growth.

Ola Atose, Founder & CEO of Africa-based FinTech & crypto firm, KoinKoin said, “For many years, African countries have largely been neglected of the same access to the tier one financial service typically offered to richer nations in the Northern hemisphere. This lack of access has stipulated a digital revolution across Africa, whereby cutting-edge and African-born FinTechs, that solve everyday real-life problems, have emerged.

Such problems include cross-border transactions, currency exchanges, and access to assets that store value. Demand for cryptocurrency in particular has surged across the continent, with funding for Africa-focussed cryptocurrency firms growing by 11 times in just 12 months, from Q1 2021 to Q1 2022.

“However, for Africa’s digital revolution to truly succeed, we must see even more collaboration between local and national governments, traditional banking services, private companies, and exciting new FinTechs,” Atose added.

Key Takeaways

• FinTech innovation in Africa has been driven by the need to resolve pain points as well as increase financial and digital inclusion.
•  FinTech companies have tied up with banks, MNOs, and other stakeholders to develop payment solutions for consumers and micro and small merchants.
• Over 90% of jurisdictions in Africa have established regulatory frameworks for digital payments.
• During the pandemic, 72% of African jurisdictions implemented measures in respect of digital payments and international remittances, as compared to 61% globally.
•  In South Africa, 85% say they will continue to use digital cross-border payments after the pandemic, compared to the global average of 71%