FinTech Gains Momentum in Africa
Financial technology (FinTech) is truly a global enabler in reaching the millions of underserved (unbanked & underbanked) across the globe. Emerging economies are taking advantage of tech to provide banking services to consumers & businesses who don’t qualify to be customers of traditional banks.
The largest opportunities exist in Latin America, Southeast Asia, and Africa, which already have high rates of mobile adoption and digital payments, but limited options for banking.
In particular, Africa is experiencing tremendous growth and yearly milestones with investments. The continent is attracting a consistent volume of investors & startups that are addressing the most challenging financial services issues. Here’s a breakdown of why Africa is ripe for fintech innovation, recent funding growth, and the startups paving the path forward.
THE RIGHT CLIMATE of opportunity FOR FINTECH
The adoption and penetration of mobile is among the highest around the world and expected to surpass over 600M (or half of the population on the continent) by 2025. As new platforms launch payments, credit, and insurance platforms, the rate of growth is only expected to flourish. Additionally, the expanding population and local initiatives targeting robust financial ecosystems reinforces further scale and sustainability.
Back in 2018, Africa ranked in the top 3 globally in terms of market size for payments volume. Mobile money movement increased further at the height of the pandemic in 2020, showing an over 40% rise year-over-year. Advances in payments and mobile adoption are fueled by the continent’s telecommunication companies (not financial institutions).
The largest telecom in East Africa (Safaricom) provides mobile money services through M-Pesa for utility payments and transfers — no need to be connected to the internet. A user’s phone is essentially their wallet. Other financial services apps have already launched as secondary products, including M-Shwari for savings & loans (which uses transaction history for underwriting credit). Access to lending products bridges a huge gap for the majority of the population who lacks credit scores, thus not qualifying for traditional credit solutions from banks.
This established foundation of digital payments and mobile adoption provides a stepping stone for other non-telecom companies to launch banking and other financial products (such as cards, financial management, and cryptocurrency platforms). Many top payment institutions (such as Visa & Mastercard) and fintech leaders (e.g. Stripe) are active with partnerships and platforms in Africa. The volume and gaps in financial services (such as cross-border transfers & remittances) provide multiple startups with their own opportunities to attract investment and enter the market.
pace of FUNDING IN AFRICA
2021 was by far the most impressive year for investment in Africa. Not only from a deal size perspective, but also based on volume — nearly $5B in total funding for the continent. Compared to 2020, this was nearly 2x as much. FinTech was the leading sector of this total— drawing close to $3B for startups. Some of the early standouts from the breakout year:
Opay - $400M Series C funding;
Flutterwave - $170M Series C;
TymeBank - $180M Series B;
Zepz - $292M Series E;
Jumo - $120M;
MFS Africa - $100M Series C;
Chipper Cash - $250M Series C extension;
Tala - $145M Series E;
Wave - $200M Series A;
The majority of these large funding rounds came in the last 4 months of 2021. Close to $2B in funding went to these nine companies alone.
AFRICAN FINTECH COMPANIES TO WATCH FOR IN 2022
In addition to the fintechs pulling in large investments, who are the other companies we should look out for? Here’s a list of noteworthy startups making an impact throughout Africa:
Bloom: offers students and recent graduates in East Africa banking in US dollars (reducing volatility from local currencies);
PiggyVest: The Nigerian financial app improves savings behaviors with rewards. Last year, more than 3M users were able to save over $450M. New features are being added to further increase balances in 2022;
OyaPay: digital wallet for paying merchants (both in-store & online) through a shopper’s phone instead of cash, card, or POS terminal;
Chipper Cash: Remittances facilitate transfers from friends and family outside of the continent and represent a critical inflow for many Africans. Cross-border transactions that are fast, secure, and low-cost are in high demand. Chipper Cash addressed this challenge early and continues to expand its platform outside of Africa (in the US & UK);
Union54: B2B API that allows companies to issue debit cards (both physical & virtual) through their mobile/online platform from anywhere in Africa — no need for a bank or 3rd party processor;
Opay: The fintech developed a ‘super app’ with multiple capabilities such as money transfers, purchasing groceries, and bill payment. Coming off of a high funding year in 2021, the platform will continue adding new features and scaling users;
Suplias: B2B marketplace for local (‘mom & pop’) shops to purchase inventory (with a special focus on African women that may lack education in running a business);
Flutterwave: Another fintech from Nigeria (based in Lagos) making an industry impact — the startup built out a global payment infrastructure for merchants (starting in 2016) and partners with PayPal to facilitate money movement for freelancers & merchants in Africa;
StartWeb Africa: easy to use, drag & drop online platform for building e-commerce websites within minutes;
The assortment and breadth of products, services, and platforms continues to grow as Africa attracts more investor interest. Besides lending, cryptocurrency is the breakout sector anticipated to make an impact this year.
OUTLOOK for fintech in africa
The right mix of underserved needs, mobile adoption, and commitment to filling gaps with financial innovation created a compelling landscape in Africa for FinTech. Founders, startup teams, and investors are working together to improve the financial lives for millions. Customizing insights from the US, UK, and other fintech hubs are paying dividends in solving the needs of Africans.
Regulators in Africa are also doing their part to actively collaborate on innovation with fintech companies. Emtech is a fintech platform providing an API infrastructure for central banks (already working with Ghana & Nigeria) and enabling connections between regulators and financial service providers. These types of partnerships balance modern banking with sound risk and compliance practices. This improved transparency creates further opportunities for startups to launch new financial products the right way from the start.
As FinTech matures in Africa, look for mid-sized firms and enterprises from the US & UK to enter the market and expand their international footprint. Similarly, African fintechs will focus on capturing financial activity from other continents and markets to become global platforms and leaders.
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