The African FinTech Opportunity
15 October 2019
The African technology ecosystem is relatively small by global standards, however when it is evaluated according to volumes and year over year expansion in VC, startup formation, and tech hubs, it’s one of the fastest growing markets in the world.
Financial Technology (FinTech) is Africa’s biggest technology sector and a major force shaping the structure of the financial industry. FinTech is also the most attractive technology sector to investors, in 2018 FinTech brought in 39.7% of the $334.5 million raised by all technology startups on the continent. Consequently, Africa’s fintech firms have grown from 301 in 2017 to 491, whilst the $132.8 million raised in 2018 was the highest-ever amount raised by the sector according to the Finnovating for Africa 2019: Reimagining the African financial services landscape report.
Mobile is the main force behind the rapid growth of FinTech in Africa, in 2017 the continent had the world’s largest growth in internet users – 20 percent – the majority of whom access the internet via mobile phones. The continent’s low penetration rates for traditional banking services, coupled with high penetration of mobile phones, makes it a rich breeding ground for FinTech innovation. According to EcoBank, more than 57% of all mobile money accounts globally can be found in Sub-Saharan Africa.
The majority of mobile money account transactions are used to send and receive domestic remittances however, transactions are increasingly being used for domestic transfers such as paying utility bills, receiving wages, and paying for goods and services. FinTech is emerging as a technological enabler in the region, improving financial inclusion. The challenge now is to go beyond the success in payments and mobile money to meet the unmet demand in the region for other, underdeveloped financial services such as credit, cross-border payments, investment products, and insurance services.
African FinTech can also facilitate the growth of the digital economy, complementing nonfinancial technologies and industries. Sectors such as agriculture, health, infrastructure, land registration, and tax collection are set to benefit from digitalisation emerging from the African FinTech sector.