The Impactful Potential of FinTech

Mobile technology adoption in Africa is among the highest globally and is projected to exceed 600 million users (about half the population) by 2025. As new platforms emerge offering payment, credit, and insurance services, growth in this sector is expected to continue its upward trajectory. The increasing population and local initiatives aimed at building strong financial ecosystems further support long-term sustainability and scalability.

In 2018, Africa ranked among the top three regions globally in terms of payment volume market size. The movement of mobile money saw a dramatic increase during the pandemic in 2020, with a year-on-year growth rate exceeding 40%. This advancement in mobile payments is largely driven by telecommunications companies rather than traditional banks.

For instance, Safaricom, the leading telecom operator in East Africa, offers mobile money services through M-Pesa, enabling utility payments and transfers without requiring an internet connection—effectively turning a user's phone into a wallet. Other financial service applications, such as M-Shwari, have been introduced to facilitate savings and loans by leveraging transaction histories for credit assessments. This allows many individuals without credit scores to access lending products that traditional banks would typically deny.

The existing framework of digital payments and mobile technology serves as a foundation for non-telecom companies to introduce banking solutions and other financial services, including credit cards, financial planning tools, and cryptocurrency platforms. Major payment institutions like Visa and Mastercard, along with fintech leaders such as Stripe, are actively forming partnerships and developing platforms in Africa, where the demand for services like cross-border transfers and remittances presents various opportunities for startups to attract investment.

Funding Landscape in Africa

The year 2021 marked a record-breaking period for investments in Africa, characterized not only by substantial deal sizes but also by high transaction volumes, nearing $5 billion in total funding across the continent. This amount represented almost double the funding received in 2020, with FinTech leading the charge, attracting nearly $3 billion for startups. Some noteworthy funding milestones included:

• Opay: $400 million in Series C funding
• Flutterwave: $170 million in Series C
• TymeBank: $180 million in Series B
• Zepz: $292 million in Series E
• Jumo: $120 million
• MFS Africa: $100 million in Series C
• Chipper Cash: $250 million in Series C extension
• Tala: $145 million in Series E
• Wave: $200 million in Series A

Most of these significant funding rounds were completed in the latter months of 2021, with nearly $2 billion directed toward just nine companies.

Prominent African FinTechs to Monitor

In addition to the fintechs receiving substantial investments, several other promising startups are making waves across Africa. Here are a few noteworthy examples:

• Bloom: Provides banking in US dollars for students and recent graduates in East Africa, reducing local currency volatility.
• PiggyVest: A Nigerian app that encourages saving habits with incentives; over 3 million users saved more than $450 million last year.
• OyaPay: A digital wallet for making payments to merchants, both online and in-store, using a shopper's smartphone instead of cash or cards.
• Chipper Cash: Facilitates low-cost, secure cross-border remittances, meeting the high demand for international transactions among Africans.
• Union54: A B2B API enabling companies to issue physical and virtual debit cards from anywhere in Africa without needing a bank.
• Opay: A 'super app' that combines multiple services, including money transfers and grocery purchases, with plans for further feature expansions.
• Suplias: A B2B marketplace designed for small local shops to source inventory, with a focus on empowering African women entrepreneurs.
• Flutterwave: A Lagos-based startup that has developed a global payment infrastructure for merchants and collaborates with PayPal to facilitate transactions for freelancers and businesses in Africa.
• StartWeb Africa: An accessible platform for quickly building e-commerce websites.

The variety of products and services available continues to expand as Africa garners increasing interest from investors. Besides lending, business expense management is anticipated to become the next significant sector for growth.

Market Outlook for FinTech

The combination of unmet needs, widespread mobile adoption, and a commitment to innovation has created a vibrant environment for FinTech in Africa. Founders, startup teams, and investors are collaborating to enhance the financial well-being of millions. Insights and experiences from fintech hubs in the US, UK, and elsewhere are proving invaluable in addressing the unique needs of the African market.

Regulatory bodies across Africa are also proactively engaging with fintech firms to foster innovation. For example, Emtech is a fintech platform providing API infrastructure for central banks and facilitating connections between regulators and financial service providers. These collaborations help to balance modern banking practices with essential risk management and compliance, creating further opportunities for startups to launch new financial products effectively from the outset.

As the FinTech sector continues to mature in Africa, expect to see mid-sized firms and enterprises from the US and UK entering the market to expand their global reach. Similarly, African fintechs will aim to capture financial activity from other continents to establish themselves as leaders on the world stage.

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