Fintech in Africa
October 9, 2020
FinTech space is fast growing in Africa. The continent has recorded massive growth in the last decade. Currently Africa has more than 400 FinTech companies and startups of which more than 80% of them are home-grown. The industry is largely dominated by payment, lending, insurance and investments focused solutions.
The growth is attributed to mobile access and penetration in the continent and lack of financial inclusion to traditional banking leaving majority (Approximately 60%) of the African adult population unbanked.
In Kenya, M-Pesa mobile money service provided by Kenya’s biggest telecommunication company Safaricom PLC has been a massive success in providing mobile payment solutions allowing users to pay bills, send money to each other and backing a giant network of cash access through M-Pesa agents network. M-Pesa has impacted local access to financial products and services growing Kenya’s population financial inclusion to over 80% in the last decade.
Across West Africa, the FinTech industry is approximately 10 times larger than local banking institutions. Flutterwave, a FinTech company headquartered in Nigeria struck a partnership deal with Chinese ecommerce giant Alibaba to allow African businesses to receive payment from Alibaba’s. MTN which is based in Ghana launched a mobile money-based IPO in 2018 that has raised over $200 million dollars
Africa, having the world’s youngest labor force and being the leading in terms of mobile penetration has attracted global giants such as Mastercard, Visa, PayPal and stripe into partnering with local Fintech companies in providing the essential financial services to the African market which has potential according to industry players.
Mastercard backed Flutterwave’s $20million extension in 2019 and Jumia Pay, a payment solution by Jumia, Africa’s biggest ecommerce platform. Visa and Stripe as well led an $8million extension of Paystack, a Nigerian Online Payments Company.
In lending, Paypal has backed Tala, an online lending platform operating in Kenya and Tanzania while Visa led a $170 million investment in Branch, another online lending platform. The biggest of all has been Visa’s $ 200 million investments in Nigerian payment processor, Interswitch, Africa’s first fintech unicorn which is set
China’s influence is not left behind in the African Fintech Scenery, Opay and PalmPay are riding on the Chinese tech penetration to offer payment solutions. Palmpay for instance comes preinstalled in Transsion’s fast selling smartphones. Both have received more than $210million from Chinese investors as the companies literally try to replicate their success back at home here in Africa.
Despite the massive disruption of the financial sector by fintech startups and companies, the industry is facing stiff regulations by governments which might serve as a blow to their growth and base establishment.
In Nigeria for instance, the central bank drafted a proposal to eaise minimum shareholders fund to a minimum of $275000 for fintech firms seeking licensing. Considering the capital markets in Africa, many startup might struggle if the proposed is enforced.
In Kenya, interest rates cap regulations are facing lending fintech’s and the banking sector as a whole with the financial conducts and digital lenders bill proposed to regulate and license digital lenders.
Industry players see government regulations as an embargo to the continent’s innovation which will affect tech innovation and financial inclusion of the African Population