Recent reports have placed Africa as an emerging Fintech market in the world, only second to China. The pandemic has put many economies of the world under suffering, with Africa included. The World Economic Forum predicts that African economies will be affected negatively by up to 4.4% in 2021 because of Covid-19. But despite this economic concern in the continent, Fintech is doing well in Africa and is posed as a critical market that will be crucial in the recovery of the African economies.
The drivers of Fintech growth in Africa
In July 2021, African nations implemented the African Continental Free Trade Agreement (AfCFTA). This has been one of the pillars that are driving Fintech growth in Africa. It has boosted positivity in the continent and many innovators are willing to venture into unchartered markets.
There has also been an accelerated digital transformation by telecom giants who are keen to build new networks and streamline existing infrastructures to improve the speed of connectivity. This accelerated effort is also increasing wireless services, which are core to the growth of the Fintech industry.
Several macroeconomic factors have also led to the growth of African Fintech. Whilst mobile and smartphone access has been a factor, the number of smartphone users in the continent is rising. Digital banking is also another macroeconomic factor that is promoting Fintech in Africa. Currently, about two-thirds of the sub-Saharan African population is unbanked. This provides a perfect landscape for innovators to come up with Fintech services to capture this customer base.
How Fintech growth is impacting Africans
Access to financial markets is on the rise. Many Africans are now able to access markets such as Forex and Crypto. Given the successes of trading activities, many people in the continent seek to benefit from asset price fluctuations in the volatile financial markets.
Global leaders in Fintech like PayPal, Visa, and Stripe have invested in Africa because of the increased industry’s valuation. The confidence by global giants to invest in the continent is spurring startups in the continent. Nigeria, South Africa, and Kenya are the top destinations for startup companies in the industry. These countries have unique ecosystems that promote tech advancement.
Fintech incentives in Africa
The development of the industry in Africa has also been boosted by various incentives. For example, the EcoBank Challenge seeks to finance upcoming finance technology startups in Africa. The challenge is a partnership that is open for all Fintechs on the continent.
In 2020, Ukheshe Payment started a campaign to provide trade financing solutions for small startups in this industry.
World Bank estimates that Africa can generate a gross domestic product of $3.4 trillion.
Challenges that hinder growth
Bureaucracy has been the biggest block to the success of trade and development amongst African nations. This seems to be a hindrance to the success of the Fintech industry in Africa.
But if the trend is anything to go by, the industry will overcome this challenge and open up new opportunities for emerging startups.