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The African FinTech Opportunity

Africa’s FinTech sector has witnessed unprecedented growth in the last decade. Despite the impact of the pandemic, the continent’s FinTech funding nearly doubled to $3 billion in 2021. Promisingly, this growth, in absolute terms, also outperformed all other emerging market regions. Rooted with the continent’s first jewel in the global FinTech crown Mpesa, Africa has […]

SmartWage

SmartWage

Africa’s FinTech sector has witnessed unprecedented growth in the last decade. Despite the impact of the pandemic, the continent’s FinTech funding nearly doubled to $3 billion in 2021. Promisingly, this growth, in absolute terms, also outperformed all other emerging market regions. Rooted with the continent’s first jewel in the global FinTech crown Mpesa, Africa has soared to new heights, with the continent producing seven new “unicorns”, in the last three years. With 95% of all transactions in Africa still made in cash, and 370 million people without traditional bank accounts, the young, unbanked, and underserved population of Africa forms the foundation of a market ripe with opportunity – one in which investors could keep a watchful eye on.

Here are some of the key themes and emerging trends in Africa’s FinTech ecosystem to look out for in 2022:

 

1. Mobile Money

Africa is quickly transforming into the largest adopter of mobile money transfer systems in the world, with mobile penetration across the continent predicted to increase to hit 615 million by 2025. As global investors look to capitalise on de-cashing the continent, mobile money FinTechs have dominated Africa’s FinTech funding, raising a total of $656 million since 2011. Consequently, the majority of Africa’s newly emerging “unicorns” are digital payment platforms. Examples of these tech giants include the likes of Interswift (Nigerian payments platform backed by Visa in 2019), Flutterwave (which raised a total of $225 million and partnered with the Standard Bank of South Africa to boost digital financial services on the continent), and Fawry (Egyptian e-payment company that became the country’s first technology unicorn in 2020).

 

2. Banking & Lending

Complementary to mobile payments, are FinTechs dedicated to digital banking and lending services. These services follow closely behind digital payment in the number of investment transactions, but receive 40 percent less financing. As ‘Buy now pay later’ solutions from developed markets filter through into Africa, and open banking starts to disrupt the continent’s traditional banking infrastructure; startups like OnePipe (Nigerian company helping organisations embed financial services within their products), Stitch (offering businesses a single API to launch financial solutions) and truID (South Africa based company offering open finance solutions) are leading the charge, attracting strong investor interest as a result. These banking and credit FinTechs are not only attempting to solve some of the greatest pain points experienced by Africa’s untapped population, but are also driving financial inclusion across the continent.

 

3. InsurTech 

Emerging as the third largest FinTech trend, InsurTechs are rapidly improving the efficiency of Africa’s insurance industry. Out of the 46 million African adults within reach of insurance, only 12.5 million have basic insurance, presenting a significant opportunity for InsurTech to scale. Having raised $200 million in total investment funding since 2011, Africa is home to big players such as Naked (South African insurance company that raised $11 million in their most recent round led by Naspers Foundry), Inclusivity (InsurTech building inclusive digital insurance solutions) and Pineapple (that raised $5.4 million in Series A funding after growing by 200% in 6 months). InsureTech’s growth is set to skyrocket, as Africa’s economic growth, and rapid expansion of digital and mobile services make the smallest market start looking like the biggest growth opportunity.

 

HR Tech

HR Tech — companies that serve to automate the management of human resources for organisations — is also building momentum across the continent.  SmartWage is an African HR and Communications company the needs of the emerging market. Their technology refrains from using the ineffective default method of communication and HR – email, and replaces it with the most used app on the continent – Whatsapp.

 

The future of FinTech in Africa

With favourable demographics, an increasing need for digitalisation, and rapidly expanding infrastructure, the continent has the perfect ingredients for an innovative explosion. Moreover, it has the two driving factors seen in many of the most profound innovative waves of the past millennium: necessity and scale. As 2022 unfolds, we expect each of these areas to evolve at pace, driven largely by necessity and the proliferation of data on the continent, supporting a more efficient delivery of services for consumers and SMEs alike, from new lending models to the emergence of Africa’s human capital technology movement. While FinTech’s past lies in the US and its present remains squarely in Asia, investors could look at Africa to take advantage of the next FinTech revolution – what investors are terming the ‘Silicon Savannah.’

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