Historically, geopolitical, currency-related risks, as well as the fragmented nature of the continent, have deterred non-African VCs from entering the region. Yet, after having lagged behind for many years, Africa might just become the next FinTech hub . This article covers the recent spur in Africa’s FinTech and which companies and sectors contributed to this growth.
So how does a market that was (not so long ago) lagging behind in technology and innovation qualify as one of the most rapidly growing FinTech opportunities around the world? In short - Africa is pretty much a blank canvas where startups can build on relatively easily.
Due to the high level of fragmentation per country, breaking down Africa’s FinTech opportunity, one should take the macro-environmental factors per host country into account - thoroughly analyzing political, economical, social, technological, legal, and environmental factors of the market or region into consideration.
Yet, one of the most positive recent indications is the implementation of the African Continental Free Trade Agreement, which highly reduces regulatory measures such as technical barriers to trade. Creating a major opportunity to help African countries accelerate growth and attract foreign direct investment.
First of all, to cover one of the biggest barriers for widespread FinTech adoption - it is alarming that 57% of the population in Africa is unbanked. The good news is that with more than 80% of the population having a mobile phone subscription, Neobanks and fintechs have a huge opportunity to boost financial inclusion outside of traditional banking.
One example of foreign investment that spurs digital disruption is China betting big time on Africa. They have the potential to build the fintech ecosystem for many countries - and as opposed to building an ecosystem as WeChat or Alipay made for one specific country, investors should nurture local African startups from the ground up.
We can say with confidence that although there is still quite the way to go, the current state of fintech in Africa is on the right path. Especially as we saw that VC funding for African fintech startups had risen by 51%. Later in the year, reports announced even more growth, as new fintechs raised a remarkable $350 million during the first quarter of 2020.
Though in all fairness, It is not so surprising that South Africa’s fintech funding has been outstanding when you realize that Fintech has the highest penetration in the region, with 94% of individuals having regular access to the internet and 67% having a bank account.
Starting with one of the highest valued African FinTechs, Opay, the Nigeria-based mobile-based platform for payment, transportation, and more. Notably, the fintech just recently secured an impressive $400 million led by Softbank. Yoco, a relatively young, South African mobile payment platform is on a growth spree with a valuation as it raised $83 million just around a month ago.
And the list of successful FinTech startups goes on. Upon a closer look at the most successful FinTechs, it became evident that the highest growth FinTech sectors include Blockchain, lending & Payments, and Remittances
What is the biggest barrier for individual African countries or Africa as a continent to become THE next FinTech hub?
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