Africa's FinTech Sector: The Youth, Mobile, and the New Money Trail

This opinion piece was featured on Vanguard News .

The financial sector has witnessed an unprecedented surge in innovation, driven by technological advancements and evolving consumer demands. This phenomenon, known as FinTech, has revolutionized the way individuals and businesses interact with financial services, and its impact has been particularly profound in Africa.?

According to the African FinTech Forum, the number of FinTech startups in Africa grew by over 60% between 2014 and 2020, reaching a staggering 600+ companies (African FinTech Forum, 2021). This growth is fueled by several factors, including:

• Increasing Mobile Penetration: Africa boasts a rapidly growing mobile phone market, with over 500 million mobile subscribers (GSMA, 2023). This widespread mobile connectivity has paved the way for mobile-based FinTech solutions, providing access to financial services to a previously unbanked population.
• Africa's Youth Population: Africa is home to the world's youngest population, with over 60% of the continent's population under the age of 25 (UNECA, 2023). This young and tech-savvy demographic is driving demand for innovative and digital financial services.
• Internet Access: Internet access in Africa has increased significantly in recent years, with over 40% of the population now connected (Internet World Stats, 2023). This growing connectivity is further enabling the adoption of FinTech solutions.
• Financial Inclusion Drive: A significant portion of the African population remains unbanked or underbanked, with estimates ranging from 30% to 40% (World Bank, 2023). This creates a substantial demand for accessible and affordable financial services. FinTech companies are addressing this gap by providing innovative solutions tailored to the needs of the unbanked and underbanked, such as mobile money platforms and microloans.
• Regulatory Landscape Evolution: African governments are increasingly recognizing the potential of FinTech to drive financial inclusion and economic growth (McKinsey & Company, 2022). They are working to create supportive regulatory environments that encourage innovation while safeguarding consumer protection. This includes developing frameworks for mobile money services, regulating peer-to-peer lending platforms, and establishing guidelines for cryptocurrency usage.

Key Trends Shaping the FinTech Ecosystem in Africa

African FinTech is where money meets innovation, regulatory policy, and a bit of drama. Fintechs are banking the unbanked, rebanking the already banked, and some are even unbanking the banked.?

Digital Banking Transformation?

Traditional banks across Africa are swiftly embracing digital technologies to offer more personalized and convenient banking experiences with Digital Banks e.g. ALAT by Wema , Gomoney by Sterling Bank .

Neobanks like Kuda , Opay , Carbon , and VBank symbolize the shift towards fully digital banking models, providing efficient services without physical branches. These neobanks cater to a tech-savvy population seeking seamless banking experiences via smartphones and computers.

Open Banking

Initiatives promoting data sharing among financial institutions are fostering innovation and healthy competition. Mono is one such company providing businesses with access to financial data. This access facilitates services in banking-as-a-service (BaaS), buy now, pay later (BNPL), and expense management.?

Open banking initiatives aim to create a more interconnected financial ecosystem, allowing for smoother transactions and innovative financial solutions.

Embedded Finance

The integration of financial services into non-financial platforms stands as a game-changer. Companies like Paystack , Flutterwave , and Anchor lead this trend, enabling smooth financial transactions across e-commerce and social media platforms. This integration goes beyond traditional banking by bringing banking services directly to where people are already engaged, making financial activities more accessible and convenient.?

Embedded FinTech

While most embedded finance refers to embedding financial services into non-financial business processes, embedded fintech integrates fintech solutions into a financial institution's website, app, or other business processes. Embedded fintech provides a way for financial institutions to offer a wider range of services, engage their customers, and deliver more value at minimal costs and low risk.?

Migo for instance, provides a Credit-as-a-Service digital platform that enables institutions such as banks, telecoms, and retailers in emerging markets to offer credit products to their customers, with no smartphones required.

Use Cases for Embedded FinTech Solutions:

• Banking & Payment Products: Moniepoint offers business accounts, POS terminals, expense cards, and loans. Opay facilitates accounts, transfers, and bill payments.
• Lenders & BNPL: Renmoney Lending and Stacs provide lending and "buy now, pay later" services.
• Financial Management: Bujeti provides corporate cards, expense management, bank payments, reimbursements, bank sync, and collections for African businesses. Bento caters to automated payroll, taxes, pensions, and employee benefits for African businesses. Kippa provides simple banking & and bookkeeping for micro businesses. Even Adeola ’s Middleman provides an escrow payment platform for social commerce.

Blockchain and Cryptocurrencies

The adoption of blockchain technology and cryptocurrencies has gained some momentum across various African markets.

The market has been quite busy with sharp declines in cryptocurrency prices globally as well as high-profile arrests of crypto executives. Despite this, Africa's adoption of digital assets remains strong. Cryptocurrencies are used for cross-border transactions, as a store of value due to currency depreciation, and in trade finance for small-scale businesses.

Although the international prominence of crypto-related scandals has increased scepticism, education initiatives may help to counter this narrative.

Africa, notably Nigeria, Kenya, Ghana, and South Africa, has shown significant grassroots adoption of digital assets despite global market fluctuations and scandals in the crypto industry. The practical applications of cryptocurrencies, especially in addressing financial challenges unique to the region, continue to drive their adoption and use in various sectors.

Most of the activity from Africa is going to Binance – the largest cryptocurrency exchange in the world in terms of trading. It provides a platform for trading various cryptocurrencies.

I believe Helicarrier is a big player in the African cryptoverse, as they are building the cryptocurrency infrastructure for Africa through a suite of cryptocurrency products:

• Buycoins — The easiest way to buy, sell, and store cryptocurrencies in Africa.
• Buycoins Pro — Orderbook for advanced digital asset trading.
• Sendcash — Crypto-powered remittance.
• Sendcash Pay — A suite of developer tools that lets you add borderless payment experiences to your digital products.
• NGNT — A collateral-backed digital currency that bridges the Naira with the advantages of decentralized blockchain technology.

This concludes the four-part series on Navigating the Startup Landscape in Africa . Stay updated on my Substack publication for more in-depth opinion pieces like this.