FEATURE : FINTECH
The report also explains the different business models that fintech can thrive in , in this context , and while many of them are disrupting the financial sector , there are several opportunities for collaboration between incumbent players and fintech . 40 % of African fintech are focused on digitally enabling existing financial institutions instead of competing against them .
Lending next driver
The report suggests that payments and lending will be the drivers of further financial inclusion , and the key areas of investments in the coming years .
Payments fintech were the first movers representing 45 % of companies pre-2013 . This segment is yet to reach its full potential by continuing to solve for critical African pain points such as financial inclusion and the high cost of transactions .
Lending will join forces with growth centred around microfinance , a great enabler of financial inclusion . Local businesses need basic credit for day-to-day activities and capital investments but often do not have the tools or credentials to go through traditional channels .
When it comes to specific applications for improving financial inclusion , they can further support advancements by acting in four areas :
• Awareness campaigns to increase literacy
• Institutional support and investment
• Launching data-sharing platforms
• Unlocking funding will also aid advancements
Caio Anteghini , Partner at BCG , Johannesburg
For fintech , it makes sense to focus on this small to medium-sized enterprise , SME segment due to the sizes of loans , broader scale , and financial transparency . One example of successful microlending is JUMO World , which is building banking infrastructure with a focus on assessing the credit worthiness of SMEs .
The report finds that fintech enabling financial institutions , receive more funding on average , than those that adopt disruptive business models , indicating a shift in the ecosystem .
Competitive strategies
There are four winning strategies for fintech and the appropriate support governments could provide to enable them to flourish :
• Fintech providing specific services via existing platforms
• Distributing a full-fledged solution via existing platforms
• Creating a new platform starting in niche segments
• B2B solutions could lead to the next wave of growth for incumbents and new entrants
“ Policymakers can be a huge catalyst to the fintech industry by developing the infrastructure and favourable regulatory environment ,” says Pat Patel , Executive Director of Elevandi .
On top of the infrastructure created in the first wave , greater adoption of smartphones , better connectivity , and cloud adoption in front-running countries will be instrumental to the second wave of growth .
Fast growing local market
In another report , Unlocking the Fintech Potential in Africa , BCG and Elevandi examine the benefits that fintech has brought to Africa and the business models that fintech and investors need to create to scale up activities . Almost half of the 1,000 fintech in Africa were founded in the past six years . Cumulatively , they have raised about $ 6-billion in equity financing since 2000 , with investment growing at an incredible compound annual growth rate , CAGR of 57 % versus 27 % for the rest of the globe . At the same time , the African fintech ecosystem is still nascent , with approximately 80 % of rounds since 2018 at seed- or angel-level maturity . However , investors and fintech need to address three key challenges to attract funding :
• Identify an economically viable model that caters to African-specific challenges and is affordable
• It can scale beyond its home market given relatively small market sizes
• It mitigates risks inherent to the developing continent
Current fintech are heavily centred in Africa ’ s largest economies , with approximately 63 % of all companies
www . intelligentcio . com INTELLIGENTCIO AFRICA 47