FEATURE : FINTECH
Key takeaways
African fintech and cross border scaling
• Almost half of 1,000 fintech in Africa were founded in past six years .
• African fintech have raised about $ 6-billion in equity financing since 2000 .
• Investment in African fintech is growing at incredible CAGR of 57 % versus 27 % for rest of world .
• African fintech ecosystem is nascent , with 80 % of rounds since 2018 at seedor angel-level maturity .
• Fintech are centred in Africa ’ s largest economies , with 63 % of all companies located in South Africa , Nigeria , Kenya , Egypt and 80 % of funding flowing into these markets .
• To move across borders , companies will need to invest in understanding regulation , procure appropriate licenses , adapt business model , and develop team on the ground .
• Growth depends on key changes as fintech and investors face several hurdles , including high costs and different regulations in each jurisdiction .
African fintech and payments , lending
• Payments fintech were the first movers representing 45 % of companies pre-2013 .
• This segment is yet to reach full potential by solving pain points such as financial inclusion and high cost of transactions .
• Some large economies , South Africa , Kenya , Uganda , Ghana have made progress in financial inclusion , but there is still long way to go
• Lending will join forces with growth centred around microfinance , a great enabler of financial inclusion .
• 40 % of African fintech are focused on digitally enabling existing financial institutions instead of competing against them .
• Fintech enabling financial institutions , receive more funding on average , than those that adopt disruptive business models .
located in South Africa , Nigeria , Kenya , and Egypt and nearly 80 % of funding flowing into these markets .
Scaling cross borders
“ This shows that the African market is already an attractive ecosystem to new entrants capturing a share of the unserved or underserved segment . However , to
THE AFRICAN EDUCATION SYSTEM IS LIKELY TO ONLY PRODUCE 50 % OF THE SKILLED WORKERS IT REQUIRES . continue attracting new entrants , fintech must be able to scale across Africa , and not solely exist in siloed markets ,” adds Patel .
Few fintech have been able to do so in the continent , where just 4 % have reached series C funding or beyond , versus 11 % for the rest of the world .
To successfully move across borders , these companies will need to invest in understanding regulation , procure the appropriate licenses , likely adapt their business model , and develop a team on the ground to successfully execute their value proposition in the new market .
“ Fintech have been playing an important role in driving financial inclusion and economic development in their home countries . With the development of digital infrastructure and policy clarity and harmonisation , they will be able to extend their impact both in their home country and cross-border , and benefit even more people across the continent ,” says Anteghini .
This growth does depend on key changes as fintech and investors face several hurdles , including high costs and different regulations in each jurisdiction .
Five areas that require attention :
• Digital infrastructure
• Policy harmonisation
• Policy clarity
• Developing local capital markets
• Growing local talent pool
In recent years , the war for talent has intensified and Africa is struggling as some of its top talent has moved overseas tempted by higher salaries . At the same time , attracting foreign talent is difficult due to long , stringent visa procedures and lower liveability scores .
It is crucial to reverse these trends , however , as the African education system is likely to only produce 50 % of the skilled workers it requires . Fintech have demonstrated their ability to succeed throughout the first stages of a company life cycle , but further scalability is unfeasible with current supply .
The high unbanked and underbanked population , accelerating mobile and Internet penetration , and an increasing need for financial inclusion across the region present a great opportunity for fintech companies .
If policymakers can foster the right environment for fintech to grow and financial inclusion to expand , it will ultimately foster long-term financial inclusion , efficiency , and quality of life , which will turn into taxes , economic growth , and capacity to reinvest . p
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