EXPLAIN: The 5 different categories of Fintech startups in Africa

by James · July 11, 2022

Why every Nigerian start-up entrepreneur tries to make a fine-tech start-up. Why do I need 1000 different ways to pay for plantain leaves?

– Aniekan (@ObiHabbibi) May 10, 2022

Africa continues to witness a wave of fintech startups offering solutions to various challenges that have confused the financial sector across the continent.

However, the proliferation of fintech startups has apparently drawn criticism from some users, with concerns that many startups zero in on the same issue while there are many other issues to solve.

The tweet above from a Nigerian UX designer is a testament to this fact.

But while most startups can attack the payment area, the fintech sector is not just for payments, and the various players can be placed in several categories.

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SEE ALSO: Top 3 Fintech sectors to watch out for in 2022 across Africa

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Here are the 5 categories for fintech solutions across the different markets in Africa:

Lending

Fentech lending makes it easier for people to borrow money usually with just a cell phone and an internet connection.

The digital lending process is a series of procedures performed by a financial institution to issue loans online. This procedure usually involves the following 3 components:

An approval process for determining the consumer’s creditworthiness and loan amount
A system for paying loan amounts and receiving repayments
A debt collection scheme to recover overdue payments

Such startups have spread across the continent with startup examples such as Branch and Tala.

Buy now, pay later (BNPL)

Buy now, pay later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them at a future time, often interest-free. BNPL schemes, also referred to as ‘installment loans’, are becoming an increasingly popular payment option, especially when shopping online.

Startups that are revolutionizing this sector are taking advantage of mobile users who are eager to shop and may not always have the money to buy what they want.

Some notable startups here include:

For example, Lipa Later has exclusive partnerships with retailers across these markets, allowing customers to pay for products in installments. Lipa Later’s partnership with French retailer Carrefour (which has an East African regional presence) allows customers to pay for items including furniture, electronics and even perishable items in monthly installments.

Remittance / International payments

A growing part of fintech players in Africa play in the international payment market where they solve the problems of sending money internationally or sending money across African countries.

Many of the high-profile fintech startups in Africa operate in this sector, with examples such as:

In addition to sending money to other people, these start-up solutions usually also involve C2B payments, which enable African consumers to make e-commerce payments internationally.

Software as a service (SaaS)

Some of the more successful fintech startups in Africa exist to create solutions that allow companies across the continent to accept payments online from users and partners.

These types of startups create software that utilizes APIs (Application Programming Interfaces) that other businesses can integrate into their own computer systems to obtain a variety of financial services.

They usually provide the opportunity to accept payments online.

Some of the leading players in this vertical include:

Crypto

Many fintech players in Africa have emerged in recent years to offer solutions related to cryptocurrencies, which in itself is a financial technology.

Examples of solutions in this sector include stock exchanges, financial ramp solutions and NFT platforms such as:

Some fintech players have used cryptocurrencies, such as stack coins, to support or improve their current services. Chipper Cash, for example, has said it is looking at stack coins to improve the settlement process for cross-border cash exchanges.

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RECOMMENDED READING: Nigerian Crypto Payments Startup, FluidCoins Launches Free Wallet-as-a-Service API

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