Fintech emerges as Africa’s most vibrant sector, finds the Mastercard study
Fintech startups in Africa grew 81% in 2021, with South Africa, Nigeria and Kenya emerging as key hubs on the continent, a Mastercard study on the state of fintech in African markets found*.
The white paper, titled ‘The Future of Fintech: Rapid Growth Attracts Smart Capital’, was released at Mobile World Congress (MWC) Africa, one of the continent’s most influential connectivity events, of which Mastercard is a founding member.
Some of the key findings from the paper include how the fintech sector accounted for 27% of the record number of closed deals and 61% of the $2.7 billion distributed across Africa in 2021. The area was further characterized by mega deals of more than 100 million dollars each.
The white paper went on to find how fintech innovation in Africa has been driven by the need to address multiple pain points, with a focus on increasing financial and digital inclusion. South Africa, Nigeria and Kenya were also seen as among the countries leading the transition to digital payments, with infrastructure and policy frameworks enabling this growth well in place.
“It is encouraging to witness the growth of the fintech landscape across the region, creating more opportunities for start-ups, scale-ups, enablers and micro, small and medium enterprises (MSMEs) to bring more people into the digital fold. At At Mastercard, we help drive fintech acceleration by offering access to our expertise, network and technology.We offer a portfolio of technology solutions, APIs, developer tools, partner networks, startup programs and a community experience for all fintech companies and payment developers, helping to to turn their bold ideas into reality, says Ngozi Megwa, Senior Vice President, Digital Partners and Enablers, Eastern Europe, Middle East and Africa, Mastercard.
The growth in the number of fintech companies in Africa reflects global fintech funding that jumped to a new record of $131.5 billion in 2021. The number of fintech unicorns reached 235 with 34 born in Q4-2021 alone. Fintech companies now represent more than 20% of the total tech unicorn value, compared to 15% the previous year.
The study showed that on the demand side, the role of MSMEs has been decisive for fintech’s growth. MSMEs are using fintech and e-commerce solutions to scale, source and reach. The growth in alternative payment rails and new platforms is shaping the commercial landscape. Driven by demand, fintech has seen products based on multifaceted innovation in emerging and mature economies. By offering scalable financial services using the internet, blockchain and algorithms, fintech companies have expanded the reach of financial services traditionally offered by banks, including loans, payments, investments or wealth management.
The white paper also explored the African fintech landscape in terms of ecosystem, funding and regulation, with the following findings included in the study:
The fintech ecosystem in Africa is adopting new technologies to deliver financial services
- Governments, regulators, financial institutions, payment and technology companies, financiers and entrepreneurs are collaborating to be at the forefront of financial innovation, developing use cases such as mobile money and using fintech as a means of financial inclusion.
- In recent years, we have seen a faster rate of digitization, which has driven the use of neobanks and digital payments. Cryptocurrency, non-fungible tokens (NFT) and blockchain-backed technologies have entered the mainstream, often supported by dynamic regulation that supports the growth of more affordable financial services.
African fintech start-ups showed exponential growth in 2021
- In terms of funding, the study showed that Africa’s fintech startups recorded 894% year-on-year growth in funding in 2021, the second highest in the Middle East and Africa region.
- Nigeria emerged as a leading fintech hub across the Middle East and Africa, as start-ups there accounted for a third of all funding distributed to fintech in 2021.
- The fast-growing sector encompasses sub-segments of special interest, including digital payments, e-money, international money transfers, peer-to-peer (P2P) lending and equity crowdfunding.
Regulators showed an increase in cooperation
- Regulators across various countries in Africa have adopted a collaborative approach to enable the introduction of new solutions by fintech companies. Africa has proactive regulators that promote innovation for financial, digital and economic inclusion.
- 45% of the population in Africa does not have an official identity, making eKYC a seamless entry point for fintech.
- Nigeria is one of the first regulators in Africa to mandate open banking frameworks, along with rules to protect financial services.
