Fintech in Africa: Crowded, Just Enough or Not Enough?

Being the most promising sector for securing investments has also increased the value of these companies, and this success has seen five fintech unicorns out of the seven in the broader technological African ecosystem. This success has contributed massively to the hype that has made the fintech sector very well known.

However, this hype has been over-indexed and has often led to the discourse on social media that there are too many players in the African fintech area.

Apart from fundraising, another reason for this discourse is the misconception that fintech is only about payments, but the sector goes beyond that vertical. According to 2021 data from Disrupt Africa, there are 573 fintech startups in Africa across the various verticals in the industry – Paytech (payments and transfers), Lendtech (Jumo), Banktech (digital and neo-banks), Insurtech, Blockchain and Cryptocurrency. Several other fintech verticals also deal with investment and trading, personal financial management, etc.

To limit it, Nigeria, for example, has 144 fintech companies in the country; payment, mobile money and digital banking share 38% of the fintech market, 23% deal with lending, 15% on savings, investment and crowdfunding, 13% on business services and infrastructure, 8% on cryptocurrency and 3% on insureTech. These data from EY suggest a widespread ecosystem.

In fact, the payment vertical of the fintech industry is by far the most active in Nigeria and Africa. Yet, for a population of 200 million people (Nigeria) and 1.2 billion (Africa), the narrative that we have “too many fintechs” is not valid.

Despite the hype, fintech has not scratched the surface of challenges on the continent that are still characterized by less developed financial infrastructure and an unbanked population. The challenge of financial inclusion remains full of much of the innovation and technology needed to ensure that more Africans have access to financial services that can drive economic growth.

Economic development is almost impossible without financial inclusion, and Africa is still lagging behind other continents. Financial inclusion goes beyond what is currently available in Africa; send and receive money, accept payments, agency banks and money transfers, etc. There is still a need for a well-functioning infrastructure in Africa that gives individuals and companies the opportunity to become more actively involved in the economy.

Fintech creates new and innovative solutions for companies and individuals in several ways apart from payment. There is a need for more players in sub-verticals such as digital loans, crowdfunding and the relatively new phenomenon of reg tech. These fintech verticals close the gap between people and financial services in various ways, giving people the opportunity to save and invest money and borrow, all without the long and tedious process of traditional banking.

There is still more to come with the fourth industrial revolution that uses blockchain technology, artificial intelligence and augmented reality to deliver a better customer experience for fintechs.

The belief that there is “too much fintech” in Africa always applies only to Paytech. But even this sub-sector still needs more players to take advantage of the many opportunities in Africa’s growing economy.

With the rapid expansion in digital, Paytech has the opportunity to go from being a sub-sector to a larger one. The ever-changing customer expectation will create more demand for online and digital payment options, which means more growth in the Paytech category.

There is already a growing acceptance of non-cash transactions in Africa, e-commerce sales are also growing, and continued growth in wallet adoption is expected.

With a growing population, and increasing mobile and internet penetration, there is a growing need for Paytech solutions to serve Africa’s non-bankers. Paytech is the most popular because it deals with the way people trade with money – which is the most important financial driver. That sub-vertical has changed the way we make payments and transactions, with more people now switching to mobile and digital payment methods.

There is a huge opportunity to develop the payment experience with innovation and technology to build more payment infrastructure to connect African businesses around the world.

With six million people accessing the internet every year in Africa, businesses need to take advantage of it. The only way to scale is to reach as many people as possible. What is really needed is the infrastructure that connects Africa to itself and the rest of the world.

Cross-border payments remain a huge challenge for businesses across the continent, with more than 70% of the more than 150 million businesses still lacking access to cross-border payments. The existing payment infrastructure can not help; on average, it takes days for settlement and costs a lot of money for the transaction. This challenge excludes Africans from participating in the global economy.

In the midst of these challenges, Africa has managed an intra-trade value of $ 69 billion from 2019, while contributing only 3% in international trade volume, far lower than other regions. African businesses need to expand and diversify their participation in international trade and global value chains in order to reduce poverty on a large scale and transform their economies. Achieving this is impossible without a simple transfer of value across Africa and the rest of the world.

While fintech has significantly improved mobile money and consumer payments, cross-border payments connecting Africa with the rest of the world remain largely unresolved; this is a mission that drives us in Fincra.

Fincra is a provider of payment infrastructure that goes across the payment landscape and caters to companies. Via our robust payment APIs and the Fincra portal, on-board businesses can use our Receive Payments feature to receive payments in their local currencies from anywhere globally via card, bank transfer, mobile money or checkout. We help our sellers reduce transaction time from days to a few minutes at no charge for chargebacks.

We want to create a world where value movement is as instant and simple as sending a text message and connecting local merchants to the world. Making the payment experience seamless and reliable for African businesses can help them connect to the global economy and unleash a wave of prosperity across the continent.

Also included in Fincra’s package of payment products is Make Payments, which companies can use to make local and international payments to bank accounts, mobile wallets and cash collection.

Fincra also offers Banking as a Service with the issuance of virtual accounts. Businesses can use virtual accounts for fast payment collection from customers in the UK, Europe, Nigeria, USA and other African countries in USD, GBP, EUR and NGN, and easy settlement in the Fincra wallet without hidden fees or the headache of international banking. Fintechs can also integrate Fincra’s API to issue bank accounts to its customers for seamless payment collection in available currency.

Apart from the digital payment solutions and offers, Fincra also provides offline access to financial services with Agency Banking solutions that drive financial inclusion.

About Ayowole Ayodele – CEO Fincra

Ayowole leads a world-class team at Fincra in building online and offline payment infrastructure for fintechs, platform companies and global companies operating worldwide. Passionate about developing a better global payment system for today’s digital world, Ayowole is convinced that Africa has enormous potential to become the new frontier of this economic opportunity. Ayowole has a background in finance from Stanbic IBTC Bank Nigeria, where he was a key member of the credit risk management team, and a growing career spanning 7+ years. Prior to Fincra, he co-founded Quidax, one of Africa’s largest cryptocurrency exchanges, where he led the product, business, finance and customer success teams.

Over the years, Ayowole has recognized the difficulties that companies face in making and receiving payments across Africa, and he has continued to commit to lowering barriers and solving challenges.