Fintech in Africa

January 25, 2019
Fintech

 

Let us do a quick overview of the African Fintech network.

FinTech in South African is looking to en-cash on the disruption in Africa with technology-led innovations and hopes to improve its failing economy. This should pick the global-investor curiosity and further fuel the changes occurring especially towards the aim of financial inclusion of the vast unbanked population in the Sub Saharan regions. No investor or FinTech entrepreneur should miss this opportunity. 

Some of the noteworthy drivers of the disrupt are:

  • Sub-Saharan Africa’s unbanked population is looking for inclusion financially
  • 89% of South African adults have either formal or informal financial services or accounts
  • Traditional South African industrial economy declines as FinTech industries report promising growth
  • FinTech startups in South Africa have over the last two years got maximum funding compared to other African countries
  • The Rand weakens and favours the startups in the FinTech sector with better margins
  • South African banks control cross-border payments and growth as they are quick to grasp the opportunity of gaining a hold in the African continent

Why is Africa ripe for the advent of Fintech:  

Fintech adoption and innovation breed well in Africa who have emerged global leaders because of the penetrative failures of the banking system, large mobile phone penetrations and large percentages in unbanked population across the continent. Year after year, the rates are stagnant for savings in banks or institutions. Insurance figures were equally dismal and had very little FinTech representation.

Growth areas:

Financial services, savings, borrowings and investment accounts, the B2B back-end office operations sector of marketing inclusive of SaaS platforms, lending SME-platforms, payment platforms and RegTech solutions will see demand due to increased compliance and reporting restrictions.

Expectations in 2019:

  • These run high on the blockchain technology adoption adding business value to financial sector fintech startups and solutions
  • Cryptocurrencies though steady at the moment have no takers among the investors at the moment
  • Rather other payment platforms using mobile transactions, digital payments, online banking and such are thriving investment opportunities
  • Fintech companies have and can solve KYC, fraud, cyber-crimes, and transparency issues in financial transactions which is why they are being openly encouraged
  • The SME and back-end operational efficiency solutions are also a thrust area that is set to grow and is incentivised as it creates employment, economic and industrial growth
  • South Africa reportedly had the highest concentration of Fintech startups, and these were mostly in the lending and financial sector
  • Most angel investors are looking at partnering opportunities with those going into disrupt

A close look at easing cross-border payments:

The multiple-currencies challenges in African cross-border transactions and trade are soon set to be overhauled and transformed with the introduction of the AFRIEXIMBANK payment system being launched in Q1 of 2019. This innovative measure is seen as being an incentive for small-businesses and trade-formalization between the different inter and intercontinental blocks, using transactions that are e-mobile and pushing a 12% low-rate for intercontinental trading. Linkages with shipping, freight, governmental policy makers and banks will bolster the system.

The bottom line:

The FinTech sector in South-Africa developments should utilise the unique disrupt advantage and its drivers. With 80% of its people being unbanked and the failure of the banking and insurance systems in Africa clubbed with market-demand, investor-interest and the ecosystem showing signs of acceleration and huge demands the FinTech industry will be the much-needed boost to the failing economy in Africa.

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