The number of tech start-ups in Africa has tripled, reaching approximately 5,200 companies. Almost half of these startups belong to the fintech sector, aiming to revolutionize and enhance traditional financial services. According to McKinsey’s analysis, African fintechs have made impressive progress, generating estimated revenues ranging from $4 billion to $6 billion in 2020, and showing average penetration levels of 3 to 5 percent (excluding South Africa). These figures are comparable to those of leading global players in the fintech industry.
According to an industry leader, the fintech sector in Africa is not merely experiencing disruption but rather an impressive eruption of growth. Both local and international investors have taken notice of the potential, leading to increased investment in African fintech. This surge in funding has resulted in larger average deal sizes and a higher proportion of fintech funding in the continent.
As the fintech industry continues to mature, it brings significant opportunities for economic growth and job creation in African economies. The continent is at an inflection point, and various countries have the chance to capitalize on the momentum of recent years and unlock further potential in the sector.
Despite a slight slowdown in funding, mirroring global trends, there is a strong expectation of substantial growth and value creation for African fintech. Given that cash is still prevalent in around 90 percent of transactions in Africa, fintech revenues have tremendous room to expand. If the sector achieves penetration levels similar to those in Kenya, one of the world leaders in fintech adoption, it is estimated that African fintech revenues could increase eightfold by the year 2025. This points to an optimistic outlook for the future of fintech in Africa.
In conclusion, fintech in Africa has witnessed remarkable growth and evolution in recent years, transforming the financial landscape across the continent. The surge of tech startups, particularly in the fintech sector, and the increasing interest from local and international investors showcase the tremendous potential of African fintech. This “fintech eruption” is bringing significant investment, job opportunities, and economic growth to various African economies.
As the industry continues to mature, African countries stand at a critical juncture to capitalize on the momentum and unlock further potential in the fintech sector. The slow-down in funding in line with global trends is likely temporary, and the fintech industry’s vast potential remains untapped. The continent’s heavy reliance on cash transactions presents a tremendous opportunity for fintech companies to expand their revenues and reach.
With countries like Kenya serving as a promising example of high fintech penetration levels, the prospects for African fintech are bright. By embracing innovation, fostering regulatory support, and investing in digital infrastructure, African nations can accelerate the growth of their fintech ecosystems and further drive financial inclusion and economic development.
As we look ahead, it is clear that fintech in Africa is not just a fleeting trend but a transformative force shaping the future of finance on the continent. By harnessing this technology-driven revolution, African economies can empower their citizens, improve financial services accessibility, and unleash the full potential of the fintech sector in driving sustainable and inclusive growth for years to come.
NEXUS TERRA – CONSULTANCY & PROCUREMENT – NEXUSTERRA