Africa’s FinTech Outlook: Opportunities and Challenges – NewZimbabwe.com

In many countries, the fintech sector is seeing considerable growth. According to a new study, the fintech market in Africa is projected to reach $65 billion (₦50 trillion) by 2030 — a 13-fold increase over 2021. This makes it the world’s fastest-growing region alongside Latin America. Researchers attribute the fintech sector growth in the region to advances in technology and the emergence of new fintech companies. Additionally, the continent’s youth is digitally literate with low credit card penetration, creating a good opportunity for companies and startups to introduce digital banking.

For example, 73% of adults in Nigeria own mobile phones, but only 2% have used credit cards. According to experts, this discrepancy presents a significant opportunity for fintech companies to bridge the gaps and limitations created by traditional banking systems. Today, most of Africa’s fintech revenue comes from companies based in Nigeria, Egypt, South Africa, and Kenya. Experts predict this trend will likely continue until 2030.

In Kenya, Nairobi leads the region’s fintech sector growth through a thriving ecosystem and confidence in funding rounds. Today, Nairobi has established itself as a leading tech innovation hub in sub-Saharan Africa. Nairobi’s fintech ecosystem represented 41% of the total technology startup deals from 2018 to 2022.

No doubt, the future of Africa’s fintech sector looks promising. Below, we’ll look at some of the rising fintech opportunities and challenges in the region:

Mobile trading platforms

One of the main developments in Africa’s fintech sector is the increased accessibility to trading and investing. This is made possible by the growth in mobile trading platforms, through which brokerages allow individual traders and investors to tap into forex, stocks, indexes, and other financial assets. Global broker Exness provides users with easy and reliable online trading with better-than-market conditions. Along with accessibility to a broad range of markets, the brokerage also offers free virtual private server hosting, guaranteeing fast and secure trading anywhere in the world. In June, Exness reported a trading volume of $3.31 trillion (₦2.5 quadrillion), having served 531,511 active traders.

Meanwhile, other trading platforms in the region continue to invest in further developments. South African trading platform Banxso recently acquired the class “A” banking license and an international brokerage license from Comoros to grow its company in Africa. Aside from the company’s plans to expand to the continent’s north, Banxso also plans to expand horizontally by launching Bank de Banxso, an online banking service.

Mobile payment solutions

Aside from easier trading, the growth of fintech in Africa has also led to an increase in mobile payment platforms. Using mobile payment, users can make payments for goods and services from the convenience of their mobile device, whether smartphone or tablet. This includes the increase in mobile wallets and digital wallets. We’ve previously written about EcoCash — the innovative mobile payment solution where users can complete financial transactions directly from their mobile phones. EcoCash recently announced plans to raise $30.3 million (₦23 billion) to secure foreign currency to redeem the entity’s Debentures — a type of bond or other debt instrument unsecured by collateral.

With the growth of e-commerce and digital services, electronic and digital payments have gradually displaced cash. This includes the rise in cryptocurrency and digital currency use as alternatives to traditional money. While cash still reigns supreme in Africa, experts suggest this may change in the coming years as banks and other financial institutions continue to innovate to make domestic and cross-border payments more seamless.

Digital lending services

Another form of fintech contributing to the industry’s growth in the region is the digital lending service. Digital lending is a type of loan acquisition system allowing users to apply for and receive loans through online platforms without the need to visit physical banks or traditional financial institutions. Data indicates that 57% of African citizens don’t have a traditional bank account, and less than 20% hold products such as lending, deposits, and insurance. As such, the growth of digital lending services in the region can help make these financial services more accessible to people.

South Africa-based digital lender Lulalend recently garnered $35 million (₦27 billion) in a Series B investment round aimed to scale its business. This includes accelerating the launch of its new digital business banking offering called Lula, developed in collaboration with Access Bank. Lula will provide a bank account customized for small businesses, including an AI-powered cash flow management tool. Lulalend’s newly acquired funds will also allow the company to expand its loan book size, roll out new solutions, and invest in talent.

Fintech accelerator programs

One of the reasons fintech in Africa has grown so much is the rise in fintech accelerator programs in the region. Fintech accelerator programs help financial services — such as fintech companies and startups — grow through partnership and investment opportunities from more prominent entities. Recently, Visa launched a new Africa Fintech Accelerator program to help African startups through expertise, connections, technology, and investment funding. Visa pleaded to invest $1 billion (₦776 billion) in Africa’s digital transformation as well as a long-term commitment to advance Africa’s economies and drive financial inclusion.

Visa’s program will enable up to 40 startups annually to grow through their three-month learning program focused on business growth and mentoring. Visa also announced that after the program’s completion, the company will continue to support fintech growth in Africa through capital investment in select participating businesses, accelerating their commercial launch through access to Visa tech and capabilities.

Cybersecurity for fintech growth

Finally, while startups and companies continue to make their presence known in the region, concerns about regulations and compliance increase. Cybersecurity, among others, is especially crucial in a growing fintech industry as it helps safeguard people’s information, data, and financial assets. Analysts insist that implementing digital KYC regulations is one of the ways fintech companies in Africa can fuel exponential growth. As innovations in blockchain and decentralized tech continue to grow, it’s important that companies invest in regulatory technologies such as anti-money laundering and KYC compliance.

Zimbabwe-based telecom firm Econet is recently one of the latest to make biometrics and digital know-your-customer (KYC) a priority. Experts have previously stated the importance of biometric KYC systems for African businesses, given the rise in financial fraud in the region. An average of 50% of fraud incidents go unnoticed with textual KYC as sole protection, making biometric KYC checks more efficient and effective for detecting identity fraud.

For more valuable insights, news, and updates on Zimbabwe and Africa, you can visit our official NewZimbabwe website.