The African Fintech Revolution
Financial technology, or fintech, has the potential to revolutionize financial inclusion in sub-Saharan Africa, where a large portion of the population remains unbanked or underbanked. Fintech has already opened doors for many low-income households in the region, providing access to credit, insurance, and other financial services that were previously unavailable.
The success of mobile money transfer systems in Africa has been particularly remarkable. According to Financial Technology Partners, Africa is already the largest adopter of mobile money transfer systems, accounting for nearly half of the world's registered mobile money customers, approximately 70 percent of global mobile money transactions, and two-thirds of the transaction volume by value.
Despite this success, challenges to the use of mobile money in innovative ways persist. The authors of the report note that the low penetration of cellular and internet networks, particularly in rural Africa, suggests that mobile money services still have significant growth potential in the region. Improving the penetration of telecommunications infrastructure will be crucial in enabling equitable access to finance for all Africans.
The potential of fintech in Africa is attracting investment from across the globe. African fintech start-ups have raised a considerable amount of capital, and the sector has experienced consistent growth since 2016 in terms of both the number of transactions and financing volume. Fintech firms specializing in digital payments dominate the fintech investment landscape in sub-Saharan Africa, while fintech dedicated to digital banking and lending services is not far behind.
Mobile Money is Fintech
Many of the region's local fintech start-ups are based in sub-Saharan Africa's tech hubs, such as Nigeria, Kenya, and South Africa. However, due to fintech's geographic concentration in Africa and its limited access to financing and business scaling, African fintech firms predominantly operate within their country of origin or regionally. Consequently, Africa's digital payment systems remain highly fragmented.
For investors, demographic trends in the region, such as a sizable fast-growing population, the expanding middle class, and the significantly underdeveloped financial services industry, signal the region's burgeoning demand for digital financial technologies. For African consumers, fintech innovations provide access to vital financial services. Improving the penetration of telecommunications infrastructure will be crucial in enabling equitable access to finance for all Africans.
