Nearly 20% of the world’s population lives in Africa. The continent is home to more than 1.4 billion people and out of them only 43% of the African people have access to mobile wallets or bank accounts. While this alarming difference raises eyebrows of concern, this also opens a wide field for businesses who wish to jump on the bandwagon of digital payment solution growth and make the most of this opportunity.
There are many reasons behind this optimism, the foremost being, Africa has the youngest population in the world. More than 70% of Sub-Saharan Africans are below 30 years of age. In addition, with the increasing adoption of smartphones that are available at a cheaper rate and faster internet, the time of digital payment growth and fintech adoption has never been so ripe in Africa.
Therefore, in this blog, we would have a detailed look at the important factors of how Africa is becoming a powerhouse and an epicenter for digital payment growth across the globe.
Although Small, The African Fintech Ecosystem is Growing
In the last quarter of 2022, the African fintech startups attracted over $200 million in deals that constituted about 4.4% of global Fintech venture capital deal flow, quite a staggering number! In addition, as far as fintech investments are concerned, the African continent has witnessed the average cheque (deal) sizes growing from $500,000 in 2018 to $1.6 million in 2021.
Here, businesses should not get digressed by the smaller deal sizes, in fact the brimming fintech startups (early stage) are at the forefront of attracting investments in Africa.
Better Literacy Rate: Aiding in Achieving Scalability
One of the toughest challenges in Africa for promoting digital banking payment solutions has been the literacy rate in the continent. But that aspect is now evolving at a rapid pace. For example, South Africa has a literacy rate of 94.4%, whereas Kenya has a literacy rate of 81.1%, along with Algeria, which has a literacy rate of 80.7%.
Better literacy rates mean that people are more likely to adapt to changing financial procedures. This also gives a chance to businesses worldwide to grip hold of this evolving market and get rich dividends in the long run.
Safer and Supportive Regulatory Environment
Even though some African nations still face regulatory obstacles to the expansion of the fintech industry, several governments are working to improve the regulatory climate for this sector. With added support in terms of transaction security, people also feel more relaxed while using online banking modes and thus increasing the horizon of digital payment in Africa.
For instance, several nations have enacted sandboxes and other regulatory frameworks that offer a more adaptable and team-based approach to fintech regulation while also assuring consumer safety and monetary stability.
The Rise in the Number of Fintech Startups in Africa
Over 800 scale-ups are present on the African continent, where there are thousands of startups. Scale-ups are firms that have been successful in raising more than $1 million in capital and made these sums public. Of the 800+ scaleups, more than 270, or 34%, are in the fintech industry.
60% of all scaleups on the African continent and 62% of all fintech companies are in Nigeria, South Africa, and Egypt combined.
Regulatory Environments That are Helpful
Even though some African nations still face regulatory obstacles to the expansion of the fintech industry, several governments are working to improve the regulatory climate for this sector.
For instance, several nations have enacted sandboxes and other regulatory frameworks that offer a more adaptable and team-based approach to fintech regulation while also assuring consumer safety and monetary stability.
High Mobile Penetration and Growing Demands
Over 80% of people in Africa own a mobile phone, making it one of the regions with the highest mobile phone penetration rates in the world. This lays a solid platform for the development of fintech, especially mobile-based financial services like mobile banking and money.
With over 400 million registered mobile money accounts, Sub-Saharan Africa is really the region with the highest adoption of mobile money worldwide.
Ever Growing Demands for Digital Payments
Demand for convenient, safe, and inexpensive digital payment solutions is rising as Africa's economies continue to expand. With a variety of digital payment options that are suited to the requirements of African consumers and businesses, fintech is well-positioned to address this demand.
Sub-Saharan Africa outperformed all other regions in the world in terms of the growth in the ownership and use of bank accounts over the past ten years. In 2021, it was discovered that 50% of Africans had sent or received a digital payment in the previous year, and 55% of them had bank accounts.
What are the Rising Fintech Trends in Africa?
Below is the list of dominant fintech trends that will have a major impact in shaping the digital payment landscape in Africa, have a look:
Mobile Payments and Digital Wallets
Mobile money services like Kenya's M-Pesa have changed the way Africans make transactions, and due to their accessibility and ease, digital wallets are growing in popularity.
Digital Lending Platforms
To address the lack of access to traditional banking services, fintech companies have started utilizing alternative data sources and mobile technologies to provide quick and accessible access to finance for individuals and small enterprises.
Blockchain and Cryptocurrencies
To promote cross-border remittances, increase financial inclusion, and offer a more effective method of money transmission, some African nations have been researching blockchain technology and cryptocurrencies.
Neo Banks and Digital Financials
In several African nations, digital-only banks are starting to take root, providing the unbanked and underbanked populace with affordable and convenient financial options.
Final Thoughts
Entrepreneurs, SMEs, and micro businesses account for more than 70% of the GDP of the African continent, however most of these business owners are unbanked. The opportunity for fintech to help the speedier growth of entire African economies as well as their ability to meet rising consumer demand cannot be overstated.
It was established that more than one-third of all scale-ups in Africa in 2022 were fintech firms. Any start-up that has raised US $1 million or more is termed a scale-up. By the end of 2022, there were over 270 fintech scale-ups in Africa, it was discovered.
So, the future of digital payment is full of growth and innovation in Africa and businesses would find a gold mine here if they take the lead and be the early disruptors. Contact our experienced team if you need the best fintech solutions that would take your business to places in the African region.
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