Noel K. Tshiani is the founder of Congo Business Network. The organisation has actively been involved in building and connecting the fintech ecosystem in the Democratic Republic of Congo since April 2019. It has organised delegations to participate in the Africa Fintech Summit in the United States, Ethiopia, Egypt, and South Africa with the objective to find investors and learn from leading entrepreneurs from advanced markets in Nigeria and Kenya.
The African fintech sector is booming with startups raising record amounts of money and expanding into new countries. But how can these companies grow and become profitable?
First, a number of factors that contribute to the success of African fintechs need to be considered. One is the continent’s large and growing population. Africa has over 1.4 billion people, and the majority of them are unbanked or underbanked. A huge potential market exists for fintechs that can provide affordable and convenient access to financial products and services.
Second, another factor that contributes to the success of African fintechs is the continent’s rapid economic growth. Africa is one of the fastest-growing regions in the world, and this economic growth is creating a new middle class with disposable income. This middle class is increasingly looking for digital financial services that can help them manage their money and save for the future.
Not all African fintechs are successful. To succeed, these companies need to address several challenges, including:
1. Lack of infrastructure
Many African countries lack the basic infrastructure needed for fintech businesses to operate, such as reliable electricity and internet access.
2. Complex regulations
The regulatory environment for fintech startups in some countries in Africa can be complex and challenging because central banks are in the beginning stages of defining regulations, especially in the area of cryptocurrency.
3. High competition
The African fintech market is becoming increasingly competitive, as more and more companies enter the space seeking to challenge banks and mobile money operators.
Despite these challenges, there are some things that African fintechs can do to get more clients, raise money from investors, and become profitable as described below:
1. Focus on underserved markets
One of the best ways for fintechs to get more clients is to focus on underserved markets. The strategy should focus on targeting rural areas, the youth, and women. By focusing on these underserved markets, fintechs can tap into a large and growing pool of potential customers.
2. Prioritise customer acquisition and retention
Customer acquisition and retention are critical factors in the success of any fintech startup. African startups should focus on developing effective marketing strategies to attract new customers, while also implementing initiatives to retain existing ones. Offering incentives for referrals, providing excellent customer service, and developing loyalty programs are some options to consider.
3. Develop innovative products and services
Another way for fintechs to attract more customers is to develop innovative products and services. Developing new payment methods, providing mobile banking services, or offering microloans will position the startup to stand out from the competition.
4. Offer competitive prices
To compete with traditional financial institutions, African fintechs need to offer competitive prices. Keeping costs low and passing those savings to customers is the strategy to follow, especially for fintech startups that want to succeed in the money transfer business from the diaspora to Africa.
5. Embrace partnerships and collaborations
Fintechs can also benefit from building strong relationships with banks and other financial institutions. These relationships can help fintechs access capital, distribution channels, and customer data. By building strong relationships with banks and other financial institutions, fintechs can accelerate their growth which can lead to profitability.
6. Get the right regulatory support
Fintechs also need to get the right regulatory support from central banks. It means working with regulators to understand the regulatory landscape and to develop products and services that comply with evolving regulations. By getting the right regulatory support, fintechs can avoid costly fines and penalties and can operate in a more stable and predictable environment.
7. Raise money from international investors
Fintechs need to raise money from investors to grow and scale their businesses. Some ways to raise money from investors include venture capital, private equity, and crowdfunding. By raising money from investors, fintechs can get the capital they need to hire more staff, develop new products and services, and expand their operations in promising countries in Francophone Africa.
8. Build a strong brand and reputation
Fintechs need to build a strong brand and reputation to attract customers and investors. Providing excellent customer service, offering competitive products and services, and being transparent about their business practices will help the startup in the long term.
9. Leverage data analytics
Fintech startups can leverage data analytics to gain insights into customer behaviour, identify trends, and make informed decisions. Doing so will help to optimise business processes, drive growth, and improve profitability.
10. Become profitable through patience
The ultimate goal of any business is to become profitable. Fintechs can become profitable by growing their customer base, increasing their revenue, and reducing their costs. By becoming profitable, fintechs can attract more investors, expand their operations, and create jobs for African workers.
According to McKinsey & Company, there are four key challenges that fintech startups in Africa face today on the road to profitability: reaching scale and profitability, navigating an uncertain regulatory environment, managing scarcity, and building robust corporate governance foundations.
To overcome these challenges, McKinsey suggests that fintech startups need to focus on developing innovative products and services, leveraging technology to drive down costs, building strategic partnerships with other stakeholders, and engaging actively with regulators to shape the regulatory environment in their favour.
In conclusion, the African fintech sector is still in its early stages, but it has the potential to revolutionise how people access financial services on the continent. By addressing problems clients face with innovative solutions while focusing on the opportunities that exist, African fintech startups can continue to grow and succeed going forward in 2023 and beyond.