Growing at an annual growth rate of 32%, the Africa FinTech market is set to achieve annual revenues of $65 billion dollars by 2030 based on assessments by Boston Consulting Group and QED Investors. While the growth rates are significant, and revenues of $65 billion seem impressive, it is worth considering the relative significance of the market in the global context. We can consider two FinTech businesses outside of Africa to see that the forecasted revenues might in fact be considered minimal to serve an entire continent. Take for example the FinTech Stripe, founded in California and valued at ~ $80 billion, it achieves annual revenues of approximately $14 billion while Ant Group, established in China, owning several digital banking and financial service brands, is valued at $80 billion. In context, the African FinTech market starts to seem underdeveloped, even at the aggressive forecasted growth rates.
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We can view this to be even more true when we also consider it in context of the need for FinTech on the continent. With a unique financial landscape, Africa presents several challenges in achieving financial inclusion as approximately half of the continent’s population remains unbanked. FinTech has emerged as an opportunity to improve access and affordability to the African consumer by providing a value proposition that is differentiated in its cost, efficiency, access, and often simplified services. Traditional banks enjoy their own value proposition, especially in areas related to security, regulatory compliance, and consumer trust, given the many long-standing brands which dominate the sector on the continent. Thinking about what could be achieved if combining the value proposition of the two, we can start to see the potential for lower cost banking that enables access and efficiency while ensuring customer trust is built by leveraging the loyalty and safety associated with traditional banks.
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Confronting Critical Questions on the path to financial inclusion
We then need to challenge ourselves to ask how we achieve this. How do we ensure that we maintain double, or even triple digit growth in catalysing innovative and digital banking solutions best suited to the needs of the dynamic African consumer? How do we build investor trust to attract the investment seen by some of the FinTech players in more developed parts of the world? And how do we encourage a mindset shift among consumers to see and understand the potential value that comes with empowering themselves to be financially included? Three questions which should undoubtedly be top of mind for the leaders in the industry on the continent, both in the spirit of unlocking financial opportunities for the many consumers which so desperately need it while also enabling sector growth to contribute to the economic development of the continent. A first opportunity which presents itself is the prospect of collaboration between the ‘new’ and the ‘old’ where FinTechs and traditional banks come together to create an outsized impact by leveraging their respective strengths and developing innovative models in the sector, geared towards the benefit of both sides.
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The Impact of African FinTech Unicorns and the Path to Local Investment
We take inspiration from FinTechs on the continent which have achieved unicorn status, being valued at $1 billion or more, demonstrating the ability of African innovators to have a significant impact on the continent. The likes of Nigerian entities Flutterwave, Interswitch and OPay all enjoy this status through the development of Africa-focused technology solutions which has resulted in its significant growth and success. What remains interesting is the unicorn investment round leaders which consist of Visa, Tiger Global Avenir Growth and Softbank Vision Fund 2 for the three FinTechs respectively. What we evidently do not see in these FinTechs, and many others, is the backing of African investors or financial institutions; many which have the financial capital and capacity to make catalysing investments from which they stand to benefit in significant investment return with the opportunity to drive integration into their traditional offerings, encouraging innovation and strengthening its reach and potential to impact the African consumer.
The burgeoning African FinTech market holds immense potential yet lags behind the needs of the continent. By fostering collaboration between traditional banks and FinTech innovators, there’s significant opportunity to accelerate financial inclusion and drive economic growth across the continent. Strategic investments and partnerships, with the elimination of industry silos, are fundamental in realising this vision and positioning Africa as a major player in the global financial landscape. There has never been a more critical time for each of us, along with industry leaders, to confront the pressing questions of how to stimulate growth through fit-for-purpose African-oriented solutions, how to generate sector-stimulating investment and how to best encourage the African consumer to benefit from the advantages of financial inclusion.
Hassan Abdullahi is a Business Development Executive with over 17 years’ experience in Corporate & Commercial Banking. He is currently a Corporate Executive in the African Subsidiaries Division of Access Bank Plc, driving the bank’s global relationship management.
Kelly-Ann Mostert is the Managing Director of a strategy consulting firm, Sustainable Strategies Africa, with sustainability, people and Africa at its core.
