Financial technology (Fintech) is a term which describes the form of technology used to operate and offer services in the financial sector. This form of technology supports businesses, business owners, buyers, etc. to control their financial practices easier and faster by using their private computers or smartphones.
Fintech development is increasing fast, especially in Africa and this development holds many benefits for the African continent. The interesting thing about Africa and its countries is that it is currently growing richer in different sectors while other counties are rather standing still without any significant growth. For this reason, foreign investors are seeing the opportunity and benefits to invest in African fintech startups. These startups now have the opportunity to create outcomes for certain issues the locals have been struggling with when it comes to financial technology.
Fintech startups spreading its wings all over the African continent
In the past few years, fintech startups are the one sector which received the most investments in comparison to other sectors. The reason for this is that fintech does not interfere with the current traditional financial services offered in African countries.1 But instead, fintech startup services and solutions like online money transfer and payments are adding to the financial service lack in many parts of the African continent. The fintech opportunities are enabling the younger generation in Africa to participate in local and global economies.2
In order for the fintech market to grow and make sense, it, of course, makes sense that the people and users are technologically mobile. This is no problem in Africa at the moment. Is has been proven, that over the last 10 years the mobile usage in Africa has grown a lot. Two-thirds of all households across sub-Saharan Africa own a cellphone.3 Because of this, digital financial services are increasing in Africa which adds to financial development all over the continent.
Fintech opportunities for Africans
Today the fintech opportunities are growing for Africans to make use of. It enables people to do money transfers and payments from their digital wallet without them even having a bank account at local banks. An example is a startup in Kenya called “M-Pesa”. This is a mobile service which enables people to transfer money inside the borders of Kenya by just sending an SMS. 4 Due to the infrastructure and long distances in Kenya, many people living in rural areas do not have the opportunity to always travel to the bigger cities in order to transfer money. M-Pesa enables these people to now transfer money in a faster and safer way. But because this is only possible inside Kenya, the need for similar services across borders is high.
“Flutterwave” is one example of such a service. A Nigerian based startup which released a service called “Moneywave” that enables people to transfer money to any country in Africa into any bank account or digital wallet. This is a much faster and safer alternative. Due to the increase in cellphone usage as well as internet access all over the continent, this type of service will grow more and develop its opportunities over the years to come.
Fintech challenges in Africa
Although the fintech market is currently growing a lot in Africa, there are still a few challenges these startups have to face. Because there are so many countries in Africa, it is hard to cater to each specific country according to their regulations.5 The regulation should be good and innovative. And at this point, the fintech market could be growing at a too fast pace for African countries to keep up with regulations. At the same time, the current regulations in Africa are poor and not as active as they are in other countries outside Africa. For this reason, the interest in this type of startups is also low. People feel safer to work for bigger companies instead of starting a startup.6