African fintech revenues could grow 8 times By 2025

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  • African fintech is the fastest-growing start-up industry in Africa
  • Africa’s fintech sector is well placed to quickly improve Africa’s global competitiveness through an increase in exporting fintech services abroad
  • The rise of financial inclusion in Africa is stifled by regulatory uncertainty and regional differences
  • Also the top 5 fintech trends and forecasts to watch in 2023

The success of fintech companies is fuelled by several trends, including growing smartphone ownership, expanded network coverage, declining internet costs,  and a young, rapidly urbanising, and fast-growing population.

African fintech is the fastest-growing start-up industry in Africa, raising over US$1,3 billion in 2021 alone.

According to McKinsey research, fintech sales in Africa are predicted to expand by 10% each year through 2025, with transactions and wallets becoming the fastest-growing products.

Despite the fact that fewer than 15% of monetary operations on the continent are digital, African fintechs collectively generated US$4-6 billion in revenue by 2020.

McKinsey’s earlier report- (Fintech in Africa: The end of the beginning McKinsey) stated the opportunity for growth in fintech is anticipated to be focused in 11 significant markets: Kenya, Egypt, South Africa, Cameroon, Côte d’Ivoire, Ghana, Morocco, Nigeria, Senegal, Uganda, and Tanzania which account for 70% of Africa’s GDP and half of its population.

With its current rising trajectory, Africa’s fintech sector is well placed to quickly improve Africa’s global competitiveness through an increase in exporting fintech services abroad. The African fintech industry significantly impacts day-to-day living on the continent.

African fintech revenues could grow by 8 times By 2025 [Photo/Mckinsey & CO]

Regulatory frameworks Needed

There are difficulties in these productive soils. The rise of financial inclusion in Africa is stifled by regulatory uncertainty and regional differences.

Africa’s fintech sector is advocating for the creation of a Pan-African regulatory organisation to provide comprehensive regulatory guidelines for regions as opposed to for entire nations.

With the current emphasis on some governments and the private sector continuously seeking to develop regulatory policy frameworks for firms, consumers, and economies.

Fintech and digital banks are regulated separately from the traditional financial system but are influenced by its rules:

Preventing Money Laundering: There is a global crackdown on non-compliant enterprises, and more regulatory agencies are burdening companies to conform.

Consumer centricity: To prevent consumer exploitation, fintech must be careful in educating consumers, particularly on the effects of previously unimaginable services and goods.

Data privacy and security: must be protected since stored personal customer data is vulnerable to hackers. Firms in the fintech business must conform and have the necessary security systems and procedures to secure sensitive data.

The top 100 fintech ecosystems in the world, including those in sub-Saharan African cities like Johannesburg, Nairobi, Lagos, and Cape Town, are listed in the Global Fintech Index of 2020.

African fintech revenues could grow by 8 times By 2025 [Photo/Fintech news Africa]
These regions receive most of the continent’s fintech start-up investment and have made substantial progress toward regulatory frameworks safeguarding stakeholders.

While specific methods of regulations are universal across nations, others are specialised to the difficulties of each market. What is known is that these policies are changing as technology allows this sector to expand significantly.

No matter how big the company, these changes make it impossible to be successful because of the expense and/or inconvenience they generate by affecting every stage of the customer relationship lifecycle.

Five fintech trends and forecasts,  as stated by BDO

Here are the top 5 fintech trends and forecasts, as stated by BDO, a global provider of accounting, tax, and business consultancy services.

The new BDO Fintech In Africa report offers concise summaries of fintech news on North, South, East, and West Africa to provide readers with an overview of the situation and some clarification on a rapidly changing and expanding sector.

Africa’s Unbanked Population

There is a sizable market to get into, given that a sizable part of Africans are still unbanked, and numerous fintechs and banks are working to address this issue and access this market. Africa’s fintech industry will develop tools enabling frictionless, cross-border transactions. In addition, numerous banks will collaborate with fresh fintechs to find solutions to this and other issues.

Highest funding ever for African Startups

Globally, financing has grown enormously; in Africa, it has increased year over year. According to statistics from The Big Deal, African start-ups raised more than US$4 billion in just the third quarter of 2022, the quickest pace the region has experienced in the three years since they crossed US $1 billion in fundraising.

The timing of the transaction is especially noteworthy because this year, over 100 African entrepreneurs have raised their first US $1 million+ round. Fintech is currently the key factor driving investment on the continent, and analysts anticipate that 2023 will be even more successful.

African Mobile network operators (MNOs) will be increasingly active.

The MNOs in the area are crucial to watch. If the MNOs are awarded a mobile money licence, the already-competitive banking industry will become even more so. Numerous studies have shown that West Africa will prioritise the growth of mobile and online banking above traditional banking institutions since these services are more affordable for the typical consumer. Africa will see an increase in more accessible financial solutions due to the continent’s steadily rising smartphone usage.

Cryptocurrency adoption in Africa will increase even further.

The cryptocurrency market has recently experienced extreme turbulence. However, more significant widespread usage and adoption of cryptocurrencies are anticipated with the emergence of fintech and businesses like Luno(a cryptocurrency trading Company). Leading cryptocurrency exchanges are working to assist the massive increase in the use of cryptocurrencies in Africa that we forecast for 2023.

Emerging technologies in Africa

Numerous fresh, creative solutions will emerge as technology advances exponentially. We anticipate seeing fresh, exciting advancements in the finance sector through IoT technology, Artificial intelligence, Big Data, and many other forms of upcoming technologies and trends.

Read: APPROACHES TO FINANCIAL INCLUSION 

Maingi Gichuku is passionate about helping African businesses grow by offering technology solutions. With a BSC in Zoology and biochemistry, Gichuku yearns for an Africa that can find solutions to its challenges. My drive is to see an economically dynamic Africa and embrace its populations by creating opportunities cutting across the social and economic strata.

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