Over the years, Fintechs in Africa has recorded impressive and scalable growth. The Decoding Venture Investments in Africa 2019 report by WeeTracker has confirmed that, African start-ups raised a total of $1.34 billion in 2019, its highest figure yet.
What has led to the intense growth of Fintechs in Africa?
Let’s consider the 4 factors facilitating the growth of fintechs in Africa.
Firstly, Innovative Service Offering
This is a known success factor across all segments, it involves creating new products or new ways of using existing products to enable fintech companies increase value prepositions and relevance to existing customers and/or to reach new ones. Notable examples include WorldRemit (available in various African markets including Algeria, Kenya, Nigeria, Tanzania and South Africa) launching its business/merchant payment options and Branch (Nigerian lender) introducing longer tenor loans.
Secondly; Easy Access to Funding
This approach is most adopted by Loan acquisition fintechs, example is Paga (a Nigerian lender). Access to funds for SMEs and MSMEs are oftentimes a cumbersome process that requires various verification processes in the traditional bank settings. Not to say Fintechs don’t go through the standard verification process before granting loans however, the process appears to be seamless against the traditional bank setting. Fintechs have made is simpler to gain funds with budget friendly interests thereby attracting lots of fund for these businesses to scale.
This approach is adopted quite widely. Payment aggregators like OPay offering lower transaction charges, lending fintechs such as Numidia (Uganda) offer lower interest rates, and remittance providers like Hellopaisa, which has smaller bid-ask currency exchange spreads, enabling it to take market share from incumbents.
Wide Broadband Network
This approach is mainly adopted by payments and remittances fintechs, as having a strong agent distribution network makes it easier for customers (especially in rural areas) to make deposits. Their basic transactions are still predominately cash-based and a wide network makes it easier for users to perform cash-in transactions, transfer funds or make payments for utility and other relevant bills. This is important for fintechs like Paga (Nigeria), EcoCash (Zimbabwe) and MTN MoMo (Ghana).
Fintechs have definitely made it easier for small business to integrate payment among all other services provided.