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4 Reasons why Africa is the Next Fintech Startup Hotbed

Jan 1, 2020 | Fintech

A new decade dawns upon the fintech industry. Evolution, partnerships, and innovation are crucial elements. Africa, a continent where financial inclusion is difficult to come by, is the booming fintech region to keep an eye on. 

Africa is a Crucial Region

For many decades, Africa has been overlooked in the financial world. A growing population of unbanked individuals should never be ignored. The continent has given rise to numerous local fintech startups poised to revolutionize the financial industry.

It is believed that 66% of adult Africans are still unbanked. That is a stunning number, given the continent’s population. For startups, this creates tremendous opportunities to explore. Offering financial inclusion is crucial in this part of the world. Traditional financial institutions aren’t too keen on exploring this option, due to low margin for profit.

In recent years, mobile money systems have gained genuine traction. Companies such as M-Pesa are breaking ground quickly. Mobile money service providers cover 13 times more of the market compared to local banks. That only further confirms how fintech can help transform Africa for the better. 

Key Driving Factors

The lack of financial inclusion only tells part of Africa’s financial story. Many experts overlook the youthful age of the continent’s labor force. Combined with a rapid adoption of mobile phones, an entirely different type of customer is created. It is not a segment traditional banks can cater to properly at this time.

Before fintech can thrive, there needs to be sufficient funding. Global investors are now flocking to Africa in quick succession. Even “competitors” such as Stripe and Visa are backing African fintech companies. Firms such as Paystack, Flutterwave, and Jumia Pay will only gain more traction. 

Even China Pays Attention

It is not uncommon for Chinese investors to back overseas companies. When those companies are located in Africa, however, the situation changes slightly. Chinese-backed fintech startups are making their mark on the financial industry.

With over $150 million invested in just two companies, it is evident that China pays close attention. There is a chance these numbers will only increase over the coming decade. 

Some of the world’s most successful payment companies are based in China. Conquering Africa is a logical next step. The best way of doing so is through incubating African startups. 

Successful Funding Rounds Galore

Throughout 2018 and 2019, numerous African fintechs raised a lot of funding. Some even raised over $100 million, confirming these is a growing interest in this industry. With this increasing interest often comes more money in the years ahead.

Interswitch raised $200 million in late 2019. Together with Branch and Opay ($170 million each), these are the highest-funded African fintech startups to date. 

Other startups have done well in the same period. Over $40 million each was raised by PalmPay, Cellulant, and Jumo

Further down the line are Yoco, Mines, Paga, and Flutterwave. All of these companies raised between $10 million and $16 million respectively. Investors are clearly diversifying their portfolio of backed companies. A smart decision, primarily during these early stages of competition.

Images courtesy of their respective sources.

Fintoism is not providing financial or investment advice. All content published on this platform is for entertainment and educational purposes only.

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<a href="https://fintoism.com/author/oglock/" target="_self">JP Buntinx</a>

JP Buntinx

JP Buntinx is passionate about cryptocurrencies, fintech, blockchain, and finance. He currently resides in Belgium.

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