The Future of Fintech in Africa

A white paper published by Mastercard last week highlights transformative efforts in the African fintech market, and predicts the future of digital finance on the continent.

(Source: Mastercard.com)

A white paper published by Mastercard last week highlights transformative efforts in the African fintech market, and predicts the future of digital finance on the continent.

The paper provides research-based evidence and features interviews with the experts leading African fintech. It sheds light on the growing volume of transactions, firms and funding that goes into the sector. 

The number of fintech startups in Africa grew from 311 in 2019 to 564 in 2021, according to a report by Disrupt Africa

Nigeria, Kenya, South Africa and Egypt lead the African fintech scene. Ethiopia has recorded steady progress over the past two years, although the level of funding that goes into Ethiopian fintech is close to nil due to various regulatory and economic factors. 

Still, there have been improvements – including in infrastructure. The primary enabler behind the growth in digital financial services is increased mobile device ownership and internet access across the continent. 

“Of the nearly 400 million new mobile subscribers expected to sign up globally by 2025, the majority will come from frontier markets like Africa,” reads the paper. 

Although cash remains king, new e-payment solutions from banks and other financial firms are likely to grow. Africa’s domestic e-payments market is projected to see 20% revenue growth per year (compared to 7% globally), reaching around 40 billion dollars by 2025, according to a report by Mckinsey & Company. 

The report explores the effects of product development techniques and user experiences on the overall digital ecosystem. It reveals growing demand for super applications. 

“Consumers who already use a variety of apps for everything from ride hailing to e-commerce, money transfers, and education, would accept a proposition that goes even further: super-apps that combine many functions in a single application,” it reads. 

Unlike other markets such as the US and Europe, the lack of a uniform regulatory approach is a characteristic of African fintech, which experts say inhibits continental growth.  

For instance, Ethiopia has only recently begun efforts to liberalize its digital financial services market. It is a move seen keenly by the continent’s largest fintech firms, which have been unable to access an immense market thus far. 

Nonetheless, there are positive initiatives attempting to unify digital payments in Africa. Among them is the Pan-African Payment and Settlement System (PAPSS), developed for cross-border trade payments for the African Continental Free Trade Area (AfCFTA), covering more than 50 countries and 40 currencies.

When it comes to domestic regulation, over 90% of jurisdictions in Africa have established regulatory frameworks for digital payments.

Read the full publication here

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