Since the start of the tech boom in Africa, the financial sector has enjoyed tremendous hype, with news of African fintech companies raising funds being a dime a dozen in tech media. It’s a true reflection of how much the fintech sector has been a funding magnet from venture capitalists and investors.

As investments in startups across Africa keep growing, fintech has continued to take a large chunk. In 2021 alone, fintech received 50% of the over $2 billion raised by African tech startups, according to data from tech industry researchers Disrupt Africa. Total investment in the sector passed the $1 billion mark in 2021, equaling the sum of investments made the previous year in the broader African tech startup ecosystem. This has been the trend since 2015, when Disrupt Africa started data gathering on the African tech ecosystem.  Being the most promising sector for securing investments has also increased the value of these companies, and this success has seen five fintech unicorns of the seven in the broader tech African ecosystem. This success has contributed massively to the hype that has made the fintech sector very well known.

However, this hype has been over-indexed and often prompted the social media discourse that there are too many players in the African fintech space.

USA with population of 330 million has over 8,775 fintechs

UK with population of 68 million) has over 2,500 fintechs

Africa with 1.2 billion population has just 573 fintechs.

Nigeria with 200 million people has about 144 fintechs.

No, Nigeria does not have too many fintechs.

— Tola (@adetolaov) May 11, 2022

Beyond Payment 

Aside from fundraising, another reason for this discourse is the misconception that fintech is only about payments, but the sector goes beyond that vertical. According to 2021 data by Disrupt Africa, there are 573 fintech startups in Africa across the different verticals of the industry- Paytech (payments and transfers), Lendtech (Jumo), Banktech (digital and neo banks), Insurtech, Blockchain and Cryptocurrency. Several other fintech verticals also deal with investing and trading, personal finance management, etc.

Narrowing it down, Nigeria, for instance, has 144 fintech companies in the country; payment, mobile money and digital banking share 38% of the fintech market, 23% deals with lending, 15% on savings, investment and crowdfunding, 13% on business services and infrastructure, 8% on cryptocurrency and 3% on insureTech. This data from EY suggests a widely spread ecosystem.

In truth, the payment vertical of the fintech industry is by far the most active in Nigeria and Africa. Still, for a population of 200 million people (Nigeria) and 1.2 billion (Africa),  the narrative that we have ‘too many fintechs’ is not valid.

We need more fintechs 

Despite the hype, fintech has not scratched the surface of challenges in the continent still characterised by less developed financial infrastructure and an unbanked population. The challenge of financial inclusion is still rife with a great deal of innovation and technology needed to ensure that more Africans have access to financial services that can drive economic growth.

Economic development is almost impossible without financial inclusion, and Africa is still lagging behind other continents. Financial inclusion goes beyond what is currently obtainable in Africa; sending and receiving money, accepting payments, agency banking and remittance etc. There is still a need for a well-functioning infrastructure in Africa that empowers individuals and businesses to engage more actively in the economy.

Fintech creates new and innovative solutions for businesses and individuals in several ways apart from payment. There is a need for more players in sub-verticals like digital loans, crowdfunding, and the relatively new phenomenon of reg tech. These fintech verticals are closing the gap between the people and financial services in different ways, giving people the chance to save and invest money, and borrow, all without the lengthy and tedious process of traditional banking.

There is still more to come with the fourth industrial revolution using blockchain technology, artificial intelligence and augmented reality to deliver a better customer experience for fintechs.

Invariably, the belief that there is ‘too much fintech’ in Africa most times applies to just Paytech. However, even this sub-sector still needs more players to capitalise on the numerous opportunities in Africa’s growing economy.

With the rapid expansion in digital, Paytech has the opportunity to move from being a sub-sector into a major one. The ever-changing customer expectation will bring more demand for online and digital payment avenues, which means more growth in the Paytech category.

There’s already a growing acceptance of non-cash transactions in Africa, e-commerce sales are also growing, and there is expected continued growth in wallet adoption.

With a growing population, and increasing mobile and internet penetration, there is an increasing need for Paytech solutions to serve Africa’s unbanked. Paytech is the most popular because it deals with the way people transact in money-which is the principal economic driver. That sub-vertical has changed how we make payments and transactions, with more people now switching to mobile and digital payment methods.

Fintech infrastructure

There is a massive opportunity to evolve the payment experience with innovation and technology to build more payment infrastructure to connect African businesses worldwide.

With six million people getting access to the internet every year in Africa, businesses have to take advantage. The only way to scale is to reach as many people as possible. What is truly needed is the infrastructure that connects Africa to itself and the rest of the world.

Cross-border payment is still a massive challenge for businesses across the continent, with more than 70% of the over 150 million businesses still lacking access to cross-border payments. The existing payment infrastructure cannot help; on average, it takes days for settlements and costs a lot of money for the transaction. This challenge locks out Africans from participating in the global economy.

Amidst these challenges, Africa has managed an intra-trade value of $69 billionas of 2019 while contributing just 3% in international trade volume, way lower than other regions. African businesses must expand and diversify their participation in international trade and global value chains to reduce poverty on a large scale and transform their economies. Achieving this is impossible without an easy transfer of value across Africa and the rest of the world.

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