There is a slow process of diversification away from payments and lending solutions within Africa’s fintech space, but the two verticals remain by far the most populated and best funded.

Disrupt Africa’s Finnovating for Africa publication, released every two years since June 2017, tracks the extraordinary development of the fintech ecosystem across Africa.

The fourth edition of the report is released in partnership with AZA Finance, an African fintech company offering secure and efficient financial infrastructure for payments, foreign exchange, and settlement; and Curacel, an insurance infrastructure company that helps insurers and partners in Africa and other emerging markets increase the reach and functionality of insurance through cloud-based tools and APIs.

The fintech startup ecosystem is continuing on its growth trajectory from an activity perspective, with the number of startups operating in the space increasing by 17.7 per cent to 678 in 2023 as compared to 2021.

Meanwhile, fintech ventures have raised more than US$2.7 billion in VC funding in the last two years, having seen unprecedented growth. There has also been an uptick in M&A activity.

Geographically, Nigeria is a clear leader in the fintech space, but from a vertical perspective, the picture is more nuanced.

Payments and remittances ventures remain the most common. A total of 199 startups – 29.4 per cent – of Africa’s fintech ventures are active in this space, though its share is declining. It was 35.8 per cent in 2021, having been 24.1 per cent in 2019 and 32.8 per cent in 2017.

As in 2017, 2019 and 2021, lending and financing was the second most-populated vertical after payments, with 131 startups making up 19.3 per cent of the total. This was marginally down from 134 in 2021, and the sector’s share of ventures, as with payments, has fallen. This does suggest a general diversification within the fintech space away from payments and lending solutions.

From a funding perspective, however, the most popular segments are actually raising a larger percentage of funding than ever before. Historically the two dominant sub-sectors of African fintech, the payments and remittances and lending and financing categories increased their combined share of African fintech funding to 81.2 per cent between 2021 and 2023, from 77 per cent two years previously.

That said, the dynamic between the two has changed somewhat, with payments’ share of total funding falling dramatically, from 62 per cent to 43.4 per cent, while lending’s share of investment has leapt, to 37.8 per cent from 15 per cent in 2021. This narrowing of the gap between the two leading segments suggests the fintech investment ecosystem is beginning to mature beyond a heavy focus on payments ventures.

Various other sectors saw increased inflows of funding over the last two years, though most failed to keep up with payments and lending from a growth rate perspective. Investtech and personal finance had a particularly strong couple of years, approximately doubling their market shares to 2.4 per cent and 1.3 per cent respectively. For all that blockchain, insurtech, business administration and security and ID ventures continued to raise at impressive rates, their shares of total funding fell, or in the latter case remained the same, over the period.

Download the report for free here.


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