Fintech, with its liberalization of banking and lending, is ultimately a people-oriented technology sector. It follows that a greater number of people will bring success, and nowhere has that been better established than in Africa, with new stats that African fintech took 33% of investment in 2017.
According to Quartz, just 17% of the continent’s 1.2bn people have a bank account. For much of the Western and many Asian economies, fintech has transformed their ways of working. For fintech entrepreneurs and technologists, identifying the requirements of the African market will be key to their success. While fairly readily identified, tailoring products to be effective will be the key challenge.
Opening up lending
Aside from South Africa, which News24 states are trying to reduce consumer lending, there is overarching interest from across the continent in lending. Consumer reviews body Crediful.com has suggested that loans can act as a vehicle for a huge range of applications. From this, it’s clear why African nations, whose private citizens lack wealth as compared to the rest of the world, are seeking new options.
As a result, American fintech lenders are already providing services as far afield as Kenya, according to Reuters. For Western fintech companies, there is clearly money to be made by branching out and providing low-sum services to the continent. The next step, however, has seen American investment go directly into African-made companies.
The digital payments market
In many developed economies, digital payments are now the norm, with the exception of some countries such as Germany. From chip and pin cards to contactless, to today’s Google and Apple Pay. In Africa where digital payment capability is not necessarily as developed, American venture capitalists have seen an opportunity.
The Financial Times of London reported in May about the $47.5m invested by TPG in an African company developing digital payments. To see the benefit of this, look no further than Barclaycard, which has built a fearsome business reputation and profit margin from being the primary leaseholder for UK transactions.
Forging political alliances
The opportunity of the African market has not gone unnoticed in political circles. Visits by Western leaders, including Theresa May, have focused on the promise of fintech in the African continent.
Trade is developing and going from strength to strength, with unconventional skills, such as those of metropolitan bankers, being offered to companies in countries as diverse as Nigeria and South Africa. Clearly, the new developments in Africa-based fintech are not a fleeting moment but are here to stay.