Financial technology, or “Fintech,” is advancing financial inclusion in Sub-Saharan Africa, an area where formal banking services, such as credit, insurance, and banking, have traditionally been limited. While the opportunities provided by this technology have opened doors for many in the region—particularly low-income households—users of Fintech are becoming sophisticated, as evidenced by a recent study published by Financial Technology Partners, a boutique investment banking business, which highlights promising investment patterns in the African Fintech industry.
Africa’s population will almost certainly continue to take advantage of the region’s growing cellular and internet penetration, as well as new digital payment, banking, insurance, and lending services. As a result, the authors believe that Africa’s need for financial services would soon circumvent traditional banking institutions, especially as the continent’s population remains predominantly unbanked or underbanked while simultaneously being the world’s second-fastest-growing payments and banking market.
Moreover, the continent has already become the world’s largest user of mobile money transfer systems, accounting for about half of all registered mobile money consumers, roughly 70% of worldwide mobile money transactions, and two-thirds of transaction volume by value. Despite this accomplishment, there are still obstacles to using the technology in new and innovative ways: Indeed, the authors argue that the region’s low penetration of cellular and internet networks, particularly in rural areas, indicates that mobile money services have tremendous growth potential.
A large amount of money raised by African fintech firms demonstrates the existing and future importance of digital financial services on the continent. Since 2016, this digital industry has seen constant growth in terms of transaction volume and funding volume.
Fintech companies specialising in digital payments dominate the Fintech investment environment in Sub-Saharan Africa in terms of both finance and transactional metrics. Fintech is dedicated to digital banking and lending services; on the other hand, it trails digital payment services in terms of investment transactions but receives 40% less funding.
Many of the region’s indigenous Fintech businesses are situated in the region’s tech hubs, including Nigeria, Kenya, and South Africa. However, the authors claim that African Fintech firms primarily operate within their country of origin or regionally, owing to Fintech’s geographic concentration in Africa and its limited, but expanding, access to financing and business scaling. As a result, Africa’s digital payment systems are highly fragmented.
According to the authors, the development of mobile financial services demonstrates Fintech’s potential to change financial inclusion in Sub-Saharan Africa. According to the authors, demographic trends in the region, such as a large, fast-growing population, an expanding middle class, and a considerably undeveloped financial services industry, signify the region’s burgeoning desire for digital financial technologies. Fintech technologies provide vital financial services to African customers. Hence the authors advocate increasing the penetration of telecommunications infrastructure to ensure that all Africans have equitable access to banking.
Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.