Fintech in Africa is now growing really fast. Though the countries were once majorly the poorest in the world however with the advent of financial technologies things have changed positively. The United Nations latest report predicts Africa’s economic growth will reach 3.5% in 2018 and 3.7% in 2019. Growth in Africa had overcome that of East Asia, and Financial Technology(Fintech) Startups playing a pivotal role in it. An extremely large number of entrepreneurs and investors are utilizing this incredible potential.
They are adding loads to the African Financial Market. With PayPal being among the top investor, collaborating with these new rising startups to disrupt the traditional dominance of private banks and money lenders in the financial system. FinTech is only envisioned to grow as the number of internet users and mobile phone dependence is growing at an exponential rate in Africa. Let’s look at all aspects of financial technologies in African markets.
1.) A look at Africa’s Traditional Finance system
Africa’s banking market is among the fastest growing with exceedingly vast potential. However, it suffers major challenges of low levels of banking penetration, huge dependency on hard cash, high cost of installation of bank branch and atm networks. In Africa Bank’s, profitability is more in North, East and West Africa than South and Central. Here, maximum revenue is from the middle segment that is people who earns between $6,000 and $36,000. Only half of the people prefer retail banks than other the online transactions and due to all these factors. African banks have among the highest cost of risk in the world.
2.) Fintech-The big opportunity
Financial technology involves using your phone as a convenient way of money transaction as phones are an extremely fast and secure mode of money transaction. Financial technology reduces loads of dependencies on hard cash, duration of retail banks, spending money to skill and train thousands of bank employees, acquiring land and government involvement to every time open a new bank branch and most importantly reduce low-level bank penetration. Over $100m has been already been invested in Africa’s financial technology sector, and more investments are only to rise in the coming years. Moreso, Paypal has also partnered with startups to further boost it.
3.)Paypal-The game changer
Paypal interests in African market started when in 2015 Nigeria became the second largest country in Africa, where they witnesses astounding 1 million users in a few months, to provide easy and secure online transaction, this further has increased the internet demand in Nigeria and neighboring countries.
According to Medium report, Paypal has recently collaborated with 12 startups and had overcome the difficulty of having six out of ten adults in Africa not having bank accounts. Some don’t even have insurance or pensions. New and exciting fin-tech companies across the subcontinent are trying to fix this. However, they face regulatory barriers and infrastructure challenges that prevent their growth and expansion. Next, are the 12 startups collaborated with.
4.) Some of the promising Fin-Tech Startups :
The medium report listed 12 startups who have collaborated with Fintech. Among those, few of leading startups are
Annona focused on the primary issue in Africa that is food procurement and focuses food supply from farmers, and online transaction related to it.”Digitizing global supply chains benefits farmers in emerging markets, both at the local level and for export.
CredPal, on the other hand, is not just limited to food, you can transfer money, pay your installments, through CredPal. “Credpal offers easy financing to individuals, and the aggregate effect is to make Africa economically stronger for us all.”
Social lender is different from others as it lends money on the basis of online reputation, its a sort of grading system to find if the person is suitable to get money credited or not. It has lent money to many Africans and brought a positive impact indeed.
5.) Effects of Financial technologies in African Market:
There is no denial that Financial Technologies has brought new hope, dimension, and potential in Africa’s Market. This is evident from huge investment by the big giants themselves. Africa, once a country hit heavy by colonialism is now financially recovering, and for every startup Africa has become a hotspot. Africa always known for its valued resources, varied culture is now ready to overcome its financial difficulties.
Collaborating with 12 startups, Paypal has also witnessed this potential. Now more startups, government initiatives are going to join in. Now, is the time to invest in Financial technology in African Countries. Similarly, it is good to note that this has also started changing the retail banking market exponentially.
FinTech is a major contributor to the rising of GDP and decrease rate of poverty in African countries. Agriculture, manufacturing, energy, investment, banking, mining, education all the sectors would see a rise in growth with FinTech. More people would come online and the gap between poor and rich would also decrease. Nigeria, Kenya being among the firsts to witness this change and would grow in entire Africa!