From M-Pesa’s inception, African fintech has been driven by accessibility, tackling financial exclusion. Now, with the rails in place, innovation is surging, from payments to credit and insurance.
Fintech in Africa: A Thriving Sector
Disrupt Africa, in partnership with AZA Finance, Revio, EMURGO Middle East & Africa, and MoneyHash, recently explored Africa’s fintech environment through a two-part podcast series. The continent’s fintech scene is booming, with 678 active ventures and $3.6 billion in funding since 2015. Fintech leads in funding, with an 18% growth rate and impressive investments in the past two years. However, it’s essential to note that while fintech has seen significant growth, it still only accounts for a fraction of the total financial services market in Africa.
Shogo Ishida, co-CEO of EMURGO Middle East & Africa, highlights the scale of financial exclusion in Africa. “Two-thirds of the population is without a bank account,” he says. Only 69% of individuals have valid identification, further restricting access to financial services. According to the World Bank, in 2021, only 43% of adults in Sub-Saharan Africa had a bank account, and just 15% had a mobile money account. These figures show the immense opportunity for fintech to drive financial inclusion in Africa.
The Innovation Gap
Fintechs are stepping in to address these challenges, offering payments, lending, credit, and insurance services. Nicole Dunn, co-founder and COO of Revio, notes that African fintech innovators aren’t solving for convenience, but for inclusion and infrastructure. Without access to financial services, individuals and businesses face barriers to economic growth and formal sector participation.
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Elizabeth Rossiello, co-founder and CEO of AZA Finance, illustrates the complexities of international payments, particularly for businesses. “It’s so cumbersome,” she says, citing absurd compliance documents and costly delays. For instance, a simple cross-border transaction can involve multiple intermediaries, each adding their own fees and delays. Fintechs like AZA Finance aim to streamline these processes, reducing costs and increasing efficiency.
M-Pesa: A Gamechanger
M-Pesa, launched in Kenya in 2007, transformed mobile money transactions. With over 2,600 transactions per second, it banks the unbanked. However, it has limitations: transaction size and interoperability constraints hinder its full potential. Fintechs like BitPesa (now AZA Finance) evolved to address these gaps. They provide larger transaction sizes, interoperability with other networks, and connections to international payment systems.
Today, fintech in Africa is moving beyond payments, thanks to foundational infrastructure laid by pioneers like Paystack and Flutterwave. Dunn predicts more niche players focusing on specific use cases or decoupling value chains, optimizing checkout processes, and more. For example, some fintechs are focusing on specific industries like agriculture or education, while others are specializing in specific services like credit scoring or fraud detection. Additionally, we may see more fintechs leveraging alternative data sources to assess risk and expand financial inclusion.