Across Fintech- digital banking, digital payments, personal finance, lending, insurance, investment, and embedded finance, writes ADESHINA ADEWUMI.
Introduction
Sub Saharan Africa has witness significant growth in 2023 despite the decline in funding over the last two quarters in line with global economic realities.
Fintech startups and innovation hubs flourished, particularly in countries like Nigeria, South Africa, Kenya, Egypt, and Ghana, addressing diverse financial needs from payments to SME services.
Blockchain and cryptocurrencies gained traction, regulators worked on fostering innovation while ensuring consumer protection, and the use of AI and data analytics increased for credit scoring and risk management.
The fintech sector played a crucial role in advancing financial inclusion, improving cross-border payments, and addressing the financial needs of small businesses.
Despite these positive developments, the industry also faced challenges, such as concerns about cybersecurity, highlighting the need for ongoing vigilance and regulatory adaptation in this rapidly evolving landscape.
In Nigeria for example, over $201.5 million has been lost to fraud since 2020 according to a recent report by Tech Cabal.
While the fintech sector across Sub-Saharan Africa has been a beacon of financial inclusion, transforming the economic landscape by providing accessible and affordable financial services to previously underserved populations.
A lot of stakeholders are concerned and worried on the rising global cost of funds and the declining shortage of investment across the continent.
Several startups in 2023 like PayDay, Bundle, Pivo, 54gene, Dash, Vibra to mention a few, have announced closure due to financial and non-financial challenges according to reports by Business Insider .
As we look ahead to 2024, it is only normal to reflect and identify several exciting trends that would shape the fintech space across the region.
This article seeks to explore further various opportunities still yet untapped across the fintech sector in Africa as well as provide insights for investors and stakeholders eager to understand and engage with the yet burgeoning opportunities across the Sub- Saharan Africa region.
1. Active participation of Government and other Regulatory bodies
In Boston Consulting Group report “Driving Financial Inclusion in Africa” The president of Rwanda; Paul Kagame was captured stating that “Fintechs have been and are continuing to be the driving force for the digital transformation and it is our responsibility going forward that all people can reap its benefits”.
The speech extract which was given in June 2023 at the Inclusive Fintech Forum can be interpreted as not only the recognition by African leaders of the roles of Fintechs in driving financial inclusion across Africa but also the role of government in creating an enabling environment to foster growth while safeguarding the interest of its people.
In Nigeria, the Federal Competition and Consumer Protection Commission (FCCPC) kicked off its clamp down on non-registered Fintechs classified as loan sharks in 2023, resulting in most being delisted and some under conditional approvals list.
Companies like Trade Lenda, Sycamore and 190+ others however made the fully unconditional approved list here.
The Nigeria Inter-Bank Settlement System (NIBSS) also on 7th December 2023 issued a circular to banks here to delist non deposit providers.
A circular which has been widely interpreted in various shades and forms from its original intent.
While practical examples have been cited in Nigeria, it should be anticipated that several other regulatory bodies across Africa would play a more active than passive role in 2024 to support the Fintechs while also protecting consumers and investors fund against random new entrants.
This can be seen as a plus and also a concern, depending on your view point.
2. Focus on Customers (KYC) and Profitability over Excessive Growth
2023 has shown the need to focus on customers, profitability, and stronger need for corporate governance structures across Fintechs and the overall financial service sector.
If the growing cybersecurity threats is anything to go by and given the more active role the government agencies would play in 2024, it is only ideal for operators to pay more active focus on the user verification and engagements.
One key benefit to the Fintechs would be the ability to better leverage on shared data to mitigate risk as well as also an open loop to get timely feedback from customers to achieve product market fit or fail quickly.
Secondly, gone are the days of unsustainable growth models as opposed to sustainable growth.
With a decline in funding rounds, founders and Fintechs would have to pay more attention to sustainable growth.
The reverse approach has led to several closure of startups that could have been avoided with more still struggling to keep up (yes more shutdowns would still happen over the next few days and months).
Those who would remain would have to buckle up in terms of corporate governance structures and accountability, this has taken the back seat over the years but would and should now take the front burner entering 2024.
3. More Emergences of Mergers & Acquisitions across Fintechs in Africa
The African Fintech landscape witnessed 26 publicly announced acquisitions over the last two (2) years according to Tekedia , a whopping 270% growth from between 2019-2021 period.
While this number can be considered few, this figure is from publicly made known acquisitions and also shows significant growth of the African landscape.
Payday for example was reported days back for acquisition by Bitmama, according to reports on Techpoint.
2024 would bring in more consolidations of efforts among Fintechs and also between larger corporates and Fintechs to explore synergies.
M&As still serves as a strategic tool to allow startups overcome the current funding landscape while also delivering returns for existing stakeholders.
Based on the current funding landscape, it is only fine to predict that more acquisitions would be considered by existing startups and the traditional banks and corporate seeking to leverage the strength and agility of the startups to consolidate on their offerings in the market.
4. Emergence of new active Angels/VCs across the Continent
The African landscape has delivered positive results return wise and impact, regardless of the overall seemingly negative news that clouds the positive impacts and results.
The various exits, although few has opened focus across the Sub-Saharan Africa region.
Global accelerators, Angels and Venture firms have also included Africa focused lens to their funds.
Corporates are also not left out, with the likes of Asset Resource Management (ARM Group) among others partnering with Techstars to invest in viable startups across Africa.
ARM has invested in several notable companies over the past years like Trade Lenda, Keble, Regxta among others.
We have also seen emergence of active venture firms from the United States like Kaleo ventures, Expert Dojo and Hi2 Global Ventures doubled up on their investment across Africa recently.
In fact, it can be argued that these firms are today one of the most active early-stage VCs on the African landscape.
This trend would continue, with new funds and Angel investors emerging to cushion the gaps experienced in 2023 funding across the continent.
5. SME lending space would grow stronger in 2024
Many would have thought that SME lending would hit the rock in 2024. However, across Africa, Small and Medium Enterprise (SMEs) contribute to about 84% of the total jobs. Government and development agencies would be bullish in creating various policies to support more micro lending opportunities for the Small and Medium Enterprises (SMEs) so as to continue to enable them to create and sustain jobs across the continent.
McKinsey report “ Fintech in Africa: the end of the beginning restates this position as new entrants and some existing B2B Ecommerce would envelope into a digital bank to further support SMEs with micro lending among others.
With the various cashless policies driven across the continent alongside adoption of digital channels, more robust Artificial intelligence models would emerge to better underwrite loan requests in real time thus reducing request to disbursement time as well as overall bad loans.
Conclusion
The fintech landscape across Sub-Saharan Africa is on for an overall positive transformative change in 2024 that would not only lead to a stronger financial services landscape but equally drive the financial inclusion goal across the continent.
With less than seven (7) years to the United Nations Sustainable Development Goals 2030.
There is no better time to invest in Africa and be part of the opportunity of creating an impact and also having a positive high return on investments.
The European Investment Bank report shows that despite the various challenges, the African financial space has remained resilience with key metrics less impacted negatively overall.
Investors and stakeholders keen on engaging with this dynamic sector should closely monitor these anticipated trends, positioning themselves to capitalize on the immense opportunities that lie ahead.
As Sub-Saharan Africa continues to embrace financial technology, the impact on economic development and financial inclusion is poised to be substantial.
About the Writer:
Adeshina Adewumi is a renowned finance expert, CEO/Founder of Trade Lenda; a digital bank for SMEs committed to driving the financial inclusion goals and next 1million jobs by empowering SMEs by 2027. He is committed to the United Nations Sustainable Development Goals and has devoted the last 10 years as an advocate for positive change leveraging technology.
Trade Lenda currently supports over 245,000 SMEs and works in collaboration with several Fintechs and government agencies to host the Trade Lenda SME Fair to empower SMEs and Farmers across each region in Nigeria.
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