Could you ever imagine that Africa would present one of the most alluring fintech opportunities? Unbelievable, isn’t it, more so considering;
- Huge unbanked population of 460 million approximately
- World’s lowest bank branch penetration of merely 5 branches for every 100,000 adults
- Flat or nil growth in the number of adults with formal banks accounts
- Retail banking penetration at nearly half of the global average for the emerging markets
This certainly doesn’t sound exciting, until you evaluate the revolutionary impact of digital technologies on the way financial transactions are being carried out in Africa. The Mobile Bank or Mobile Money is the most trending feature of the African economy and has redefined the concept of banking across the globe. The country now boasts of;
- $2.1 billion worth of mobile financial transactions
- Number of mobile money accounts has more than doubled
- Mobile money transactions have diversified to include mobile top-ups, P2P transfers, bill payments, remittances, among others
“World Bank’s Global Findex has pegged the Fintech opportunity in Africa for personal banking at a whopping $22 billion, and micro and small business banking at $57 billion”
Not long-ago Africa faced several challenges in its banking landscape from lack of proper infrastructure to lack of education. As per World Bank data, approx. 66% of Sub-Saharan Africa population is unbanked. Lack of proximity to the bank, limited number of branches, longer-wait time, high-cost of borrowings acting as major barriers.
In such a scenario, mobile-money services ensuring low-cost and on-time financial transactions have gained prominence. Tools such as M-Pesa and Moneywave have made the payment or transfers simpler and more accessible to people especially in the rural areas. M-Pesa, a mobile money platform today accounts for more than 30 million customers in 10 countries, which clearly indicates the growing usage of mobile-money accounts for transfers, loans and much more.
Mobile based financial services offer immense opportunity for Fintech companies and start-ups in Africa. As per GSMA, mobile penetration in Africa is projected to reach 634 million users by 2025 and at present, the country leads the mobile money transactions with over 100 million active mobile money accounts. Lower smart phone prices are providing the much-needed impetus to digitization of transactions. By building smart solutions, FIs can accelerate their own revenue along with expanding the financial inclusion net. Banks can play a massive role in enabling mobile money while boosting their own bottom line.
According to Finovating Africa by Disrupt Africa, at least 57 fintech companies have invested close to $92 million in technology innovations in Africa between 2015 to 2017. Approximately 300 new start-ups have entered African payments and remittances space. Start-ups such as Branch and GetBucks are increasingly using customer mobile transactions, purchase and payment history, airtime records to assess re-payment capabilities of an individual. This is becoming a popular way of granting loans in Africa region.
Blockchain, bitcoin and cryptocurrency are some other areas that haven’t been explored a lot, but hold huge potential in solving the problem of traditional banking in Africa – that is the ability to compute credit scores and enable zero-fee hassle free borderless microtransactions. South African Wala financial platform, Dala cryptocurrency, and Centbee bitcoin wallet are some examples of such innovation. During the first 30 days of Wala app and Dala cryptocurrency launch in South Africa, Uganda, and Zimbabwe, approximately 57000 data wallets were created. This is expected to rise further.
Banking without a bank is a key aspect of financial inclusion that brings unique opportunity for mobile fintech companies in Africa. The journey however has just begun. With proliferation of alternate banking challengers such as Google and Amazon dominating the digital-interactive transactions, it is a right time for mobile fintech companies with its innovative offerings to cater to the financial needs of a larger rural-unbanked population. Another approach that can bridge the gap between the growing rural-unbanked class of people vs urban-banked sector is by way of collaboration between banks and fintech start-ups. For instance, banks such as Rand Merchant Holdings have launched Alphacode Club to support fintech companies in South Africa. As an end-user of these products, we can clearly foresee that these strategies will only be beneficial for the economic development of the nation but will also help customers enjoy financial independence without any inhibitions.
Which strategy will eventually succeed to fully cover financial inclusion goals may still be a matter of opinion and thoughts? But something that can be unanimously agree upon is the fact that the country is constantly treading towards a sound financial structure built on a robust mobile infrastructure. The unbanked will be the new class of customers who have the potential to drive product innovation across all class of transactions, be it payments, remittances, lending, funding, and liquidation.
It won’t be incorrect to say that Africa is not far from building a robust financial layout exclusively centered around the needs of its unbanked population.