Africa: Kenya, Nigeria, SA Lead Fintech Growth in Africa As Sector Sees Massive Expansion

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26 October 2022
The Exchange Africa
By Wanjiku Njugunah
  • Mastercard has released a new study that indicates that fintech startups in Africa grew 81 per cent in 2021, with South Africa, Nigeria, and Kenya emerging as key hubs on the continent
  • The report also found that the fintech sector accounted for 27 per cent of the record-high number of deals closed and 61 per cent of the US$2.7 billion deployed across Africa in 2021
  • The three countries were also seen as among the countries leading the transition to digital payments, with infrastructure and policy frameworks that enable this growth firmly in place

Mastercard has released a new study that indicates that fintech startups in Africa grew 81 per cent in 2021, with South Africa, Nigeria, and Kenya emerging as key hubs on the continent. The white paper was seeking to determine the state of fintech in African markets.

Titled 'The Future of Fintech: Rapid Growth Attracts Smart Capital', the report also found that the fintech sector accounted for 27 per cent of the record-high number of deals closed and 61 per cent of the US$2.7 billion deployed across Africa in 2021. The space was further characterized by mega deals of more than US$100 million each.

Further, Mastercard also found that fintech innovation in Africa has been driven by the need to resolve multiple pain points, with a focus on increasing financial and digital inclusion. South Africa, Nigeria and Kenya were also seen as among the countries leading the transition to digital payments, with infrastructure and policy frameworks that enable this growth firmly in place.

Commenting on the finding, Ngozi Megwa from Mastercard said that it was encouraging to witness the growth of the fintech landscape across the region, creating multiple opportunities for start-ups, scale-ups, enablers and micro, small and medium enterprises (MSMEs) to bring more people into the digital fold.

"At Mastercard, we are helping to fuel fintech acceleration by offering access to our expertise, network and technology. We provide a portfolio of technology solutions, APIs, developer tools, partner network, startup programs and a community experience for every fintech company and payments developer, helping turn their bold ideas into reality," said Megwa.

The white paper also observed that growth in the number of fintech companies in Africa is reflective of global fintech funding, which jumped to a new record of US$131.5 billion in 2021. The number of fintech unicorns reached 235 with 34 alone born in Q4-2021. Fintech companies now represent more than 20% of total tech unicorn value, compared to 15% in the previous year.

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The study showed that on the demand side, the role of MSMEs has been crucial to fintech's growth. MSMEs use fintech and e-commerce solutions to scale, source, and reach.

The growth in alternative payment rails and emerging platforms are shaping the commercial landscape. Buoyed by demand, fintech has seen products based on multi-faceted innovation in emerging and mature economies.

Providing scalable financial services using the internet, blockchain, and algorithms, fintech companies have widened the reach of financial services traditionally offered by banks, including loans, payments, investments, or wealth management.

The white paper also explored the African fintech landscape with regards to the ecosystem, funding and regulation, with the following findings included in the study:

The fintech ecosystem in Africa is adopting new technologies to deliver financial services Governments, regulators, financial institutions, payment and technology companies, funders, and entrepreneurs are collaborating to be at the forefront of financial innovation, developing use cases such as mobile money and using fintech as a vehicle for financial inclusion.

Further, Mastercard noted that recent years have seen a faster rate of digitisation, driving the adoption of neobanks and digital payments. Cryptocurrency, nonfungible tokens (NFTs), and blockchain-backed technologies have come into the mainstream, often backed by dynamic regulation that supports the growth of more affordable financial services.

In terms of funding, the study showed that Africa's fintech startups recorded 894% year-on-year growth in funding in 2021, the second highest in the Middle East and Africa region.

Nigeria emerged as a leading fintech hub across the Middle East and Africa as start-ups there accounted for a third of all funding deployed into fintech in 2021.

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