Innovation in the African fintech sector is booming and is expected to create a new development path in Africa. According to analysts, the sector is expected to bring in $416 billion a year and will help bring in a whole new wave of development to the continent.
South Africa is an attractive location for Fintech entrepreneurs
South Africa is one of the most attractive destinations for fintech entrepreneurs. The country is home to the continent’s most vibrant FinTech ecosystem, as well as the continent’s top financial institutions.
One of the biggest trends in FinTech is the rise of mobile money. It’s a technology that has helped millions of unbanked Africans access financial services. For many, mobile money offers the chance to use digital payments, including micropayments, to make small transactions.
Another innovation is the Employer of Record, which is a legal structure that allows companies to set up a legal entity locally, speeding up the process of entry into the market. While this is not cheap, it may be an option worth considering if you are a tech entrepreneur aiming to establish an operation in the African market.
South Africa is also one of the leading markets for FinTech startups, and the sector is one of the more lucrative on the continent. As an example, a recent report found that more than 40% of the FinTech revenue on the continent is generated in South Africa
Challenger banks have been launching with zero fees
Challenger banks are a new breed of financial institutions that have been launching in Africa with no fees. These digital banks aim to disrupt the status quo of traditional banking services. They offer products and services that consumers need, such as no-fee debit cards, Mastercard debit cards, Visa debit cards, and the ability to block credit and debit cards.
While these challenger banks have been gaining momentum, their success will be hampered by entrenched incumbents. In South Africa, the largest banking sector, the market is dominated by FirstRand and Standard Bank Group Ltd. Both have a presence across the country and have made a significant move towards digital banking.
The challenger bank trend began in Europe, but is quickly making inroads throughout the continent. This is partly due to a shift in regulatory standards that have allowed startups to develop their own financial services.
For instance, in South Africa, the government is testing a Rapid Payments Programmed. It will allow real-time clearing of payments for domestic and foreign transactions. It is a part of the South African Reserve Bank’s Vision 2025, which aims to boost financial inclusion and reduce cash dependency.
Africa is creating an entirely new development path
Fintech innovation in Africa is transforming the continent’s development path. The influx of new funding into the industry could signal the beginning of exponential growth for African fintech markets.
The rise of mobile money has made it possible for millions of Africans to access financial services without traditional banking. In countries like Kenya, mobile technology has become the dominant payment method. Using this technology, Safaricom’s M-Pesa has transformed the nation’s economy and has expanded to seven other African nations.
A growing mobile subscriber base is driving innovation and development in Africa. According to GSMA estimates, West Africa’s mobile penetration has doubled over the past decade. It has also enabled companies like Safaricom and M-Pesa to significantly reduce their costs.
Despite the rapid growth of the mobile subscription market, many Africans are still underserved by the financial system. This has created a number of pain points for innovative financial solutions. For instance, households do not have the resources to pay bills on time. Likewise, informal businesses are unable to secure loans or crop insurance.