Within a period of three years, the number of financial technology (fintech) startups in Africa has almost doubled, a BusinessDay analysis shows.
According to a recent report by Mastercard, a global pioneer in payment innovation and technology, the number of fintech startups in the continent grew by 81.4 percent to 564 in 2021 from 311 in 2019, with South Africa, Nigeria, and Kenya emerging as key hubs.
“The sector accounted for 27 percent of the record-high number of deals closed and 61 percent of the $2.7 billion deployed across Africa in 2021. The space was characterized by mega deals of more than $100 million each,” the report stated.
It further stated that the rapidly growing sector comprises sub-segments of particular interest, including digital payments, e-money, international remittances, peer-to-peer (P2P) lending, and equity crowdfunding.
Ngozi Megwa, senior vice president, digital partners and enablers, Eastern Europe, Middle East, and Africa at Mastercard said in the report that fintech companies have become an increasingly important segment for people.
“They are channels for innovation and growth, as well as partners for co-creation. They come in different shapes and forms. Some fintech companies engage in issuing and acquiring activity and are, therefore, our direct customers,” Megwa further said.
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She also added that others are enablers that help their customers digitize and innovate, often specializing in segments or flows that are not yet serviced. “They preview innovation and offer us the opportunity to explore new use cases.”
The report also revealed that Sub-Saharan Africa’s fintech startups recorded an 894 percent year-on-year growth in funding for 2021, the second highest in the Middle East, Africa, and Pakistan region.
“Nigeria emerged as a leading fintech hub across the Middle East, Africa, and Pakistan as startups there accounted for a third of all funding deployed into fintech in 2021.”
It highlighted that smartphones are the most important tool for fintech adoption in Africa.
Of the nearly 400 million new mobile subscribers expected to sign up globally by 2025, the majority will come from frontier markets like Africa. With efforts to remove the affordability barrier, smartphone adoption is likely to grow to 75 percent by 2025.
The Mastercard report recommends that for fintech companies to succeed, partnerships need to transform into multilateral collaborations to innovate, facilitate, accelerate, scale, and regulate.
“All stakeholders come together to work on solutions that address actual needs. Proactive regulators are working together to create pan-regional frameworks, which protect the consumer while developing an ecosystem in which entrepreneurs can thrive and succeed,” it added.
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