Africa’s Fintech infrastructure and the roadmap to digitization
In the last 15 years, Africa’s development outlook has improved significantly, with the growth of digital technology, mainly driven by the mobile revolution and digital innovation.
With more than 80 percent of the population having a mobile phone subscription, digital technology has become a key driver for growth. Across the continent, digital trade is also increasing, with financial technology (fintech) companies innovating daily to provide services that bridge the gap in financial inclusion, improve processes for financial institutions, and grow the continent’s economy.
When the global Coronavirus pandemic hit in 2020, digital technology was a critical factor in business adaptation and became an important tool for stability, work enablement, and life across the continent.
However, while the pandemic undoubtedly accelerated Africa’s transitioning to digital, there remains more to do in terms of scale and access. Digital strategies need to be integrated into the development agenda of African countries, and a pillar for this strategy is an investment in fintech infrastructure.
A country’s economic development and stability rely strongly on good fintech infrastructure in the processing of financial transactions to enhance productivity. From determining how financial services are provided and their efficiency, to enabling movement of money, high-quality infrastructure significantly lowers transaction costs, provides better and more accurate risk evaluations, and improves lending and access to capital, all of which have a heavy bearing on a country’s economy.
In Africa, we have seen the emergence and rise of various Fintechs contributing to economic growth, while troubleshooting the continent’s problems across finance and economy.
The continent has also seen the rise of fintech companies who are providing solutions and services to financial institutions in a bid to improve and/or change the way financial providers offer services to users while providing additional capabilities to improve the experience of the end-user through infrastructure.
With the introduction of novel fintech infrastructure, financial institutions are now able to improve their offerings to consumers and create new solutions to accommodate more consumer needs.
For example, when we launched Bank one at Appzone, our goal was to drive financial inclusion and increase economic growth through the deployment of cloud infrastructure that manages all operations of retail Banks and enables delivery of Banking services via digital channels.
In a relatively short period, the clientele has grown to now include a couple of commercial banks and 450 microfinance institutions in Nigeria and other countries across the sub-Saharan Africa region, utilizing the infrastructure to improve day-to-day operations and improve the end-user experience.
There is a rise in fintech adoption because consumers, enterprises including small businesses require financial solutions that address their needs in real-time. Fintech companies are therefore helping financial providers meet their consumer needs and offer new offerings at a faster pace – this has also turned the page for Foreign Direct and local investments as more and more people see the benefit of viable fintech infrastructure on the African continent.
Appzone for example recently concluded a $10million Series A Fundraise under the Cardinal Stone Capital Advisors Growth Fund (CCAGF) to further expand the company’s proprietary technologies to innovate more solutions across Africa.
Investing in Fintech and what it means for Africa
With the growing rate of financial services and digital penetration in Africa, there’s a high chance that the need for digitized and automated banking services and infrastructure will continue to grow and when they do, institutions will seek Fintechs to scale up.
As this ecosystem expands, we will see more seamless financial services and processes, better end-user engagement, more adoption of digital and more automated processes. The more financial services that adopt a more digitized, smarter, and faster fintech infrastructure, the more end users are engaged with the right offerings that serve them. This means a better economic outlook with relevant solutions for Africa.
The African Union launched a Digital Transformation Strategy for Africa (2020–2030), a blueprint and master plan for transforming the continent’s economy. For Africa to be a key player with the capacity to implement the UN 2030 Agenda for Sustainable Development and its own Agenda 2063, full digitization is necessary.
However, while digitization can be developed through several means like public-private partnerships, the full adoption of digital technology and the financing of fintech infrastructure can be a tool for economic growth and the reduction of inequality. It can also facilitate reaching the most marginalized individuals, fostering their inclusion in the financial services ecosystem.