From partnership to product innovation accelerating, fintech integration into other verticals rising, and significant regional variation, Africa’s evolving fintech market is shaping up to be substantively different from fintech markets in the rest of the world.
According to a new McKinsey report. Africa’s fintech sector is expanding rapidly with revenues projected to hit $230 billion by 2025 on rising mobile adoption, digital transformation, and increasing financial inclusion,
It said, “Despite macroeconomic challenges, the continent’s fintech ecosystem has demonstrated resilience and adaptability with funding for tech startups rising 18-fold over the past six years.”
The report titled ‘Redefining Success: A New Playbook for African Fintech Leaders’ highlights key growth drivers, including a digitally savvy population, declining data costs, and regulatory advancements fostering innovation and expanding the market by penetration.
Africa’s leading fintech markets—Nigeria, Ghana, Egypt, and Kenya—have achieved market penetration rates of up to 13 percent with fintech revenues currently estimated at $3.8 billion, accounting for 2.5 percent of the continent’s $153 billion financial services market.
The report emphasises a shift from hypergrowth to sustainable profitability, noting that fintech companies with comprehensive growth strategies were 97 percent more likely to achieve above-peer profitability.
With mobile internet penetration expected to increase from 300 million users in 2020 to nearly 475 million by 2025, Africa is entering a transformative phase for digital financial services. The expanding fintech landscape also presents an opportunity to address economic inclusion, as 57 percent of Africans remain unbanked.
The sector’s maturation is leading to increased mergers and acquisitions (M&A), enabling fintechs to scale from national leaders to regional powerhouses. The report projects financial services revenue to grow by 9 percent annually until 2025, solidifying fintech’s role as a key driver of Africa’s economic transformation.
“The fintech revolution in Africa is not just a trend; it’s a transformative force that is reshaping the continent’s financial landscape,” said Mayowa Kuyoro, partner at McKinsey, Lagos, and author of the report.
“Despite the macroeconomic challenges, the resilience and adaptability of African fintechs are truly remarkable. With the right strategic focus and supportive regulatory environments, the fintech sector in Africa is poised to unlock immense value, driving sustainable growth and improving the lives of millions across the continent.”
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According to McKinsey, here are six factors combined to create a distinctive African value proposition for fintechs.
New partnerships and opportunities are emerging
McKinsey disclosed that new partnerships and alliances are emerging as disruptors, telcos, and banks navigate the changing financial landscape. These collaborations are reshaping access to financial services across Africa through innovative solutions and expanded market reach.
Disruptors and banks are joining forces to leverage their complementary strengths, especially in underserved markets. A notable example is the partnership between Kenyan fintech Fingo and Ecobank, which led to the launch of the Fingo Africa App. This app promotes financial inclusion among African youth by enabling users to open bank accounts and manage their money seamlessly.
Disruptors and telcos are also collaborating to extend financial services beyond traditional mobile money offerings. In February 2024, MTN partnered with South African fintech JUMO to introduce Qwikloan, a short-term loan service available via the MTN MoMo app and USSD. Similarly, M-PESA Safaricom teamed up with Onafriq in March 2024 to streamline international remittance inflows across 40 African countries.
Banks and telcos are forging partnerships to leverage mobile network infrastructures and expand access to financial products. M-PESA partnered with Access Holdings to facilitate cross-border remittances between East and West Africa, while Mastercard’s virtual payment solution enables Airtel Money customers in Zambia to make global online payments.
In Kenya, Absa Bank collaborated with Visa to introduce innovative payment solutions like the Absa Mobi Tap, allowing small businesses to accept card payments via Android smartphones.
While partnerships drive much of the innovation, some players are opting to go solo. Certain telcos are diversifying beyond traditional wallet services, using their infrastructure to offer financial products across sectors. Meanwhile, established banks are launching fintech subsidiaries to remain competitive.
In Nigeria, Access Bank introduced Hydrogen, a payment services fintech, shortly after Guaranty Trust Holding Company (GTCO) launched its payment firm, Squad. This dynamic environment reflects a growing competition for market dominance as financial services continue to evolve across the continent.
The market is consolidating
The fintech space has seen M&A activity accelerating in 2024, driving consolidation across the market. During the first quarter of 2024, eight fintech deals were struck in Africa compared with 12 over the whole of the previous year.
M&A can have one of two main benefits: enabling fintech businesses to scale rapidly or extending a lifeline to companies that have been affected by declining investment. For instance, Paystack, a prominent pan-African fintech company, announced it had acquired Brass, a Nigerian business banking start-up specializing in SME services.
In South Africa, Lesaka Technologies, a publicly listed fintech, has acquired payments services provider Adumo in a 1.59 billion rand ($85.9 million) deal. Very often, these deals are prompted by investors looking to consolidate start-ups to create bigger and more profitable entities.
Product innovation is accelerating
The third key shift in market conditions is evidenced by the flowering of new products and services, processes, experiences, and business models as fintechs look to solve old problems in new ways and transform how financial services are accessed and used.
These emerging technologies and solutions signal a move toward integration and interoperability. In the payments space, for example, where innovation is reaching its plateau, the scaling opportunity is in innovating in-person payments through the range of point-of-sale (POS) terminals and scan-and-pay services.
As the chess pieces on the board shift, innovative players are finding new ways to drive competitive advantage. For example, LemFi, a company that initially targeted Nigerian migrants in Canada by offering multi-currency accounts that enabled them to send money back to their home country, is expanding its offering across the continent through a series of strategic partnerships with trusted local partners to both enhance its services and ensure compliance with regulatory standards.
The integration of fintech into other verticals is on the rise
In 2019, a general partner at a prominent venture capital firm famously forecasted that every company would eventually become a fintech company, and this is starting to play out on the continent.
Fintech innovation and M&A are reshaping the market landscape as banking and financial services are increasingly integrated into nonfinancial apps and services, increasing access to fintech across sectors such as agriculture, transportation, health, and hospitality.
In the logistics and transport sector, for instance, Nigerian mobility fintech Moove offers vehicle financing integrated into ride-hailing apps and logistics platforms, and the company recently received a significant vote of confidence via a funding injection from Uber. Korridor, a logistics fintech that serves customers across 13 African countries and has developed solutions that help to streamline cross-border logistics, is also innovating rapidly.
Since its inception 14 years ago, Korridor has grown into a one-stop platform for managing all logistic trip-related expenses, offering a range of services from insurance and electronic payments to cash payouts.
Similar trends can be seen in the energy, retail, and healthcare sectors. In Kenya, for example, SunFunder shifted from developing solar energy solutions to providing loans and investment services for solar energy projects, and M-KOPA has evolved into an asset finance company with built-in financing options across its portfolio to enable affordability and ease of access.
Fintech players are taking up different roles across different regions
Fintech activity across Africa varies by region, with emerging markets showing promising growth. In North Africa, Egypt, and Morocco are advancing payment infrastructure through improved regulations.
West African banks, especially in Nigeria and Ghana, are building fintech divisions, with mobile money surging in Ghana by 63 percent in 2023. East and Southern Africa are seeing deeper bank-fintech partnerships, like Standard Bank’s $11 million investment in Float.
Frontier markets like Angola, Algeria, DRC, and Ethiopia are catching up due to better regulations and rising GDP. Notably, Algeria’s open payment sector and Africell’s partnership with USAID in Angola drive financial inclusion.
The African regulatory landscape remains highly fragmented
Regulatory tailwinds across Africa are driving fintech growth by enhancing customer protections, improving financial access, and promoting cross-border trade. Countries like Egypt, Morocco, and Angola are fostering cashless transactions, while Kenya and Nigeria focus on consumer protection and data security.
Regional initiatives like AfCFTA and PAPSS aim to simplify cross-border payments and improve interoperability. However, fragmented regulations remain a key challenge, with countries like South Africa, Nigeria, and Ghana tightening licensing and compliance. Localized data protection laws and digital taxation in markets like Kenya and Nigeria further complicate cross-border operations for fintech companies.
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