The number of fintech companies in Africa has nearly tripled since 2020, significantly improving access to finance for individuals and businesses across the continent, according to the Finance in Africa report.
The report indicated that the African fintech sector is thriving, with digital finance expanding more rapidly than traditional banking. The number of African companies providing innovative financial services rose from 450 in 2020 to 1,263 by early 2024.
“Fintechs are fundamentally redefining the landscape of financial services in Africa, with a wide variety of innovative financial services and products on offer – especially relating to mobile money, digital payments, remittances, digital lending, buy-now-pay-later, insurance, and virtual assets,” the report said.
The report stated that “The traditional brick-and-mortar banking model is being challenged by mobile banking, online banking, mobile wallets, contactless services, and digital payments for remittances through online platforms, mobile networks, and blockchain-based digital currency.”
Citing a McKinsey fintech report (2022), the European Investment Bank (EIB) indicated that fintech companies in Africa are offering financial services estimated as being up to 80 percent cheaper than traditional bank services and offering interest on savings up to three times higher.
According to the Access to Finance 2023 Survey by EFInA, over 45 percent of the adult population in Nigeria in 2023 transacted digitally compared to 34 percent in 2022.
DFS in Nigeria is predominantly bank-based. Most adults (45 percent) used DFS through banking channels, and 13 percent performed DFS through other formal channels.
“For both bank and other formal DFS usage, merchant payments and remittances are the most common transactions,” it said.
Oluwatomi Eromosele, the general manager and research manager at EFInA, stated in an EFInA podcast that this demonstrates the increasing adoption of digital financial services as more people start using financial products for their transactions.
She said, “We also see that through the financial service agent network in local communities, agents are extending formal financial services to about 11 million Nigerians who are not banked but are actively engaged in financial offerings. This tells us the power of technology to reach the excluded underserved.
“To ensure that these agent network communities continue to grow, we also have to remain mindful of the potential risk associated with that.”
She explained that digital financial services are crucial because, even before COVID-19, it was clear that reaching excluded or rural communities would be very challenging without technology. The insecurities and weak infrastructure make it difficult for financial services to rely on the traditional brick-and-mortar model they used in the past.
“Even though there are communities where bank branches used to exist, many of these branches have now closed. It is essential to find ways to ensure that these individuals still receive access to financial services. Access is crucial, especially with ongoing innovations; people increasingly seek services that are convenient and efficient,” Eromosele added.
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