African fintech is different to developed markets

African fintech is different to developed markets

The African fintech space is different to more developed markets in that startups in the sector are building a whole new infrastructure as opposed to tweaking an existing system.

Much of fintech in developed markets is about providing services to banks, or delivering something that already exists with a better customer experience, whereas in Africa it’s almost exclusively about delivering access to financial services directly to the end user for the first time.”
In Africa, there are still many countries with more than half of those who do not have bank accounts.

(Refference)Bank account penetration rate of each country



(Source)Global Findex Database 2014

A very major Fintech service in Africa is mobile remittance using mobile phones.

Mobile remittance in Africa is different from “mobile banking” in developed countries including Japan (banks provide as an additional service to account holders), even those without a bank account can conduct financial transactions by making proceedings and identity verification through using mobile phone short messages (SMS) .

As a representative example of the mobile remittance service, there is “M-Pesa” provided by Kenya’s telecommunications operator Safaricom.

There are challenges, however.
Access to resources to scale is a problem, as is the fact that there is not enough technical and development capacity for the amount of innovation and ideas around.

Funding for high-risk initiatives is another challenge.

In many other regions, there is a mature venture capital culture in which investors are willing to take significant risks and accept a low probability of success.
In Africa, the funders want a mature company with paying customers and a solid business plan – basically a high guarantee of success.

Under the circumstance, incubators and partners for African fintech startups are increasing.

Support is increasingly being offered by traditional banks, more and more of which are open to working with and collaborating to fintech startups.

They realise that fintechs can bring tremendous potential and opportunity.
These banks often host initiatives like hackathons and sponsorships, or even getting a proof-of-concept implementation going,” Oosthuizen said.

The final contracting stage, however, is still where the difficulties arise, with these commitments daunting to negotiate if you are the small party.

In the future, it is expected that the support system will be enhanced and active investor funds will be provided for Fintech related startups in Africa.

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