Fintech companies have been on the rise for the past few years all over the world. Africa has been one of the places where Fintech has made a huge difference.
Fintech companies have been on the rise for the past few years all over the world. The last fintech company that may have been a true success was Paypal. But in the last few years there have been a lot of developments to bring in new technologies to the financial services industry and to make it easier to use. By 2018 investment in Fintech startups or ideas will be more than $6 billion according to some estimates.
Africa has been one of the places where Fintech has made a huge difference. The traditional financial services were not always easily available in rural areas and one had to travel to cities to open and operate a bank account. There were no ATMs or bank branches in most of the areas and as a result, more than 88% of Africans didn’t own a bank account. This was also a huge opportunity for Fintech companies to change how almost an entire continent accessed the finance systems. This has led to massive investments and a race to become the market leader in their fields.
Fintech Companies Space
The Fintech space can be divided into the below fields although there are overlaps in many cases.
- Lending Services – If getting access to the banking system is hard, alternate lending services are a faster way to get access to finance.
- Payment services – If people do not have bank accounts then most payments are done in cash. This creates many problems as cash needs to be collected from stores by big businesses and deposited in bank accounts. Fintech helps by creating payment wallets (ewallets) that make payments and reconciliation easier than before.
- Remittance Services – As an expat sending money to home can be a costly affair. The banks and remittance companies charge a lot to transfer money from one country to another. New players in Fintech are reducing the charges and challenging the older order.
- Banking Infrastructure services – the vast amount of data that are collected by service providers can be invaluable for banks. They can use this data to predict demand and manage risks better than ever before.
The spread of mobile phones and mobile internet in Africa has played a huge part in laying the groundwork for Fintech to grow. By 2020 almost all people will have access to mobiles and in turn financial services.
M-Pesa was a game changer in terms of new financial ideas in Africa. Started by Vodafone in 2007, it has become the primary choice for people in Kenya and other countries to make payments via mobile. GetBucks is another rising player which gives online loans and banking services to people.
There are a lot of firms which are investing in Fintech companies in Africa in a major drive. Firms like Alphacode and Barclays Rise are investing in incubators for emerging ideas and are expecting to see new Fintech companies to change the face of banking in Africa. The potential for Fintech to do good in Africa is sky high today. In the next few years we will see a paradigm shift in how Fintech changes people’s lives in Africa.