Mobile money over the years has become an inevitable part of Africa’s financial services landscape. In the past ten years or more, mobile network operators have dominated the mobile money industry in the entire continent. In addition to that, FinTechs have also laid a strong foundation in the market which has caused many banks operating in the region to compete aggressively for the mobile banking customer. So, the reasons for the assertion that the African region is full of opportunities for fintech and mobile money opportunities will be provided below.
Safaricom’s initial M-Pesa offering played a crucial role in enabling small businesses and consumers had access to banking service to send and receive money in a quick and secure manner at great distances. Today however, mobile finance management services have included a wide array of financial services like insurance, credit, international remittance and M-Pesa which has less than a quarter of total mobile financial services users in Africa. In the past years, mobile money penetration has increased by more than 30 per cent annually. Moreover, the margins on payments in Africa are also the highest in the entire world with approximately two per cent of the transaction value.
The growth of FinTech is attributed to the rapid decline in the cost of mobile phones in the past years.
This increase affordability of mobile phones has created a boom in the mobile money market. By the year 2021, more than 634 million people which is 52 percent of the entire population in Africa will have a mobile phone subscription.
Africa’s mobile money market has expanded, diversified, and matured in the few past years. Now, all the mobile money providers can fall into one of the below four types.
In this type, the MNO is responsible for most of the steps in the value chain that includes the physical agent network, telco network, and payments issuing and processing. In this, a bank acts as a deposit holder. M-Pesa and MTN are two of the most successful names in this category.
In this type, an MNO gets the support from a banking partner for providing products that are beyond payments like deposits and consumer loans. M-Shwari in Kenya is one of the examples in which there’s a partnership between CBA (mid-sized Kenyan bank) and Safaricom (Leading telco company in Kenya).
Equitel is an example of this model which is a partnership between Airtel and Equity Bank. It has over two million customers in Kenya. Equitel offers its customers to send money from their bank account to any account in Kenya. Moreover, it allows banking services like taking out loans and maintaining deposits. Apart from banking, Equitel also offers airline ticket purchase.
Paga in Nigeria that has grown its customer base by 81 per cent annually is the best example of a FinTech solution. This company allows customers to send money through their phones. It also allows them to pay for all the online purchases on merchant websites.
Africa arguably has proven to be the best place for FinTech startups and rapidly increasing internet penetration is one of the main reasons for it. Internet penetration in Africa was just 13.5 percent in the year 2011but has increased to 39.3 percent by the end of the year 2019. Although this number is way below the world average but it’s also important to notice that the number of internet users grew at a whopping 3600 percent between 2000 and 2012.
The immense growth of internet users has boosted African entrepreneurship with African startups growing by a massive 32 percent with the funding of more than 70 percent. Investigation reveals that the total funding for African startups touched the $1 billion mark in 2018. This figure shows that FinTech companies in Africa have massively benefitted from foreign direct investment. These numbers are now also attracting companies all over the world who now see Africa as a paradise for FinTech startups. Last year, Stripe, a United States FinTech Company acquired Paytech, a leading FinTech company in Nigeria for $200 million.
M-Pesa laid the foundation for the transformation of FinTech in Africa in 2007. Little wonder, M-Pesa has emerged as the most successful FinTech firm in Africa. It has revolutionized mobile transactions in Africa from Kenya and other East African countries, central Africa and West Africa as well. Africa has the highest number of unbanked people in the world which makes it extremely difficult to access banking services and not only that, these people carry huge amount of cash with them. In such a scenario, FinTech provides an alternative as it empowers many such vulnerable people.
Individuals are not the only ones positively affected by the FinTech revolution, but also whole communities who lacked the access to basic banking facilities like having a bank account, sending & receiving money, making payments for essentials like water, electricity, etc., and starting their own new business. Cashless society which is prevalent in modern societies in the developed world is also provided for thus preventing traders and businesses men and women from the risk of robbery.
The FinTech story of Africa is one of the greatest tech-success stories that you’ll ever find across the world. How this story will shape in future is a fascinating question which only time can answer. However, one thing is for sure that it has massive potential in Africa. And in the coming years, we might have many other FinTech companies emerging.
Article written by John Bamidele, founder of gbc.ng, a leading digital news portal on gaming in Africa. Well versed and experienced in Africa gaming, John has been a journalist for two decades working in Print and electronic media, writing on Sport, Marketing, Marketing Communication, Tourism and Politics.
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