As Africa continues to experience a rapid surge in fintech revenue, marked by a compound annual growth rate (CAGR) of 32%, a recent report by Boston Consulting Group (BCG) and QED Investors foresees the continent’s fintech market reaching an estimated $65 billion by 2030.
South Africa, Nigeria, Kenya, and Egypt stand at the forefront of Africa’s fintech race, propelled by a lack of legacy infrastructure that has enabled these nations to explore innovative financial ecosystems.
The report notes that just under 500 million people in Africa are unbanked, with slightly over 410 million classified as underbanked.
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Fintech as the Access Solution
Caio Anteghini, a partner at BCG Johannesburg, emphasises the potential of fintech as a solution to the access challenge, particularly with smartphones presenting significant opportunities in payments and lending for regional champions adopting full-stack attacker models. The global and African fintech journey is still in its early stages and is poised to revolutionise the financial services industry.
Global Fintech Growth Race
Africa currently leads the global growth race for fintech, anticipating a remarkable 13 times growth by 2030. Latin America closely follows with a 12.5 times growth rate, while Asia-Pacific expects an 8.5 times growth and Europe a 5.5 times growth. North America, although projecting growth, is expected to see four times growth by 2030. However, it’s crucial to note that these figures represent growth rates, not overall revenue values.
While Africa’s fintech market is expected to reach $65 billion by 2030, it is the smallest value among all regions. Latin America anticipates a market worth $125 billion, Europe $190 billion, North America $500 billion, and the Asia-Pacific market is poised to top $600 billion by 2030. QED Investors Managing Partner Nigel Morris anticipates continued growth in both developed and developing fintech markets globally.
Globally, the financial services sector, while profitable, grapples with innovation and customer satisfaction. African companies have seized the opportunity to address market gaps through innovative fintech services, providing financial freedom to local users. Mobile money services, particularly among African telcos, are a prevailing trend. Many banks in South Africa have also entered the fintech space with innovative services, such as points-based reward systems and digital currencies.
In Africa, where cash remains predominant, fintech emerges as a potential solution to access challenges. Most of the population is either underserved or fully unbanked. As the youngest and fastest-growing region globally, demographic shifts and increased earning power deepen the need for financial access. Africans’ first interaction with the financial services sector often occurs through smartphones, presenting significant opportunities in payments and lending.
Currently, payments dominate the fintech segment, driving initial growth. Payments are expected to remain the most significant use of fintech until 2030. Business-to-business-to-any-user (B2B2X) and B2B services are anticipated to become prominent, with B2B fintech revenue projected to grow at a 32% CAGR until 2030. The rise of B2B2X, where telcos deliver financial services to end-users, is set to be an emerging business model relying on fintech.
Regulatory Considerations
The regulation of the fintech sector in Africa has been light and fragmented, varying across countries. While some nations have robust regulatory systems, others lack measures to guide and structure the market. Striking a balance is crucial; regulators must avoid over-regulation to foster innovation and growth. Regulators play a vital role in creating an open banking system supporting digital infrastructure and economic growth.
Regulatory frameworks should acknowledge the co-existence of fintech services with traditional financial services. This can be achieved by granting standalone fintech licences or accepting fintech service providers as integral parts of the financial ecosystem. The rapid growth of fintech services in Africa necessitates regulatory adaptability to ensure sustained innovation.
As the fintech landscape evolves rapidly in Africa and globally, the continent is positioned for significant growth. Businesses need to adapt, enabling fintech payments to reach underbanked or unbanked customers. 4C Group stands as a reliable partner, offering innovative digital tools and fintech technology to facilitate this transformative journey. For inquiries about these offerings, contact 4C Group today and join the fintech revolution shaping the future of financial services in Africa.