How Investors Can Tap the Potential of FinTech for Growth in Africa

There is an increasing potential for FinTech growth in Africa, evidenced by how investment in African FinTech soared during Covid-19.

The continent saw FinTech funding, including mergers and acquisitions, grow to $1.35 billion in 2020 from $1 billion in 2019.

This growth has been exacerbated by Africa’s rising smartphone ownership and falling data costs among its 1.3 billion people.

Various countries have made digital transformation a priority. There has been an increased parallel investment in telecom and data infrastructure.

The fact that only 40 percent of adults in sub-Saharan Africa had a bank account in 2017 also signifies a huge potential for Fintech investors.

Some of the notable investments are in countries such as Nigeria, Kenya, and South Africa. This is according to the Briter Bridges report, which surveyed 177 start-ups and 33 impact investors across emerging markets.

South Africa was the leader, with 112 million dollars in investments. Nigeria followed with 74 million, and then Kenya, which raised 62 million as Egypt came fourth with 51 million dollars.

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Payment solutions represented the bulk of these investments followed by credit, insurance, and financial infrastructure.

Despite the conspicuous success in payment platforms across Africa, a huge potential remains in formalizing these systems and reaching the unbanked and the underbanked.

When this goal of financial inclusion is achieved, it could kickstart an era of more secure, more productive economic activity across Africa.

Many venture capitalists consider Africa a blank canvas, a new frontier up for grabs. This idea of Africa being a single potential market has been supported by the implementation of the African Continental Free Trade Agreement (AfCFTA).

AfCFTA looks to usher in a wave of multinational FinTechs looking to take advantage of more uniform trading conditions.

Nevertheless, Africa still has a long way to go despite the huge FinTech potential. Its success needs expert knowledge of its disparate markets, effective stakeholder engagement, local capacitation, and a strategic reputation management strategy.

Its potential largely depends on its ability to scale. And this can only be achieved through continuous marketing, reputation enhancement, partnerships, stakeholder relations, and brand building as it does with the underlying product.

The ability of African FinTech to differentiate itself will be a powerful advantage. Companies can stand or fall based on their ability to develop and maintain a coherent, attractive brand proposition.

So, can pitfalls experienced by FinTech companies be avoided?

Well, for one, there is a need to lay a firm foundation for continental expansion, with a corresponding strategic approach to reputation management and stakeholder relations.

This can help prospective companies avoid the mistakes others that came before made. Also, partnerships are imperative. They need to be forged across a disparate set of geographies and operating conditions.

For the FinTech industry to live true to the expectation of supporting local employment, industries, and value chains, communication competencies will be its key.

This will be achieved by working with governments, regulators, and communities that are direly needed.

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Localized and centralized communications strategies need to take place concurrently. Also, knowledge of media landscapes and contexts within individual countries is equally crucial.

That said, there is a tremendous potential for FinTech in Africa, and it is more accessible than ever for companies looking to expand.

But as always, it rewards those who take a considered, strategic approach, and who keep the integrity of their brand and reputation top of mind.