CHAMS FINTECH KNOWLEDGE SERIES
According to the Harvard Business Review, the spotlight of FinTech innovation currently appears to be shifting once again, this time towards Africa.
The driving force behind this transformation is the widespread proliferation of mobile phones, even in areas where internet-capable devices are not yet prevalent.
This wave of FinTech in Africa is characterized by its focus on inclusive mobile banking services, bridging the gap for those who lack access to traditional banking services.
It is worth noting that Africa is home to 33 of the world’s 47 least developed countries, as categorized by the U.N., making the need for accessible financial services even more critical.
While it took several decades to establish universal smartphone and internet infrastructure in more developed regions like the U.S. and China, Africa’s progress in this domain is still in its early stages.
However, this potential drawback has turned into a significant advantage for FinTech in Africa. Rather than being hindered by the absence of fully developed infrastructure, the continent has found opportunities to leapfrog ahead in the FinTech domain, showcasing how innovative solutions can be developed in resource-constrained environments.
Unlike previous waves of FinTech innovation, which heavily relied on cutting-edge technologies, the African FinTech wave is built on the foundation of mobile phones.
The adoption of mobile phones on the continent saw a significant surge around the turn of the millennium, and today, they have become ubiquitous.
This rapid expansion of mobile technology has contributed to a swell in economic growth. According to IMF estimates, four of the top five highest GDP growth rates in the world are observed in African countries benefiting from this FinTech boom.
Furthermore, African countries that missed out on the earlier FinTech waves witnessed in the U.S. and China are now experiencing accelerated progress, propelled by their hyper-efficient mobile infrastructure.
The accessibility and inclusivity offered by mobile-based financial services are transforming the financial landscape in Africa, providing opportunities for financial inclusion and economic development.
The transformative growth of fintech in Africa and other emerging markets has indeed been a game-changer, with the potential for even more positive impacts in the future.
While the payment space in Africa is witnessing the rise of notable players like Flutterwave, Paystack, Chipper, MFS Africa, Cellulant, and Jumo, competing alongside established global providers such as Visa, Mastercard, and Stripe, the coming years are likely to see increased activity across other fintech verticals.
These may include lending, know-your-customer (KYC) solutions, small and medium-sized enterprise (SME) management software, and decentralized finance (DeFi). As the fintech ecosystem matures and consolidates, there is also expected to be a rise in mergers and acquisitions (M&A) activity.
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