Forecasting Fintech in Africa: 5 Developments to Observe by 2024

Despite global economic realities leading to a decrease in funding across Fintech - digital banking, digital payments, personal finance, lending, insurance, investment, and embedded finance - Sub Saharan Africa saw significant growth in 2023. Nigeria, South Africa, Kenya, Egypt, and Ghana especially saw the emergence of Fintech startups and innovation hubs, addressing different financial requirements from payments to SME services. Blockchain and cryptocurrencies gained acceptance, regulators strove to enable innovation while protecting consumers, and AI and data analysis were used more for credit scoring and risk management. The Fintech industry helped to promote financial inclusion, enhancing cross-border payments, and meeting the financial needs of smaller businesses. However, the sector faced challenges such as cybersecurity concerns, highlighting the requirement for ongoing vigilance and regulatory transformation in this rapidly changing ecosystem. For instance, according to a recent Tech Cabal report, Nigeria has lost $201.5 million to fraud since 2020. The Sub-Saharan African fintech sector has been a driving force in financial inclusion, changing the economic landscape by giving previously underserved populations access to affordable financial services. While stakeholders are worried about the rising cost of global funds and shrinking investment in the continent, several startups, such as PayDay, Bundle, Pivo, 54gene, Dash, and Vibra, have announced closure due to financial and non-financial issues, as reported by Business Insider. As we prepare for 2024, it is important to take stock of the trends that will shape the regional fintech space. This article provides insights to investors and stakeholders interested in the burgeoning opportunities in Sub-Saharan Africa, including those that have yet to be tapped. is essential to the success of the project The involvement of Government and other Regulatory bodies is integral to the project's success. The President of Rwanda, Paul Kagame, has commented that "Fintechs have been and continue to be the driving force behind digital transformation, and it is our responsibility to ensure that all people reap its benefits". This speech, given in June 2023 at the Inclusive Fintech Forum, implies the support of African leaders for Fintechs in promoting financial inclusion across Africa, as well as the role of governments in fostering growth while protecting its citizens. In 2023, Nigeria's Federal Competition and Consumer Protection Commission began its crackdown on loan sharks classified as unregistered Fintechs, which resulted in many of them being delisted, and a few placed on the list of those given conditional approval. Companies such as Trade Lenda, Sycamore, and over 190 others were fully unconditionally approved. Additionally, on 7th December 2023, the Nigerian Inter-Bank Settlement System (NIBSS) issued a circular to banks to delist non-deposit providers, which has been interpreted in a variety of ways. It can be expected that in 2024, regulatory bodies across Africa will have a more proactive approach toward Fintechs than in the past, both to support these new entrants and also to protect consumers and investors' funds. This could potentially be seen as a positive, or a cause for concern, depending on your perspective. Practical examples have been cited in Nigeria. 2. Prioritize Customers (KYC) and Profitability rather than Uncontrolled Expansion In 2023, Fintechs and the entire financial services sector demonstrated a need for increased focus on customers, profitability, and enhanced corporate governance structures. As cybersecurity risks continue to grow and government agencies become more active in 2024, operators should focus more on user verification and engagement. This presents an opportunity for Fintechs to better leverage shared data to mitigate risk and to gain valuable customer feedback to achieve and/or rapidly identify unviable products. Additionally, founders and Fintechs should now pursue sustainable rather than unsustainable growth models due to the decline in funding rounds. Unavoidable closures will still occur in the near future, but those able to remain will need to put corporate governance structures and accountability first. Up until now, this has taken a back seat, but it should now assume the role of priority entering into 2024. New emergences of mergers and acquisitions across Fintechs in Africa are becoming more frequent. According to Tekedia, the African fintech landscape has seen a surge of 26 publicly announced acquisitions over the last two years, representing a whopping 270% increase from 2019–2021. This number may seem small, but it signifies a notable growth of the African industry. Recently, reports from Techpoint revealed that Payday was acquired by Bitmama. Predictions for 2024 point to more consolidation from fintechs, along with collaborations between larger corporates and fintechs to maximize synergies. Mergers and acquisitions are still being used as a strategic tool to help startups tackle the current funding landscape while providing returns for investors. Taking the current funding landscape into account, it is reasonable to anticipate that more acquisitions will follow, both from established startups and traditional banks and corporations looking to benefit from the speed and agility of startups. The arising of new venture capitalists and angel investors across the continent has been observed. The African landscape has yielded beneficial outcomes in terms of return and impact, despite the overall negative news that often eclipses the positive effects. The few existing exits have drawn attention to the region of Sub-Saharan Africa. Global accelerators, Angel investors, and Venture capital firms now use an Africa-oriented approach with their funds. Corporations have also gotten involved, including Asset Resource Management (ARM Group) who partnered with Techstars to put money into promising startups in Africa. ARM has funded numerous noteworthy companies, among them Trade Lenda, Keble, and Regxta. We have also seen the entry of U.S. based Venture firms such as Kaleo Ventures, Expert Dojo, and Hi2 Global Ventures, who are now among the most active early-stage VCs on the African landscape. This trend will inevitably continue, with new funds and Angel investors compensating for the shortages of funding in Africa in 2023. It is anticipated that the SME lending sector will become more robust in the year 2024. Many believed SME lending would die out by 2024, yet Small and Medium Enterprises (SMEs) across Africa are responsible for roughly 84% of jobs. To ensure job security and economic growth, governments and development agencies are forging policies to facilitate micro-lending to SMEs. According to the McKinsey report “Fintech in Africa: the end of the beginning”, this is being accomplished as B2B Ecommerce become digital banks to provide SMEs with loans and other services. As countries move towards cashless transactions, Artificial intelligence models are being adapted to rapidly underwrite loan requests, as well as reduce delinquency. To conclude, the experiment proved that the new product is viable and suitable for the intended use. In summary, the experiment showed that the new product meets the requirements to be used as intended. In 2024, the fintech sector in Sub-Saharan Africa will be undergoing a general, beneficial transformation. This will not only bolster the financial services sector, but also boost the African continent's mission to increase financial inclusion. With less than seven years until the expiration of the United Nations' Sustainable Development Goals in 2030, there has never been a more appropriate time to invest in Africa. Not only is this an opportunity to have a positive effect, but investors could potentially reap a high return on their investment. The European Investment Bank report indicates that, in spite of its difficulties, the African financial industry has retained its resilience -- its metrics have not been significantly negatively affected. Those interested in working with the evolution of this sector should examine the predicted trends and be ready to use the great possibilities that come with them. As Sub-Saharan Africa steadily adopts financial technology, the effect on the growth of the economy and financial opportunity will be immense. The author is a long-time software engineer who has worked in various industries, from health care to finance, for over 25 years. For more than two and a half decades, the author has been a software engineer in a variety of industries, ranging from health care to finance. Adeshina Adewumi is a celebrated financial specialist and the CEO/Founder of Trade Lenda, a digital bank for small and medium-sized enterprises (SMEs). His company is dedicated to achieving the objectives of financial inclusion and creating a million jobs by 2027. He has pledged his support to the UN Sustainable Development Goals and, in the last decade, has been an active advocate of technology-based progress. Trade Lenda works with over 245,000 SMEs, teaming up with Fintechs and government organizations to hold the SME Fair. This activity is intended to give SMEs and Farmers in various parts of Nigeria an advantage.

Source: https://medium.com/@onerichesse/the-future-of-fintech-in-africa-5-predictions-to-look-out-for-in-2024-047bd2e07bc3?source=rss------fintech-5