The fintech landscape in Africa has shown commendable growth over the past decade, and it is now counted among the biggest sectors across the continent. Nigeria leads the pack with the growth rate of the fintech sector standing at an average of 30% annually for the past five years. Nigeria is home to over 200 fintech start-ups.
The biggest fin techs are payments and wallets, which are both expected to grow by 10% until 2025. Digital banking is taking precedence over traditional banking and the increased migration to digital transactions has seen many consumers opt to utilise the various digital platforms on offer to carry out financial transactions and investments. This spells traction of growth for the digital banking and mobile money sector and a potentially huge return on fintech investments anticipated to surpass the $700 million generated in 2020, for example.
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Notably, Nigeria has enjoyed successful growth of its fintech industry largely due to some factors including improved regulations that have seen an increase in cashless transactions, a low penetration of banking services, a huge mobile industry that has seen a flooding of smartphone use, and a largely youthful population that prefers tech.
Most impressive is that Nigeria is home to most of the unicorn fin techs in Africa. A unicorn is a privately held company with a valuation of over US$ 1 billion.
Currently, fintech in Africa is the most dominant sub-sector in Africa’s technology sector, both in terms of start-ups and investments. A report by Disrupt Africa indicates that the fintech industry accounts for 31.4% of Africa’s start-ups. Furthermore, fintech is anticipated to drive economic growth and financial inclusion across the continent over the next few years. The sector is anticipated to experience a jump in growth by 2025.
Investment in the fintech sector in Nigeria is high. About 67% of all Venture Capital funding over the past five years went to fintech start-ups. The seed cheque size for Nigeria start-ups in 2022 stood at $4.5 million, while early-stage cheques are also high. The only challenge that could besiege the fintech sector in Nigeria is saturation as many flock to the industry due to its open opportunities and quick returns. Saturation could harm the sector due to the economic downturn and companies offering similar services. Market consolidation and improved consumer services could keep the fintech industry afloat.
