The uptake of digital technology and the increase of mobile money use has led to a demonstrated increase in digital banking over the last decade, and predictions indicate that the digital banking landscape will be the new normal in the fintech sector over the next few years.
The latest ‘Future of Fintech in Africa’ report indicates that the continent’s reliance on digital and mobile financial offerings is likely to increase over the next few years as more consumers adapt to digitalisation. The report indicates that using digital options for carrying out financial transactions is now the preferred option for approximately 40% of Africans. What is most notable is that mobile money has now grown from standard transactional operations such as cash in and cash out, as well as bank to mobile transfers, and bill payments, to including advanced financial services that consist of a complete ecosystem such as microfinance and insurance, and is aided by progressively developing digitalisation.
Improved education on digital financial systems has also ensured that most Africans appreciate the benefits of dematerialised money compared to utilisation of the customary bank account and physical banking transactions carried out over the counter.
The fintech and mobile money sectors have helped onboard millions of Africans onto a formal banking system in the past decade. The future of the financial services market revenue pie is anticipated to reach $250 billion by 2023 and there are new fin techs that are sprouting across the country.
Perhaps most interesting is that currently, sub-Saharan Africa is the global leader in mobile money adaptation, with over 400 million registered mobile money accounts and a growth rate of 139% per annum. This has seen an increase in the number of fintech scale-ups (i.e. start-ups that have raised US$ 1 million or more). By the end of 2022, there were 270 of these, according to the 2023 Future of Fintech report.
For greater context, you should read: EcoCash transaction limits: impact on the National Payments System in numbers
Obviously, the benefit to the market is the high mobile money penetration which reportedly shows over 80% of Africans own a mobile phone and more than 50% are reasonably digitally savvy.
But this optimism and ray of opportunity should not mean that there are no challenges on the ground. Yes, the opportunities are there such as accessibility, speed and less paperwork. But there are also challenges that need to be addressed such as the general mistrust of financial systems and security issues that could lead to scams, poor digital and financial literacy, unaffordable Internet as well as service-related system issues such as power outages, unfriendly regulations and difficult application requirements for service providers. But the business owners who manage to bypass or find solutions to these are likely to enjoy the benefits of a now-growing sector that promises endless opportunity across the value chain.
Cover Image Credit: Benjamin Dada
