FinanceFintech

How African fintechs are diversifying to challenge the emerging banking space

Image Credit: CNN (fintechs), 2021.

African fintechs are blazing the trail in innovation and growth across Africa, especially with Nigeria leaping five steps forward on the 2021 Global Startup Ecosystem Index, to rank 63rd, just third behind South Africa in 48th and Kenya in 61st. This significant leap rides on the back of the laudable successes this year in her fintech space, with the rise to unicorn status of Flutterwave and Chipper. As such, many African fintech companies are increasingly breaking bounds within the African market, and as well globally. Of the global number of tech unicorns, according to UKfintech, fintechs now represent a whopping 20% of their present value in 2021. This is a strong testament to the viability and growth of fintechs globally, and especially within Africa.

Image Credit: TechCrunch, 2021

As of May 2021, according to Maxime Bayen, African fintechs had raised a total combined value of $800 million, and were projected to further raise over $2.8 billion in VC funding this year. In that stead, recently, Fairmoney and Payhippo have both raised over $42 million in Series B funding and $1 million in pre-seed funding respectively. With this expansive strength of funding, these fintechs are diversifying their business interests, especially in neobanking. As TechCrunch reports, Fairmoney recently secured a microfinance bank license from the Central Bank of Nigeria, with plans to delve into SME-lending and position itself in the market as a neobank. Fairmoney, as well as a number of other African fintechs, intend entry into the emerging banking space through a credit-led model (offering credit or similar offerings to users before providing a bank account for them). Consequently, Carbon has also recently concluded a five-year partnership with Visa to enable basic financial services and a seamless banking experience for its users. Zeepay, Ghanaian fintech, as well, just concluded Series A funding rounds of over $7.9 million to finance its growth across 20 markets in Africa, with interests in transiting into banking and financial services.

With this increasing focus on growth and innovation, African fintechs are poised to offer bigger challenges to traditional banking, with the revolutionary possibilities of technology for banking and financial services. This will also lead to consequent increases in funding for fintechs across Africa, as well as a deeper use of fintech services within the continent, following expanding mobile penetration in African countries.

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