FinTech and the Future of Africa

By Michael Kent, co-founder and Chairman, Azimo

Africa is greater than ever and offers tremendous opportunities for businesses and entrepreneurs.


Seven of the world’s 20 fastest-growing economies are African, and the continent’s total GDP is forecast to double between 2015 and 2030.

Michael Kent, co-founder and Chairman at Azimo

By 2050, the continent will be home to a quarter of the world’s population. It already boasts the youngest and fastest growing workforce: 60 per cent of the population is under 25.


So how can we harness this potential and deliver long-term opportunities in Africa?

UK businesses, particularly FinTech firms, are in the best position to achieve this ambition, especially those that can capitalise on the ubiquity of mobile connectivity across Africa.


There are now over 700 million mobile subscribers in Africa and that number is expected to top 1 billion by 2023, according to a report by Ericsson.


Making the most of this user base can offer tremendous opportunities for fintech firms that use mobile wallets to reach the unbanked – which, according to the World Bank, accounts for 68% of Africa’s adult population.


Some nations have embraced mobile wallet innovation faster than others. Kenya, for example, is leading the way with over 90% of the country using this payment method via M-Pesa, arguably the most successful and impactful FinTech innovation in the world.


In contrast, Nigeria lags behind adoption, despite having the largest mobile market in Africa. There are now 135 million wireless connections yet only 6% of Nigerians use their mobile phones to make financial transactions.


Bringing digital money transfer into the mainstream by tapping into Nigeria and other “mobile-first” and nearly “mobile-only” markets in the regions – such as South Africa, Uganda and Angola, can help to close the poverty gap and drive financial inclusion – a problem that traditional banks have yet to solve.


The barriers to financial inclusion through traditional banking are variable and complex. Among them is the inability of Africa’s central banks to keep up with financial innovations that can reach the most vulnerable people. Regulatory reform is also required – and should extend to the telecommunications sector, which has become a vital financial services provider to millions of people.


Wide distrust in the banking system and fears of financial fraud are also major factors, as well as the extortionate charges that customers must pay for everyday banking services. In big African economies like South Africa, financial services fees can be up to four times higher than in rich nations such as Germany or Australia – making it impossible for the poorest in the country to join the formal economy. As a result, more than 60% of all purchases in South Africa are still paid for in cash.

In an ideal world banks would drop their fees but this is difficult to achieve, due to the high operating cost associated with doing busies in fragmented markets and the on-going need to spend on IT security to minimise the threat of cybercrime. All of these expenditures are passed on to the consumer.


The only tangible solution to the unbanked crisis is through mobile FinTech innovations, which are succeeding in providing the basic services that banks fail to deliver.


For example, M-Pesa allows anyone with a smartphone to deposit, withdraw or transfer money and to pay for goods and services. Azimo has a strong partnership with M-Pesa, with 96 per cent of our transfers to Kenya arriving in M-Pesa mobile wallets.


Remittances sent home from abroad in this way are helping million of people to feed families, educate children, and pay for medical care. In Nigeria, remittances totalled $22bn in 2017 – more than the country’s oil revenues.


Receiving a money transfer is often the first regular financial transaction that many people in sub-Saharan Africa will make.


Once people are part of a financial system, they can gain access to other life saving services, such as: borrowing to invest in housing or to start a business, insurance against crop failure, and saving for education or old age.


The UK has biggest and most innovative FinTech sector in the world, and leads in the area of mobile payments. Africa needs this innovation and expertise – and UK FinTech needs Africa to scale and grow.


As the continent continues to embrace technology and improve their digital infrastructure, there will be significant opportunities for UK FinTech firms to compete in the region with banks and local FinTech competitors.


This will lead to greater choice and better services for customers – at prices that are inclusive and fair. And with more people gaining access to financial services, there will be greater levels of prosperity in Africa, which will enable the continent to compete effectively on a global scale.

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