March 2, 2024

Fintech innovators are bridging the gap for unbanked Africans

growth of mobile payments in Africagrowth of mobile payments in Africa

The wave of fintech companies, or those involved in financial technology, has been rapidly growing in Africa in recent years, offering a wide range of new and innovative financial services to consumers and businesses across the continent.

From mobile banking to peer-to-peer lending and digital wallets, fintech companies are helping to bridge the gap between Africa’s underbanked population and the formal financial sector, while also making it easier and more affordable for people to access the financial services they need.

Key drivers of growth

One of the key drivers of fintech growth in Africa is the rapid expansion of mobile technology on the continent. With mobile phone penetration rates now exceeding 80% in many African countries, fintech companies have been able to leverage the ubiquity of mobile devices to provide new and innovative financial services that were previously unavailable to many people. 

For example, mobile banking apps like M-Pesa in Kenya and EcoCash in Zimbabwe have made it possible for people to access banking services and transfer money even in areas where traditional banks are scarce. These services have been particularly beneficial for those who are in rural areas, who often face significant barriers to accessing traditional financial services.

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Mobile-first transactions

Another significant driver of fintech growth in the region is the increasing demand for digital financial services among consumers and businesses. With more and more people turning to their mobile phones and other digital devices to access the internet and conduct transactions, fintech companies are well positioned to meet this demand by providing digital financial services that are fast, convenient, and secure. For example, digital wallets like Paypal, Paytm, and M-Pesa allow people to store and transfer money digitally, making it easier and more convenient for them to make payments, send money to friends and family, and manage their finances.

Fintech companies are also playing an important role in helping to bridge the gap between Africa’s informal and formal financial sectors. Many people in Africa rely on informal financial services like informal savings clubs, money lenders, and informal insurance providers to meet their financial needs. 

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Enabling peer-to-peer transactions

However, these services can be risky and expensive, and often lack the transparency and oversight of formal financial services. Fintech companies are helping to bridge this gap by providing more affordable and transparent financial services that are accessible to a wider range of people. 

For example, P2P lending platforms are enabling people to access loans at more affordable rates than traditional money lenders, while platforms like BitPesa and Remit.ng are making it easier and more affordable for people to send money across borders.

Driving economic growth and development

Fintech companies are also providing new and innovative financial services that are helping to drive economic growth and development across Africa. For example, platforms like BitPesa and BitX are helping to increase access to international markets and promote trade by providing digital currency exchange services and cross-border payments. 

Additionally, lending platforms are helping to drive financial inclusion by providing credit to underserved individuals and small businesses, enabling them to invest in new opportunities and grow their businesses.

Another interesting fintech growth in Africa is M-PESA which is a mobile phone-based money transfer and microfinancing service, launched in 2007 by Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania. It has since expanded to include a wider range of services such as bill payments and savings. M-PESA is now used by over 30 million customers in Kenya alone, and is credited with increasing access to financial services for millions of people, particularly in rural areas where traditional banking services are scarce.

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The Nigerian fintech company, Paga, provides a mobile money platform that enables customers to make payments, transfer money, and access other financial services using their mobile devices. Since its launch in 2009, Paga has become one of the leading fintech companies in Nigeria, serving over 15 million customers and helping to drive financial inclusion across the country.

What’s next?

Fintech companies are playing an increasingly important role in shaping the financial landscape of Africa, offering a wide range of new and innovative financial services that are helping to bridge the gap between Africa’s underbanked population and the formal financial sector. 

With the continued growth of mobile technology and the increasing demand for digital financial services, fintech companies are poised to continue driving economic growth and development across the continent in the years to come.

By Austin Waga

Austin Waga is a Germany-based finance expert with 16 years of experience developing innovative financial solutions for clients across Africa. They are known for their forward-thinking leadership, ability to guide high-performing teams, and track record of delivering on budgeted bottom-line revenue.

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