Between 2011 and 2016, 700 million people signed up for a bank account globally. In 2016, the World Bank (WB) set a goal of securing universal access to formal financial services by 2020. At the time, about two billion worldwide remain unbanked. As the World Bank sought to expand worldwide financial inclusion, much of its concentration was on Sub-Saharan Africa. Banking without a bank is a key aspect of financial inclusion that brings unique opportunity for mobile fintech companies in Africa.
Africa’s banking sector experienced a number of difficulties not too long ago, including inadequate infrastructure and a lack of education. According to World Bank figures, almost 66% of people in Sub-Saharan Africa do not have access to a bank account. Major obstacles include being far from the bank, having few branches, having to wait for extended periods of time, and having expensive borrowing costs.
Without accounts, people are forced to conduct transactions that are frequently dangerous, wasteful, and inconvenient. Accounts are the first point of entry into the formal financial system. Parents waste time standing in line to hand over cash for their children’s school fees. Entrepreneurs seek out usurious-rate loans. Savings are placed under the mattress.
Fintech has been shown to increase financial inclusion. Can it, however, close the financial inclusion discrepancies in account ownership between Africa and the rest of the world? The evidence is conflicting, but thus far, Africans have benefit from it. There are significant disparities between men and women, rich and poor, young and old, among persons with commercial bank accounts. However, when it comes to Africans using Fintechs, there are no such gaps.
Fintechs have come a long way in the region as a whole, having received a lion’s share of funding for technology over the years. There are, however, still some unexplored areas.
Laugh at the Hype
From 2017 to 2021, the average rate of account ownership in developing economies increased by 8% points, from 63% to 71%. In Sub-Saharan Africa, this was largely due to the adoption of mobile money.
Data from the Global Findex 2021 survey finds growth in the use of accounts to make digital payments as well as to save, borrow, and engage in the broader financial ecosystem. Payments appear to be a catalyst for other financial services. The majority of adults who received a digital payment also made a digital payment. They were also more likely than non-recipients to save, borrow, and store money.
Slightly more than half of adults in developing economies could access emergency money within 30 days without much difficulty. In addition to the findings on resilience, Findex report captured data on the degree of financial stress people feel about common expenses
Despite these progress, millions of Africans remain unbanked. Lack digital assets including power and internet has contributed massively to this. More so, there are still not enough Fintechs in Africa. According to a specialist research and analysis performed by BPC and Fincog, 57% of Africans do not hold any kind of bank account, including mobile money or digital accounts.
Fintech has continued to take a sizable portion of investments in companies across Africa. 50% of the entire money raised by African tech startups went to this area in just 2021. Although these are very strong feet, statistics will bring us back to earth. With 330 million people, the USA boasts more than 8,775 fintech startups. UK with 68 million people, has more than 2,500 Fintech startup. With 1.2 billion people, Africa only has 573 fintech companies. Just laugh as much as you want to.
Not Enough Fintechs
Since Fintechs do more than payments and transfers, there’s no telling the crucial role they play across all individuals and sectors of the economy. Fintechs cut across – Paytech (payments and transfers), Lendtech (loans and overdraft), Banktech (digital and neo banks), Insurtech, Blockchain and Cryptocurrency. Several other fintech verticals also deal with investing, trading and personal finance management, and we still don’t have enough of these in Africa. Insurtechs just like the insurance sector of the region is still crawling.
The difficulties in the continent, which is still characterized by a less developed financial infrastructure and a large unbanked population, have not yet been fully addressed by fintech, despite the buzz. Ensuring that more Africans have access to financial services that can spur economic progress, the challenge of financial inclusion is still unsolved. It is riddled with many unsolved problems that require a great lot of innovation and technology.
In order for people and businesses to participate more actively in the economy, Africa still needs a well-functioning infrastructure. Beyond just payment, fintech develops fresh, cutting-edge solutions for organizations and individuals. In subverticals like digital loans, crowdfunding, financial management, and investment management, there is a demand for more participants.
Cross-border payment is still a massive challenge for businesses across the continent, with more than 70% of the over 150 million businesses still lacking access to cross-border payments. We need not a soothsayer to explain that there’s not enough Fintechs for Africans.
McKinsey analysis estimates that Africa’s financial-services market could grow at about 10% per annum, reaching about $230 billion in revenues by 2025. Africans will require more fintech services to carryout daily financial tasks.