Fintech’s support of the modernisation of the African continent took another stride forward last month with the formation of the Fintech Association of South Africa (Finasa). The new hub was launched at an event supported by the South African Reserve Bank and the Payments Association of South Africa.
It has already begun working in partnership with four other African fintech hubs in Kenya, Nigeria, Mauritius and Egypt; in addition, several other hubs on the African continent are pursuing the same goal. For example, the Nigeria-based Africa Fintech Network was launched in 2018 with a mission to “drive Africa-led fintech solutions and technologies by nurturing synergies within the ecosystem”.
The ecosystem is at the heart of each hub. Lavina Ramkissoon, chair of Finasa, says: “In terms of our vision, the first goal is very simple and that is to be the voice of the ecosystem. The second is around nurturing and empowering the next generation of fintech talents that need to come through. This definitely works around collaboration and partnerships.”
Foreign investment flourishes
Africa is widely seen as fertile ground for fintech start-ups, a view endorsed by a recent global fintech report from KPMG. It highlighted the fact that Nigeria-based payments firm OPay raised $400m in the second half of 2021, the largest sum raised in Africa to date.
Africa’s banking infrastructure is being helped by co-operation from developed countries. According to KPMG Nigeria, 2021 was a record year for fintech investment in Africa, and it predicts this momentum will only increase. Foreign investment deals recovered after a brief dip during the Covid-19 pandemic in 2020 with over $1.6bn invested across 153 deals, double the value of 2020 and representing a 50% growth in transaction numbers over the same period.
Africans stay mobile
One of the key drivers of the uptake of fintech in Africa is the growing availability and use of smartphones, which is expected to dramatically increase the use of online banking facilities. KPMG reports that the value of deals in the first quarter of last year was greater than for the whole of 2020. Meanwhile, in South Africa, the report says challenger banks have been launching with zero fees, which is a dramatic step in a market where fees had been universal even for basic banking.
Key services remain payments and transfers, particularly foreign remittances. According to KPMG, a large Zimbabwean population in South Africa would physically take cash home across the border, a practice made impossible by Covid-19 for a long period, fuelling a growth in people attempting money transfers with their mobile phones instead. That habit has now become much more commonplace.
Co-operation is key on the continent
A defining characteristic of Africa’s fintech hubs is working groups, one of which in Finasa focuses on impact and innovation. According to Ms Ramkissoon, this is where the association brings together like-minded individuals running start-ups and digital citizens to share information and tackle problems at zero cost.
She explains: “When partnering with the other fintech associations, we want to have a knowledge exchange that is going to encompass start-ups engaging with each other and giving them a more direct access to each other. [They can ask each other] how can we accelerate the growth and not repeat the similar sort of mistakes? Is there anything that we can actually do to circumvent a lot of these problems? We’re all fighting the same battle.”
We’re all fighting the same battle
The Fintech Association of Nigeria, formed in 2017, anticipates a strong liaison with Finasa of South Africa. The association’s chief operating officer Dr Babatunde Obrimah welcomes the formation of the new South African hub, with which he says it will work closely to share lessons on challenges.
The chief lesson, he says, is on funding, especially for early-stage fintechs. The second is a shortage of skills, heightened by migration to other countries such as Canada. But he remains focused on the positives. “One of the biggest achievements has been being able to work with [Nigeria’s] Securities and Exchange Commission to develop the fintech roadmap for the capital markets,” he says.
“We are also shortly going to start working with the insurance regulator to develop a fintech roadmap for the insurance sector that will be part of various frameworks and policies by other regulators and the central bank, [such as] the Nigerian Start-up Bill, which has just been passed into law by the National Assembly,” he adds.
Short on talent
While the future looks bright for fintech in Africa and it is expected to continue to grow at speed, there is a significant challenge: the availability of talent. Fintechs depend on software developers and engineers to create, maintain and develop their services and there are already acute shortages on the continent. But this is now being made worse by the remote working model created by the Covid-19 pandemic, with African developers taking up lucrative positions with employers based in the US, Europe and elsewhere.
Fintech partnerships are widely considered fundamental to financial inclusion for the citizens of Africa themselves. Challenges such as funding aside, the formation of Finasa last month should prove to be a major stride forward for the providers and users of banking facilities in Africa.
