Part 1: A starters guide to the African Fintech Landscape
An overview of sectors, developments, and markets shaping Africa's Fintech scene.
Over the next weeks, we’re going to be exploring the state of the African Fintech landscape.
In today’s piece, we’re going to look at the different fintech sectors and companies that best illustrate its growing importance to African economies with a particular emphasis on innovation and uniqueness to the African context. Given the breadth and size of the fintech industry, we have decided to break the article down into three separate parts. Remember to check your mailbox in the near future.
Part 1: A starter’s guide to the African Fintech landscape
Part 2: Regulation and Investment - Regional Variation?
Part 3: What makes an African Fintech firm successful?
So what is fintech?
Fintech, in its loosest definition, is Financial Technology - an umbrella term used for computer programs and other technologies that support or enable banking and financial services. Simply put, fintech is using technology to improve, enhance and develop the efficiency of financial processes. fintech has had a huge impact in the financial sector and has resulted in ground-breaking changes to existing processes and systems.
One of the main reasons for the acceleration of fintech is almost universal access to mobile phones. With a mobile device, holders are now able to access fintech services such as contactless payments and mobile banking. In advanced economies, Apple Pay, Monzo, Revolut, Starling are common examples of this type of technology.
Our day-to-day use of fintech has been far-reaching in its influence and has resulted in a shift in the way individuals and corporations now manage and control their finances. To keep up with Fintech innovation numerous legacy banks, be they retail or investment, have adapted their business models to embrace financial technology.
Among 160 banks across 50 countries, surveyed by KPMG, 57% ranked the “need to embrace emerging financial technologies” as their most important strategic priority.
Whilst fintech has rendered transfer fees, withdrawal, and monthly service fees a thing of the past, its most notable advantage is to democratize access to financial services. fintech has meant that individuals no longer need to travel (in some parts of the world often long distances) to a Brick & Mortar bank to manage their finances. Of course, the caveat is that the penetration of fintech entirely depends upon the level of technological and digital infrastructure that exists.
We have identified 5 types of fintech that can best be used to help set the African fintech landscape, they are
Money
Insure
Wealth
Reg
Crowdfunding
These sectors have been selected as they offer strong case studies, have common trends regardless of borders, and have a large scope for growth. It should be noted that the sectors covered in this newsletter do not comprise the entirety of the fintech sector. Moreover, we are going to be using examples of firms to highlight these trends as well as spotlighting the unique solutions offered to Africa’s unique scenarios.
So what is behind Fintech’s growth in Africa?
Home to over 400 fintech start-ups ranging from wealth-tech, insurtech, lending, cryptocurrency, payment-transfers and solution providers Africa is growing with the main hubs being Kenya, Nigeria and South Africa.
The success of fintech has been spurred on by numerous factors including the existence of a young, largely unbanked, and financially excluded population. Therefore, due to an infrastructural deficit in regard to the reach of traditional financial institutions and retail banks fintech has grown at a rapid speed on the continent.
Statistics themselves are the best indicator of the potential of African fintech markets with 60% of Sub-Saharan Africa being under the age of 25 and having over 650,000,000 mobile phone users resulting in a huge expansion across the continent.
Fintech’s trajectory in Africa differs from other continents, as Africa has ‘leapfrogged’ previous, and existing models of financial development, a topic we covered in detail in our previous newsletter. A good illustration of ‘leapfrogging’, is the contrast between Africa’s fairly developed mobile payments sector, which handles $300 billion worth of transactions, and the dearth of physical bank locations and ATMs across the continent. Therefore whilst the majority of advanced economies are looking to move away from legacy systems, in Africa, this has had little effect due to a lack of such a system in the first place.
More advanced economies have certainly taken notice of Africa’s flourishing fintech sector, in particular Money-Transfer payments.
For example, Paystack, a Nigerian payments firm that focuses on modern online and offline payment transfers was purchased by US payments giant Stripe for $150m in October 2020. Paystack has become indicative of the wider growth of the African fintech market raising more than $600m in funding between 2014-19. Kenyan firm Equitel is another example of a payment platform in Africa that is pushing boundaries. Equitel offers a full array of banking services on mobile devices focusing on a locally driven strategy and was able to capture 22% of the mobile money market within 5 years. Undoubtedly, these gateways often empower the most disadvantages within African societies, as seen in Kenya with financial inclusion increasing from 26% in 2006 to 83% in 2021.
1. Mobile Payments 📲
Mobile payment applications and gateways are some of the most prevalent uses of fintech. Such applications allow users to carry out banking activities without physically visiting a bank. For example, companies like MPesa and Flutterwave allow customers to send and receive money through smartphones at a minimal transaction fee.
In Sub-Saharan Africa, mobile payments have grown massively in scope and serve as the best form of evidence that Africa is digitalizing. Over the last two decades, the rise of mobile phones has much furthered financial inclusion drastically within the continent. In fact, in some countries, mobile payments dwarf the existence of traditional legacy banking.
One such example being Kenya, which as of January 2021, had 66.6 million registered mobile money accounts compared to just 7.6 ATMs per 100,000 people.
Yet in many markets cash remains king, take Nigeria for example where 95% of all transactions are still via the traditional hard cash means. However, new innovations like mobile payments will help African economies transition to a more digitally advanced economy. Rwanda and Kenya, have certainly demonstrated the importance of this in their developmental blueprints, a trend that has been exacerbated by Covid-19.
Mobile payments account for almost 10% of Sub-Saharan Africa’s GDP. In Asia, often associated with high mobile usage, mobile payments account for 7% of the GDP. In addition, for every 100 Africans about 10 are active users a stark comparison to South Asia where the figure is around 2.6 active users.
Why are mobile payments doing so well in Africa?
When looking at the wider picture it is easy to see why mobile payments have taken off: Africa has a young population, new technology like smartphones are commonplace and necessity is the mother of innovation.
Nigeria, for example, has a population of over 200,000,000 of, which 50% are under the age of 35 meaning they have spent the entirety of their professional career within the digital age.
Nigeria isn't alone in these circumstances, Kenya as well is home to a youthful population with in excess of 60% of 52,000,000 Kenyans being under 35 with smartphone penetration by contract exceeding the population by around 12%. A situation that is corroborated by the sheer rise in financial inclusivity: currently 66% of Sub-Saharans yet of the same subset of the population 45% now have access to a mobile money account.
Mobile payments - variation across Africa?
However, there are huge differences in mobile payment usage across the continent:
The more mature mobile-payment markets, like Kenya and Tanzania, are home to a larger amount of mobile payment accounts than people with Kenya having a 116% coverage indicating that people are creating multiple accounts to outmaneuver limitations found with a particular country
In the maturing markets, which includes South Africa and Cote d’Ivoire for example there are between 100 to 1,000 accounts per 1,000 adults.
Lastly, there are the sleeping giants which consist of the likes of Nigeria, Egypt, and Morocco. Where regulation has dampened the growth of mobile payments or, like in Morocco’s case, there is already a high level of banking penetration.
There are numerous examples of the growth of African mobile payments across the continent, many of whom are now being heavily invested in by and adapted to foreign markets. A trend we can expect to continue as Africa pushes towards greater intra-African trade.
The case of Flutterwave:
Take Flutterwave for example, a giant of the money-transfer market within Africa and previously mentioned stripe acquiree. Founded in 2016 in Lagos, it is now one of only 4 African unicorns with commentators attributing a significant factor of its success to its intra-African approach. Flutterwave has gone from strength to strength and now operates in Nigeria, Ghana, South Africa, and seven other African countries. Notably, in May 2021 it agreed to a groundbreaking partnership with Ethiopian firm Amole expanding its market size by at least 115,000,000 and an 8,000,000 strong diaspora remittance market.
Recently, Flutterwave was pinpointed by Patrick Collison, the Co-founder of payments firm, Stripe, as an example of how foreign founders and companies now look to African firms as innovators in the fintech and payments space.
Flutterwave is by no means an exception to the rule in the money transfer game. Kuda, a competitor founded in 2019, currently has approximately 300,000 users processing transactions of over $500m per month. Kuda’s ambition and progress have recently been matched by a $10m investment by venture capital firm Target Global. This is a strong step for a firm whose aim is to “become the go-to bank not just for those living on the continent, but for the African diaspora.”
In East Africa a similar trend has taken place, penetration into the Kenyan market now stands at over 116%. This has resulted in the rapid growth of MPESA a mobile payment platform, which we covered in-depth in our last article. Dubbed “Africa’s most successful money service”, MPESA was founded in Kenya in 2007 and has since expanded its operations across East Africa as well as markets further afield including Egypt, the Democratic Republic of the Congo, Ghana, and Lesotho with a total customers base of 41.5m conducting 12bn transactions in 2019 alone.
The last example is the firm MamaMoney from South Africa. Launched in 2013, it counted 6 employees two years later before growing to 120 in 2017. The firm assists migrant workers in over 50 countries to send money home with fees as low as 0.1%. The pricing is based on transactions with the average fee being around 3%. The simplicity of the app and its dynamic pricing is resulting in it gaining traction across the world.
The South African company takes an interesting approach to remittance-tech and in particular in regards to its approach to remittance technology. Remittance-tech, a form of money transfer, is particularly interesting when taking into account that there are 2.9 million immigrants from other African countries working in South Africa alone with the remittance market for the Southern African Region in total reaching some $7bn.
The bottom line is that 400 million consumers in sub-Saharan Africa now use mobile payment banking systems to handle $300 billion worth of mobile money transactions. This begs the question how did this market get off the ground?
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2. Crowdfunding 🧑🏾🤝🧑🏾🧑🏾🤝🧑🏾🧑🏾🤝🧑🏾
Crowdfunding is another application of Fintech that is growing on the African continent.
Crowdfunding refers to the financing of a project or venture by raising capital from a large pool of people who tend to make small to modest contributions. Platforms like Kickstarter, GoFundMe, and Patreon are the result of developments in Fintech and are used regularly in Africa. The platforms allow entrepreneurs and early-stage businesses to raise funds globally, allowing startups to bypass geographical boundaries and reach international markets and investors.
But why is crowdfunding so large in Africa?
Despite relatively slow adoption, crowdfunding in Africa is often a mechanism with great potential for increasing access to finance for entrepreneurs in Africa. African crowdfunding models grew to a total of $182m in 2016 a 118% increase from the 2015 figure. There is, however, a degree of regional disparity with 41% of these activities taking place in West Africa, 28% in Southern Africa with the remaining 24% in Eastern Africa, excluding North Africa.
Crowdfunding in Africa’s potential can be attributed to 3 factors:
The continent’s leading position in terms of adopting digital finance and mobile money.
The relatively low penetration of traditional financial institutions, rendering access to loans and startup finance difficult.
Crowdfunding’s cultural fit with traditional funding practices across some African societies.
It is well known that digital financial solutions have expanded in reach across Africa. It is difficult to say that there is a particular focus for the unbanked and under-banked, in tandem with significantly lowering costs of such services and making it possible to serve the base of the pyramid in a more profitable way. A good example being the aforementioned mobile money platforms with there now being in excess of 140 service firms with a consumer base counting 10% of African Adults.
The low penetration level of traditional financial institutions in Africa economies has made it immensely challenging for small and micro businesses to flourish. In many ways crowdfunding has been an effort to fill this gap via the use of microcredit agencies and community institutions, also known as crowdfunding. Nowhere, is this clearer than in West Africa and in particular Nigeria.
Types of crowdfunding in Africa
Nigeria, being home to the largest economy and population is a good example to base the size of crowdfunding in Africa. A report released in 2017 by Crowdfunding expert, Suzanne Wissie-Huiskes titled "Crowdfunding Potentials for Nigeria” revealed that in Africa at least USD$83.3 Million was raised through Crowdfunding in 2015. A previously common source of capital for many Nigerian fintech startups and can be broken down into the following types:
1) Donation-based crowdfunding
2) Loan-based crowdfunding
3) Reward-based crowdfunding
4) Equity-based crowdfunding
In 2017, an estimated $7-8m were raised for fintech startups via donation crowdfunding with loan-based crowdfunding being the most popular accounting for 90% of the total figure. Noticeably, the P2P eco-system contributed heavily to this model with users registering with respective firms, like Fint, Kiakia, and Sureloan, to register for loans.
However, recent regulations look to change this field potentially for the worse. In Nigeria limits have been passed on the amount a firm can raise:
The maximum amount that a Medium Enterprise may raise will not exceed N100Million.
The maximum amount that a Small Enterprise may raise will not exceed N70 million.
The maximum amount that a Micro-Enterprise may raise will not exceed N50 million.
We can expect crowdfunding in Africa to continue over the next few years given to a predicted increase in the pool of entrepreneurs alongside the growth of technology. However, regulation, as always, is a step behind and so will play a key role in the future of this sector.
Crowdfunding has noticeable similarities with wealth tech and at times the two may interlink but there is however a difference.
3. Wealthtech 💰
Generally, WealthTech is any technology used in wealth management as well as the fintech companies that developed around them. Its goal is to provide innovative digital solutions for the investment and asset management industries. In the African context, this generally is incorporated into a form of crowdfunding.
The Global Wealthtech Rise
According to analytical research firm FinTech Global, wealthtech is one of the fastest-growing sectors within fintech over the last year. As highlighted by the increases in wealthech ventures surging to $4.6bn across 247 deals in 2018. This trend continuing into the first quarter of 2019 with wealthtech companies raising almost $2.5 billion.
Moreover, almost $17 billion has been raised by the global wealthtech sector between 2014-19, at a recorded compound AGR of 49.7 percent, with more than 1,300 wealthtech transactions taking place during this period with an average deal size ranging increasing from $4.8m to $18.6m from 2014-18. Fitting as the asset management sector as a whole for Africa has been growing exponentially over the last decade.
PwC South Africa estimated that traditional AuM drawn from 12 separate markets was set to rise by $1,098bn by the end of 2020. This is a huge increase from the 2008 figure of around $293bn representing an annual growth rate of 9.6%. This strong growth trend is being fuelled by mutual funds which in turn is being driven by a variety of factors including:
Economic growth and the rise in purchasing power. Nigeria is expected to see 7.6 million households enter the middle class by 2030 whilst Ghana can expect 1.6 million.
Delivery of cheaper products for the consumer
The adoption of new technology which will financially enfranchise more customers
As previously mentioned, Africa’s young population has proven that it can deliver pragmatic tech orientated solutions to problems. With these factors taken into account the potential for wealthtech growth at a consumer and firm-level is understandable. However, there are various factors that need to be considered when attempting to analyze the sector as a whole: the macroeconomic climate and investor trends
Instability is, unfortunately, the constant in some African markets and as a result, there is rarely macroeconomic stability. For example, the Nigerian stock market has crashed 4 times in the last 12 years, which combined with a reduction in the value of the Niara (due to global oil prices), and unpredictable government policy has made investing in Nigeria risky for both domestic and international investors alike.
The shaky foundations of having a commodities-based economy can often result in unfavorable investment conditions for the middle class
Further depressing the situation is that valuable assets on the Lagos Stock Exchange are often too expensive for the purchasing capacity of middle to lower-class investors, with the government requiring broker fees usually around the 2.5% mark as payment.
The average savings account in Nigeria returns about 1-4 percent per annum. With an inflation rate around the upper boundaries of 11 percent, Nigerians with savings accounts get a real return of about -7 percent per annum.
Given this brief outline, it's hardly surprising that millions of Nigerian consumers and investors alike are turning to wealth tech as a means to access investor markets. The best way to understand how is to break down the options available to Nigerians and how their rise could result in an adoption of a more inclusive policy.
Here are some examples of firms seeking to overcome the macroeconomic challenges aforementioned:
Chaka has built a technology that allows Nigerians with a bank account to create trading accounts. These accounts give access to purchase global blue chip and local Nigerian stocks. Chaka’s roadmap includes not just equities, but other investment products like mutual funds, fixed income products, and eventually, cryptocurrencies. However, Chaka has recently fell foul of regulation a topic we will look at in part 2.
Bamboo grants Nigerian users unrestricted access to over 3,000 stocks listed on the Nigerian and U.S. stock exchanges. This app curates top stocks, exchange-traded funds (ETFs), and American depositary receipts (ADRs) in the United States.
Rise allows users to make Dollar investments in U.S. real estate, stocks, and Eurobonds. The app allows users to create an investment plan, select an asset class and investment duration and fund the plan with as little as USD 10.00.
But what firms are targetting inclusivity?
Since launching in 2016, over 2,000,000 people have used PiggyVest to manage their wealth. The platform allows the consumer to put aside small amounts of money towards a particular target or locks the funds away for a specified amount of time. The consumers’ attraction to piggyvest, and the subsequent success of the firm, can be attributed to the following 5 factors:
The first is Piggybank which is the core savings aspect of Piggyvest, and it pays 10% per annum.
The second is Safelock which allows you to put aside money for a specified period and you cannot access the funds until the time has expired.
The third feature is Targets which helps you save towards a particular goal such as house rent.
The fourth is Flex Naira which is a flexible savings wallet that keeps the interest from all other features.
The fifth feature is which allows you to convert your savings to dollars. Market conditions determine the interest rates on this feature.
Shifting Trends: The growth of impact investing & the changing objectives of the Africa diaspora
From another perspective, as consumers globally become more attuned to the social impact of their purchases and their investment, and in many cases firms have responded in kind. The African market has been no exception with the expected funding gap for the continent to reach the UNSDGs by 2063 is around $130bn with private capital having to be a means of filling this gap.
“The same study noted that low-income countries, the majority of which are located in Africa, will require $342-355 billion annually to deliver on the SDGs, but will not meet these huge investment needs with their own domestic resources, and consequently there will be a funding gap of approximately US$130 -160 billion”
Such a scenario has shifted in part investments and wealth within the continent with many investors opting to invest in more ethical results-based investments. It is hard to estimate the total market value of impact investment with some claiming it to be as high as $502bn in 2019, a trend that is likely to continue in tandem with the need for $75trn worth of mechanical, agricultural, and infrastructural investment in Africa over the next decade.
New Solutions to Impact Investing:
WEKA investments, a UK-based marketplace, has created a platform that enables customers in the UK to invest in African start-ups and small businesses geared around impact investing. The company allows the consumer to choose their investment project before pooling it with other capital and launching the investment. Their successful pilot saw the investment of £10,000 of debt capital into two Ghanaian start-ups: Complete Farmer an Agritech firm and Nvoicia, which aims to help companies accelerate their cash-flow process. This model implemented by WEKA has been highly popular with the company having formed affiliations with the likes of Cambridge University, Google, and Clifford Chance.
Wealthtech has expanded the opportunity for millions of Africans to partake in investments, a feat previously deemed highly unlikely if it were not for the development of new technologies. Moreover, we can expect this sector to develop in tandem with a general increase in PPP and GDP growth across the continent.
The rapid ascent of Wealthtech has been mirrored by similar developments within the insurance field. Insurance is another example of an expanding market due to technological developments and economic growth, in the process rapidly changing the market environment for millions of Africans.
4. Insurtech 🔒
The term Insurtech refers to the application of technology to insurance models allowing companies to provide tailored insurance services and data security to clients. One way in how Insurtech has grown is by streamlining the insurance process through online claims filing and policy management. In the African context, a sizable proportion of Insurtech startups are in the microinsurance & digital brokerage sector. Many of these startups are also starting to include B2B data analytics, ancillary revenues & insurance add ons to small and medium enterprises (SMEs), and vertical SaaS solutions.
Why is Insurtech on the rise in Africa?
African economies tend to have the lowest insurance penetration globally. Even Nigeria, which is home to a vibrant and emerging Fintech scene, has an insurance penetration as low as 0.4%. For much of Africa a combination of factors including, low incomes and financial exclusion, has resulted in low insurance levels and market penetration. In fact in Africa, the value of insurance issuance (known as the gross written premium, or GWP) as a percentage of GDP, is half of the global average whilst premiums per capita are 11 times lower.
However, the future is not all bleak for the African insurance market with McKinsey estimating its value, in terms of gross written premiums, at $68bn making it the 8th largest in the world. Moreover, the lack of insurance penetration alongside strong pre-covid economic growth offers a strong scope for growth, in fact, the projected pre-covid growth for the African insurance market between 2020-25 was 7% per annum, second only to Latin America and slightly higher than Asia’s 6% over the same period. However, the current future market size is currently not evenly distributed across the continent and is heavily concentrated in certain countries as 91% of premiums is held in 10 countries with South Africa accounting for 70% alone.
Nor is the consumed product homogenous across the continent. Anglophone West Africa maintains an equilibrium between nonlife and life insurance products; whilst nonlife insurance policies dominate the market in Francophone Africa, with life insurance policies comprise the majority of South Africa’s insurance products.
The same discrepancies can be seen in predicted growth across In Nigeria, for example, commercial insurance has performed strongly, with oil and gas growing at 9 percent yearly and marine and aviation at 10 percent between 2014 and 2018. In Ghana, the Ghana Oil and Gas Insurance Pool (GOGIP) almost doubled from $25 million in 2016 to $48 million in 2019 and represents approximately 15 percent of total non-life premiums.
Yet insurance’s growth in Africa is not being driven by an increase in penetration but rather by economic growth and in the occurrences where penetration is taking place economic growth is taking place in tandem with structural reforms, including public-private partnerships and compulsory regulation. These reforms are some way off in Africa but they are taking place, the Nigerian Pension Reform Act of 2014 benefited both consumers and the insurance industry alike, leading to a 70 percent growth in the sale of pension products between 2012 and 2017.
Crucially, the digitalization of African economies, which is expected to take place at an ever fast pace, is expected to increase consumer demand and expectation and insurtechs have been quick to fill that void, a void which given the relatively unique challenges faced in Africa is best filled by African solutions.
However, the realities on the ground offer a different and unique approach to insurance within Africa,
African economies, be they urban or rural, are markedly different from those in the developed world, with cities, in particular, growing through a rapid period of growth. This has resulted in sectors that are hard to insure, in the urban these can be slums and in the rural, these can be small-hold farms. Thus there drivers behind the growth of the insurance market, and ergo insurtech, have been diverse requiring innovative solutions unique to the African context. To emphasize this diversity and uniqueness we are going to look at two examples.
Take Sugar, founded in 2018, which offers a revolutionary form of Insurtech focusing on South Africa’s numerous townships having noticed a gap in the market. Sugar provides insurance that covers the structure and contents of a home providing home assistance if needed, covering access to plumbers, electricians, and locksmiths. Given that 25.6% of South Africans live in irregular housing this represents a significant market size. This model can be applied across African states with a UN report in 2010 indicating that 61.7% of Sub-Saharan Africans were living in irregular housing. As urbanization increases across the continent, in particular in the likes of Angola (48.6%), the lack of urban planning and infrastructure can potentially change the insurance situation as we know it, making insurance a difficult change with insurtech firms like Sugar potentially offering a vibrant solution.
Another example is PULA, a Nairobi-based firm founded in 2015, which helps consumers access insurance with a particular emphasis on agricultural smallholder farmers and helping them navigate climate risks improve their farming practices and bolster their incomes over time through the use of digital products. The market discrepancies between large and small-scale farm premiums are considerable: in the U.S. or Europe where farms are typically large, an average insurance premium is $1,000. But in Africa, where smallholding or small-scale farms are the norms, the number stands at an average of $4.
Crucially, such developments mark an exciting and potentially game-changing development for the entirety of the agricultural sector. Agricultural insurance premiums in Africa represent less than 1% of the world’s total despite the continent possessing 17% of the world’s arable land. Often such disparities stems from the traditional method of calculating insurance through farm visits which is often impractical for these smallholder farmers. As a result, they are often neglected from financial protection against climate risks like floods, drought, and disease.
This success hasn't gone unnoticed having recently won the Insurer of the Year Awad at the 2020 African Insurance Awards and has fostered a fruitful partnership with the World Food Programme to insure 3.5 million farmers across 10 African countries.
All of the aforementioned fintech sectors have to abide by numerous regulations which are often subject to rapid change and in the African context can be notoriously restrictive. Yet once again the array of African entrepreneurs have developed a technological toolbox to address these issues, known as RegTech.
5. Regtech 🔗
Regtech (regulatory technology) focuses on the automation of compliance processes for financial institutions. It offers fast and cost-effective management of large amounts of data, including transaction records and compliance documents, such as corporate tax returns.
A primary purpose of implementing RegTech solutions is to mitigate regulatory risk, which grew in importance and commonality following the 2008 global financial crisis 2008. The sector has grown astronomically over the past decade as more sectors see the utility of implementing RegTech solutions; so much so that there was a 600% increase in global investment during a 5-year period from 2014 to 2019 and a 103% year on year increase in 2019 alone.
Why is regtech on the rise in Africa?
The opportunities for RegTech in Africa are beginning to grow in particular as African governments aim to expedite their digitalization strategies, as a result of Covid-19, as well as the implementation of the CCFTA which seeks to boost intra-African trade from 18-50% by 2035. To meet this target, the US$3+ trillion African Continental Free Trade Area (AfCFTA) will need to reduce the barriers of moving goods, capital, and people between countries; challenges that in part may be addressed through the use of RegTech solutions. Despite the salience of these recent events, however, the sector in Africa is still in its infancy and local RegTech experts and innovators are rare. However, it crucially must be borne in mind that as fintech further develops as well regulation and thus reg-tech.
Yet they are emerging, South African firm Intergreatme raised R32m in June 2019
Johannesburg-based startup Intergreatme, founded in 2016, serves as an identity management platform that provides users with control of their data across the sectors of financial services, telecommunications, and insurance.
A major section of the platform also allows and helps businesses comply with the various The platform also allows businesses to comply with the Financial Intelligence Centre Act (Fica), the Regulation of Interception of Communications and Provision of Communication-related Information Act (Rica), the National Credit Act regulation (NCA) and Protection of Personal Information (POPI) regulations. In June 2019 Intergreatme was able to raise in excess of R32-million via the crowdfunding platform Uprise, highlighting previous trends mentioned in the article.
Lastly, we are going to address the growth of regulation/RegTech to protect the consumer both from abuse and fraud, with the regulatory technological element coming into play due to the expansion of fintech. If, for example, 22.3m South Africans have access to smartphones in 2022, as predicted, then it is almost a certainty that this will lead to an increase in the exchange of both personal and company data at a level unprecedented in the continent’s history. This huge expected increase in APIs will almost certainly include the growing fintech sectors mentioned and with the CCFTA coming into place and eventually expanding the need for coherent and effective regulation will start to transcend borders making regulatory technology an integral part of a product as opposed to a marketing element.
There has been a response to these challenges, including those posed by data and APIs, with 26 countries on the continent adopting data laws similar to the EU’s GDPR with the most comprehensive being the South African POPIA which is due to be enforced from the 1st of July 2021. In effect, POPIA aims to empower citizens with enforceable rights over their personal information, in addition to establishing a minimum of eight requirements for data processing. Finally and most importantly, POPIA created a broad definition of personal information for end-user protection, as well as forming the SAIR as the lead enforcer of the law.
It will only be a matter of time till such practices expand and develop in economies across Africa with innovative firms edging to play a part in it.
In our next article, we going to go into depth analyzing the regulatory and policy framework that fintech faces across Africa, analyzing and comparing on a region by region basis. So for more information on the why, how and future of fintech in Africa make sure to subscribe and look out for the next article.