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The Fintech (Financial Technology) Phenomenon in Africa 2021

September 15, 2021 | Published by |

Fintech is a phenomenon that has swept the world in recent years. It is an industry that seeks to solve many issues faced in traditional banking and financial services, especially for less-developed countries.

The current Fintech growth rate in Africa is starting to show no signs of slowing down. The penetration rate of smartphones is on the rise, and with this comes increased access to financial services via Fintechs.

The number of Fintech customers in Africa is growing faster than the rest of the world. By the end of 2021, Africa’s fintech market is projected to be worth $14 billion, with half its customer base being under 35 years old. This new generation of African consumers is tech-savvy and has an increasing appetite for better offerings from startups. Many of these young Africans are also ‘digital natives’ who have grown up in a time when digital technologies are flourishing. However, according to a recent report by McKinsey & Company, although Africa has been experiencing rapid uptake of mobile phones and broadband connections, its banking infrastructure lags.

The World Bank’s Global Financial Inclusion database indicates that less than 40% of adults in Sub-Saharan Africa (SSA) own a bank account, and only about 40% of adults in SSA have access to formal non-cash payments. With such low penetration levels compared to other regions, it is no wonder that fintech startups are making huge strides in providing financial services and products for Africans.

Fintech growth in Africa can be attributed to several factors:

  • Increasingly available internet infrastructure
  • Evolved mobile money offerings
  • A growing population of young adults

In addition, Fintech growth has been accelerating as more startups are formed to address the unique financial needs of those living in Africa. With greater use of mobile money and banking services, Fintechs in Africa are uniquely positioned to take advantage of the growing market.

Some of the main challenges Fintech is meant to address are:

Poor access to finance

With the growth in agriculture and related industries, Africa has a growing middle class with disposable income who need access to financial services such as loans and insurance products. Access, however, is hampered due to weak infrastructure and because traditional banks in Africa often lack product sophistication for this market.

Rising costs of transactions

The challenge here is that traditional banks typically charge high fees for service, especially online. These fees are passed on to the customer through higher transaction costs. This drives customers away from the formal banking system to informal methods such as informal money transfer systems and physical cash.

High rate of taxation and regulatory compliance issues

As Fintech companies expand their services globally, different tax regimes apply to different countries. This leads to complex situations where some customers are taxed at higher rates than others – resulting in customer frustration. Some Fintech companies have developed products designed to circumvent compliance issues, bearing the brunt of risk for the customer.


While technology has advanced tremendously in recent years, it is still relatively early days for Fintech, and it faces many challenges before reaching maturity.

The financial services industry was not designed for emerging markets; rather, it was built with high net-worth customers in mind. The industry has been slow to respond to the challenges faced by emerging markets which are different from those of developed countries.

Fintech companies have moved quickly to fill this gap with innovative financial products, but many are still exploring how best to serve these markets or have failed altogether because of weak infrastructure, and uncertain policies.

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