Which aspects do the Top African Fintech start-ups have in common? The last three years have been really prosperous for digital business, and the credit market was not an exception. In Africa, there has been an important growth registered for the fintechs, and yet, there is a lot to do. What is the secret of that success? Lets take a look at some common features of the best market players.
According to the last McKinsey report, only between 2020 and 2021, the number of start-ups from the tech world in the continent have tripled. The total number of that kind of companies reached 5,200 and nearly half of them are fintechs. Their presence is really significant, especially considering that their estimated revenues for 2020 represented near $4 billion to $6 billion. These numbers have nothing to envy when compared to other global market leaders.
All around the world, fintech companies appear as a new and flexible alternative to improve financial inclusion, particularly for that portion of the population which was excluded from the traditional banks industry. To understand the gravity of the situation, it is enough to know that, just 3 years ago, 1.7 billion adults from every country were unbanked and, of these, 400 million persons live in African countries.
So, even though Africa is a fertile territory for fintech expansion, they need to deal with certain obstacles such as a highly fragmented market, many cultural boundaries, complex and volatile regulations, or different levels of internet penetration.
Is not only about offering online loans…
To succeed in Africa some special strategic abilities are required
1. Value proposals must be adapted to the market characteristics: the first step is to study and get to comprehend the market and its customers needs, so the company can develop tech-based solutions which really deal with financial needs not covered by the local financial industry.
2. Achieve a quick development of a large base of active users: one of the advantages of the African market is its population of more than 1.3 billion people. Nevertheless, the customer acquisition process is not easy mainly because of lack of infrastructure and low customer purchasing power. Then, strategies for client acquisitions typically adopted by the African leader fintechs are usually related to pricing or physical network distribution.
3. Design concrete monetising strategies and apply them effectively: it is not enough to have a large customer base, it must be converted into reliable revenues. They can come either from a core activity, or by developing multiple monetisation strategies.
4. Manage low levels of revenue per customer: the logic is simple; Africa shows the lowest income population in the world, so services and operating models must be adapted to reduce costs and offer low-priced products.
5. Comprehend and deal with Africa’s offline market: taking Nigeria as an example, there are only four bank branches, 17 ATMs and 147 POS devices for every 100,000 people. This context needs to be taken into account when reaching clients offline using, for example, pre-existing infrastructure and networks.
6. Work actively with regulator players: financial activity will always be controlled by numerous regulations so, for the companies to build a sustainable business, it is important to work with the governments advance to an unified direction.
Watch this space for updates in the Technology category on Running Wolf’s Rant.
To stay in the loop, subscribe to our Newsletter.
Alternatively, feel free to check out our Featured Posts or scroll down to view posts related to this one.
If you live in South Africa and you're looking for a live music gig or music festival to attend, feel free to check The SA Gig Guide on our sister site (SA Music Zone).
You're also welcome to feed your brain some knowledge on our other sister site, (Interesting Facts).