While African fintech raised over $1.3billion in 2021 alone, the industry in the region is not without its challenges.
The success of Africa’s fastest-growing start-up industry has been driven by a range of trends. Increasing smartphone ownership, reduced internet costs, expanded network coverage, and a young, fast-growing population have all helped grow African fintech.
The African fintech industry’s continuing success has the potential to quickly advance Africa’s global competitiveness; with an increasing amount of fintech services exported globally.
Despite the success, it has become clear that the industry is not without its obstacles. Regulatory differences between countries on the continent are slowing down the expansion of financial inclusion across Africa. Calls for a pan-African regulatory body that can define policies have been also been heard. However, a body such as this does not appear particularly close to being created.
According to McKinsey & Company‘s ‘The future of payments in Africa‘, Africa’s domestic e-payments market is expected to see revenues grow by approximately 20 per cent per year. By 2025, the market is expected to reach around $40billion.
Despite the difficulties, Africa has made moves to ease payment constraints. The ‘PanAfrican Payment and Settlement System‘ development by the African Continental Free Trade Area has made it easier to make payments across 50 countries and their 40 currencies.
Fintechs providing solutions to the regulatory problems
The Global fintech Index of 2020, which lists the top 100 fintech ecosystems, contains four sub-Saharan African cities. The cities leading the sector are Johannesburg, Nairobi, Lagos and Cape Town. The index highlighted that most of the continent’s fintech start-up funding goes to these cities.
South Africa-based Bizzamm, a business processing service provider, aims to offer a tool that empowers its clients in the region to automate their business processes. Tools such as this support African fintechs in navigating the many regulatory requirements, particularly for cross-border payments.
Regulations for the gathering and storing of client information, and how information is processed are gradually becoming more strong. As they encompass more and become more enforceable worldwide, African fintechs must ensure they are compliant. Solutions by companies like Bizzamm enable businesses to become compliant more easily in an affordable way.
Recently, the South Africa Reserve Bank (SARB) looked to modernise payment systems in the region via the adoption of a new international standard. Reasons cited for adopting the standard include increased regulation, ever-evolving cybersecurity threats and customer demands for faster, more cost-effective payments.
It appears organisations of all levels look to ease the road to regulation. While it may seem a long way away, work is being done to position African fintech in good stead. Although progress is being made, serious advancements are required for its regulatory landscape to ensure Africa’s fintech innovations are not slowed.
Source: thefintechtimes.com