Africa’s fintech sector is poised for exponential and rapid growth that will challenge existing financial services providers, despite the fact it is in the early stages of adoption compared to the rest of the world.
This is according to recent analysis by Frost & Sullivan, which says the fintech industry in Africa may experience a similar disruption to that seen in Australia, a country with financial services development comparable to South Africa.
The fintech sector in Australia is set to take US$10 billion in revenues away from the big Australian banks and contribute US$3 billion of new revenue from 2015 to 2020.
“The African continent has embraced mobile communications at a faster rate than other parts of the world, whilst also pioneering mobile technologies such as M-Pesa, through which almost 50 per cent of payments are being made by Kenyans,” said Wayne Houghton, director of growth implementation solutions for Africa at Frost & Sullivan.
“Africa’s under-developed banking infrastructure means that the fintech wave will more likely be an enabler of financial inclusion than the typical disruption seen in more developed markets. With at least 60 per cent of the adult population on the continent still without a bank account, Africa offers significant opportunity for the industry.”
An increase in the use of algorithm-based banking and robo-advice is set to significantly affect the financial planning market globally, and Frost & Sullivan believes it is only a matter of time before these trends find application in Africa.
Artificial intelligence (AI) systems are already being used in social media networks to manage the digital ecosystems of established financial institutions, enabling a more uniform consumer experience amongst diverse types of services.
“MyBucks and TagPay have already joined the growing list of international companies to have taken an interest in Africa’s FinTech industry, competing with local startups such as Kenya Fintech, SnapScan and Rainfin,” said Houghton.
“Existing South African financial services providers are beginning to appreciate the threat and the opportunity fintechs pose. Some have embraced open innovation as a way to explore these types of opportunities and understand how to make them relevant for the local market. In South Africa, we have already seen the emergence of Standard Bank’s WeChat Wallet. And predictions globally suggest that Apple Pay and Android Pay will be the next revolution in banking, with a number of bets being placed on the emergence of a ‘Facebook bank’.”