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Our Blog
Nov 29
2016

Fintech Innovations in Africa: Beyond Wallets

By zealousys

Sawubona SA!

Let’s have a look at a few facts:-

  1. 80% of adult African population lacks access to banking services.
  2. Cash is still the king for the majority of the African populace
  3. Most of the fintech startups are restricted to their home countries.

[Courtesy: CBInsights]

VC Investment Trends Worldwide: Fintech

Focus of fintech investments ==> Unbundle and Disrupt the bank

In 2015, Fintech investments amounted to $14 billion USD worldwide

Africa attracted 30 % of these investments

[Courtesy: Disrupt Africa]

What does this mean for the fintech companies in Africa?

The unbanked population and the growing African economies present an opportunity for the fintech companies. For this reason, offering financial products and services in new and innovative ways can set an example of  success, where traditional banking services have failed.

For example, Let’s go back to the Mobile Money revolution in Kenya. Setting up an ATM and traditional banking services was expensive. As a result, M-Pesa was born. Rest is history. A clear citation of how the fintech disrupted the payments industry.

 Types of Fintech Startups in Africa

Mobile Wallets

While mobile wallets have proved to be revolutionary in sub-Saharan Africa, the penetration is low in other parts such as Nigeria and South Africa. As per a 2015 study by GSMa.com, there are currently 222.8 million mobile wallet users in Africa.  However, the  number of new regions (Zambia and Malawi) are on the rise.

Challenges

  1. Financial inclusion of the unbanked through mobile payments platform
  2. Mobile money agents (retailers, convenience stores) find small transactions unprofitable
  3. Increasing trust among active users

Payments

paypal-to-m-pesa

The payments industry is a progression from mobile money. As a result, The areas of innovation where fintech startups can work on are:-

  • Interoperability of mobile money
    1. Cross-wallet transactions within the country
    2. Cross-border transactions
  • Costly remittances to Africa (e.g. integration of m-Pesa with Paypal)
  • Bitcoin eco-system
  • Digital payments support at POS

mergims-app-screenshot

“The way to pay in Africa, Mergims allows relatives abroad to purchase airtime, electricity and other goods for their family at home instead of transferring cash”

 

Core Banking Services

Lack of data on credit-worthiness is a major issue of this cash-dependent and largely offline continent. This makes it difficult for sanctioning loans and credit to the population. To address this issue, two emerging start-ups, Branch, and GetBucks are redefining the algorithm of credit scores.

In other words, these mobile apps use machine learning algorithms to process thousands of data points collected by the loan applicants’ permission. Finally, applicants are then served Tailored loan products. Furthermore, these data points usually include the following:-

Tailored-Loan-Products

Wealth Management

Throughout Africa, since ancient times wealth has been always associated with livestock. Based on such traditional beliefs, fintech companies are coming up with peculiar wealth management offerings. For instance, Live Stock Wealth, a crowd farming company from South Africa has a unique proposition:-

Logo-of-Live-Stock-Wealth

-You invest in a cow that is at least three months pregnant using their website, mobile App or text platforms

-Additionally, The website and mobile App enables you to manage your cow remotely and to give it a name

-Get a return on your investment by selling the offspring

The Takeaway

To sum up, the startups in the fintech space have only begun. Eventually, the growing African economy will be a world-stage for the evolution of financial technology. After all, Fintech here has leapfrogged the traditional phase of banking services.

To be a part of the revolution, connect with us at Info@Zealousys.com

 

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