- According to the report, the COVID-19 pandemic has accelerated trends toward digitalization and created a fertile environment for new technology players.
- Financial-service revenues in Africa are also expected to grow by 10 per cent a year until 2025, with payments and wallets being the fastest-growing products.
A new report examining the state of the fintech industry in Africa has indicated that fintech revenues could reach eight times their current value by 2025.
The report published by McKinsey claims that Africa’s financial-services market could grow at about 10 per cent per annum, reaching about $230 billion in revenues by 2025 ($150 billion excluding South Africa, which is the largest and most mature market on the continent).
According to the report, the success of fintech companies in Africa is fueled by several trends, including increasing smartphone ownership, declining internet costs, expanded network coverage, and a young, fast-growing, and rapidly urbanizing population.
The report further noted that the COVID-19 pandemic has accelerated existing trends toward digitalization and created a fertile environment for new technology players, even as it caused significant hardship and disrupted lives and livelihoods across the continent.
“Our analysis shows that fintech players are delivering significant value to their customers. Their transactional solutions can be up to 80 per cent cheaper and interest on savings up to three times higher than those provided by traditional players, while the cost of remittances may be up to six times cheaper.
Taken together with an influx of funding and increasingly supportive regulatory frameworks, these factors could signify that African fintech markets are at the beginning of a period of exponential growth if, as expected, they follow the trajectory of more mature markets such as Vietnam, Indonesia, and India.”
On the emerging markets, the report noted that Ghana and francophone West Africa are expected to show the fastest growth, at 15 per cent and 13 per cent per annum, respectively, until 2025. Nigeria and Egypt follow, each with an expected growth rate of 12 per cent per annum over the same period.
The report concludes that growth opportunity in fintech is likely to be concentrated in 11 key markets: Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda, which together account for 70 per cent of Africa’s GDP and half of its population.