Africa’s smartphone boom is set to create a $40bn fintech market – Report

The report by Mastercard has shown that smartphone usage will continue to play a big role in the adoption of fintech, especially in Nigeria and other Sub-Saharan African countries. By 2025, it’s expected that smartphone adoption will go up to 75% in the region, which will, in turn, cause African fintech revenue growth to reach around $40 billion. 

The report predicts that most of the 400 million new mobile subscribers expected globally by 2025 will come from Africa. Nigeria, in particular, is expected to lead the way, with active subscriptions rising to 211.8 million by September this year.

According to Mastercard’s “The Future of Fintech: Rapid Growth Attracts Smart Capital” report, Nigeria is one of the leading fintech hubs in the Middle East and Africa. In 2021, Nigerian startups received a third of all fintech funding deployed in the region. 71% of the venture capital invested in Nigeria went into fintech.

“Fintech startups in Africa grew from 311 in 2019 to 564 in 2021, with South Africa, Nigeria, and Kenya emerging as key hubs. The sector accounted for 27% of the record-high number of deals closed and 61% of the USD 2.7 billion deployed across Africa in 2021. The space was characterised by mega sales of more than USD 100 million each.

“In the Sub-Saharan Africa (SSA) region, fintech startups recorded 894% year-on-year growth in funding in 2021 – the second highest in the Middle East, Africa, and Pakistan region during the period, and the highest yearly growth rate over the past five years. SSA received USD 1.56 billion in funding, the highest in the region by a wide margin.”

Despite smartphones having the most impact on fintech adoption in Africa, Mastercard said removing the affordability barrier will increase adoption rates even more. Fintech needs smartphones to reach its full potential in Africa. Making smartphones more affordable can encourage even more people to adopt fintech and reap its many benefits.

“With efforts to remove the affordability barrier, smartphone adoption is likely to grow to 75% by 2025. In Africa, widespread broadband and smartphone penetration fill the infrastructure gap to enable digital fintech services. While cash dominates, newer e-payment solutions by banks and non-bank companies are likely to grow. Africa’s domestic e-payments market is projected to see 20% revenue growth per year (compared to 7% globally), reaching around USD 40 billion by 2025,” the report added.

Africa is seeing a surge in fintech growth, with Mastercard’s Senior Vice President for Digital Partners and Enablers, Eastern Europe, Middle East and Africa, Ngozi Megwa, commenting on the recent report. Megwa said:

“It is encouraging to witness the growth of the fintech landscape across the region, creating multiple opportunities for start-ups, scale-ups, enablers, and micro, small and medium enterprises (MSMEs) to bring more people into the digital fold. At Mastercard, we are helping to fuel fintech acceleration by offering access to our expertise, network, and technology. We provide a portfolio of technology solutions, APIs, developer tools, partner networks, startup programs, and a community experience for every fintech company and payments developer, helping turn their bold ideas into reality.”  

Other key highlights of fintech companies include their wide-ranging solutions for consumers, and micro and small merchants, which are made possible through partnerships with banks, mobile network operators (MNOs), and other stakeholders.

Regulators across multiple African countries have adopted a collaborative approach to enable the introduction of new solutions by fintech companies. 

The growth in the number of fintech companies in Africa reflects global fintech funding, which jumped to a new record of US$131.5 billion in 2021. The number of fintech unicorns reached 235, with 34 alone born in Q4-2021. 

Fintech companies now represent more than 20% of total tech unicorn value, compared to 15% in the previous year. This increase in funding and growth shows that the fintech sector is booming and that Africa is at the forefront of this industry.

The role of MSMEs has been crucial to the fintech industry’s growth on the demand side. MSMEs use fintech and e-commerce solutions to scale their businesses, source products and reach new markets.