According to McKinsey research, the African fintech sector (excluding South Africa) is anticipated to grow by 10% yearly to reach $150 billion by 2025. More smartphone ownership, reduced internet costs, increased network coverage, and a young, quickly urbanizing population are all contributing to the development of fintech businesses in Africa. The COVID-19 pandemic has sped up the transition to digitalization and improved the climate for emerging technology players.
According to McKinsey’s report, fintech businesses offer their clients a lot of value. In comparison to what traditional players are offering, their transactional solutions can be up to 80% less expensive and their savings interest rates can be up to three times higher. Fintechs may potentially make remittances up to six times less expensive.
Fintech markets in Africa may be entering an exponential growth phase, like that witnessed in more developed markets like Vietnam, Indonesia, and India, given the availability of investment and favorable regulatory frameworks. Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda, which combined account for 70% of Africa’s GDP and half of its population, are the major markets for fintech growth, according to the research. The highest market share in these regions is now held by South Africa (around 40% of revenues), but until 2025, Ghana and francophone West Africa are predicted to expand at the quickest rates of 15% and 13% per year, respectively. Egypt and Nigeria are also anticipated to have rapid development at 12% annually over the same period.
The report indicated that depending on the degree of digital maturity, the potential in each market will change. There will probably be more innovation in sophisticated financial services in nations like South Africa and Nigeria that have better developed financial systems and digital infrastructure. Advances in fundamental financial services are expected to be seen in markets with expanding financial infrastructure and systems, like Egypt.