Trends in African Fintech: What does 2022 Have in Store?

Fayomi Carr

At Flourish Ventures, we have been investing in financial services for well over 10 years now. Over that time, we’ve seen the landscape change dramatically. 

We have just over 60 investments across the world in every type of area from big data and analytics, challenger banks, consumer and SME lending, digitising money, insurtech, personal finance, infrastructure, payments as well as embedded finance. 

From this colloquial front row seat that we occupy as a player in the fintech, we have seen some trends and ideas that are starting to see emerge in the market. 

Over the course of the last few years, we have seen that finance is becoming second nature. When one thinks about the trajectory of financial services; traditionally it was something that was done at a bank.

 However, we have seen a much more reduced pool of financial transactions happening in banking halls due to the emergence of super apps that are guiding the way in where and how consumers can access financial services.

 One such example is a company like Tencent, which ties in the age-old Chinese custom of sending red envelopes of money on special occasions by embedding financial payments into a social messaging app, which is WeChat. 

This is one of the earliest examples of how financial services have been taken from the analogue world and have become digitised and embedded within other types of programmes.

If one looks at where financial services are today, one will see that big platforms are becoming influential distributors in select segments. Five of the biggest companies in the world: Amazon, Facebook, WeChat, Google and Alipay, can steer demand to any supplier and allow a lot of new product providers to proliferate. 

This has the potential to lower costs for customer acquisition for start-ups. Amazon for instance started out delivering books and is now the largest eCommerce player in the world. 

They are quite embedded in financial services to the extent that they have found a way to unbundle the bank through applications like Amazon Pay and Amazon Cash-In, Amazon Lending, Amazon Protect and Amazon Allowance.

 All of these services have been embedded within the platform to become a super app for financial services as much as it is not their core business.

Older fintechs did the trailblazing work of unbundling the banks. At a time during which banks offered up a full array of services to customers, the initial fintech startups targeted a single financial service and deliver a standalone offering that they thought was often superior to an equivalent offering given by a traditional universal bank.

 These fintechs would access different pools of information and would interact with the customer where they were clearly able to develop deliver loans more efficiently than a typical bank would. This has pushed players within the industry to rebundle to enhance customer viability. 

The first generation of apps struggled to monetise as stand-alone hook offerings and what we’ve seen is that the emerging winners are beginning to diversify their product lines and revenue streams.

 Many are actually introducing bank accounts as a means to go with the customer across multiple segments. Startups that will start with lending will also start to offer a bank account, a debit card and additional services. 

This is the next generation of what the fintech giants of the continent will look like. They will no longer be specialists in doing one service particularly well but they’ll actually be able to aggregate more services and own the customer.

The majority of people now have access to a variety of financial products not only through their bank but also through other applications that help them send money and access financial services. We’ve also seen that the dominant tech platforms are now the dominant distributors. 

Before, one would access financial services through their bank or through an agent but today that is happening through mobile devices and computers. Fintech startups are starting to bundle together banking services and this competition is making banks up their game. They are having to refine their own services in order to keep up with the rapid pace of fintech.  

We are entering the digitally native era in which tokens will become a native asset class. Transactions will increasingly occur in Web 3.0 spaces as well as blockchain spaces in the metaverse where the currencies in use will be tokens. 

This is a relatively new space in the continent but it is one that is seeing start-ups migrate to this network native area where crypto and blockchain technology start to define the way that consumers access financial services.

 *Carr is the Principal, Flourish Ventures and the talk was adapted from his presentation at the 2021 OuiTalkTech Africa Forum in Lagos.

Quote 

“This is the next generation of what the fintech giants of the continent will look like. They will no longer be specialists in doing one service particularly well but they’ll actually be able to aggregate more services and own the customer”