Africa is in the midst of a fintech transformation. Powered by venture capital and boosted by gains in mobile internet, hundreds of start-ups are connecting hundreds of millions of Africans to financial services.

This opportunity stems partially from an inability over time of the big local financial players to scale payment products to the masses. Still, that does not render Africa’s traditional banks powerless in the face of disruption by start-ups.

With the right mix of innovation and partnerships, Africa’s established commercial banks can gain an edge over VC backed ventures in the continent’s digital finance revolution.

Massive market

Funding that revolution is a mass mobilisation of venture investment toward Africa with the bulk of it—roughly 50% annually—going to fintech focused companies. VC spending on the continent rose from $400 million in 2015, reached $1 billion in 2018 and is on track to surpass $2 billion in 2021.

While those figures represent a day and a week in Silicon Valley, it makes Africa one of the fastest growing tech markets in the world by year-over-year VC growth.

The opportunity investors and founders are chasing is bringing large segments of the continent’s unbanked online. By several estimates—including The Global Findex Database—Africa is home to the largest percentage of the world’s unbanked population, with a sizable number of underbanked SMEs and consumers.

In that respect, the continent represents a reciprocal opportunity for savvy financial actors. Those who find product market fit can grow revenue streams from online payment products while driving financial inclusion for 1.2 billion people across 54 countries.

Start-ups Surge

The rise of the M-Pesa mobile-money service in Kenya provided a compelling use case for start-ups on the viability of phone-based apps to scale financial services in Africa. Launched by Kenyan telco Safaricom in 2007, the P2P payment product went on to acquire over 20 million users, process billions of transactions annually and helped earn Kenya one of the highest mobile-money penetration rates in the world.

While M-Pesa wasn’t a VC backed endeavour, investors and future founders took note. Over the last decade, hundreds of fintech start-ups have emerged in Africa’s key markets—namely those with large economies and populations—to launch app-based payments platforms. A number of those companies have built notable customer bases and more recently, several African payments companies have garnered global headlines.

Since going live in 2018, Pan-African digital payments venture Chipper Cash has scaled its business to 3 million users, 80,000 daily transactions and $100 million in monthly payment value.

In 2020, U.S. payment giant Stripe affirmed the potential of Africa’s digital finance market—and the value of start-ups to access it—when it acquired Nigerian fintech Paystack for a reported $200 million.

Additional global financial players, such as Visa and PayPal, have also pursued partnerships with young VC backed outfits to expand in Africa.

Start-ups are not the only players on the continent, however, when it comes to expanding online payments adoption. Established banks in Africa are also building on legacy infrastructure and client networks to offer novel digital finance services.

Fintech Collaboration

Many longstanding financial institutions in Africa are pursuing innovation—such as online wallets and digital payments services—to bank the unbanked and meet the preferences of an on-demand generation. It’s important that the continent’s established banks be a part of the innovation transformation occurring in Africa, given their longstanding client networks and more defined regulatory environment.

Africa’s banks shouldn’t make this journey alone, however. partnering with
fintech start-ups and technology partners can accelerate their route to success. We’re seeing a growing tally of case studies that demonstrate this.

In 2018, Ethiopia’s Dashen Bank and Addis Ababa based Fintech Moneta Technologies launched the Amole digital wallet, underpinned by CR2’s digital
banking platform. Since its launch, Amole has opened up the ability for millions of Ethiopians to conveniently transact a diverse range of payments and services entirely online.

Amole also expanded payment and money transfer options to include Person-to-Person (P2P), QR codes and card payments in Ethiopia—home to Africa’s seventh largest economy and second largest population. Today, with over 3 million customers registered on the platform, Amole is playing a significant role in moving Ethiopia towards a cashless society.

The Covid-19 crisis created an additional push toward digital finance in Africa, when governments in large economies—such as Nigeria, Kenya and South Africa—implemented measures to shift a greater volume of payment transactions away from cash toward contactless mobile options.

While conditions across Africa are ripe for digital finance adoption, there are signs some traditional banks are missing the moment. A recent report by research group Briter Bridges and the Catalyst Fund, illustrated that African payments start-ups and neo-banks are leading on new product launches and customer acquisition, on the back of raising capital at rapid rates.

Additional reporting by TechCabal, highlighted how product and service glitches in digital banking apps rolled out by two established Nigerian banks had led to a customer exodus. This was juxtaposed to VC backed fintech startup Kudabank, which had grown its customer base from 300,000 to 1.4 million in Nigeria—home to Africa’s largest economy and population of 200 million.

To meet the moment and hedge disruption, traditional African banks need to pursue just the right product innovation to grow (and not lose) digital finance market share to fintech ventures.

Trust Advantage

Traditional banks in Africa still hold a significant asset they can leverage in the continent’s fintech race: client trust. A case study is Nigeria, which in addition
to being Africa’s largest economy, now receives the greatest share of VC to start-ups.

A 2020 study and survey by McKinsey Consulting on fintech in the West African country found that 67% of banked customers in Nigeria “still…trust their bank more than fintech.” The research indicated that despite missteps by traditional banks in the country, there was still some hesitation by consumers to shift to fintech products. Some of this likely stems from consumer knowledge of longstanding Nigerian
financial regulations and deposit guarantees for traditional banks, compared to relatively new regulatory structures for mobile money.

The study concluded that customer adoption of fintech products in Nigeria is being driven primarily by access and convenience, but trust is critical and this gives the edge to trusted partners, i.e. banks. This all adds up to validate the role Africa’s traditional banks can play in the continent’s digital finance transformation. It’s clear, a flurry of startup driven
fintech activity is occurring in Africa right now across a continent ripe for digital transformation.

But this pivotal moment also presents opportunities for Africa’s banks. Longstanding financial institutions must respond with innovation services built through collaboration with enabling digital banking platform partners. Those banks that pair their customer trust advantage to novel innovation on the product and platform side stand to excel in Africa’s 21st century fintech landscape.

This article is a product of CR2 Market Insight and culled from



ITPulse is a wholly information technology communication (ICT) news website, with a special focus on the African continent. The website provides up-to-date biz-tech news, analysis and comprehensive and thorough insight into the continent's ICT terrain

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