Africa, one of the fastest-growing mobile markets in the world, has experienced a digital revolution over time. Unlike most developed regions with broadband access, Africans depend heavily on mobile devices for internet access. This is facilitated by the availability of smartphone devices and low data costs.
The East African region, for instance, boasts a 100% mobile penetration rate, exceeding Africa’s average of 92% and approaching the global average of 111%. Kenya tops the chart with a penetration rate of 129%, followed by Tanzania at 113%.
These data make one thing clear: Africa’s fintech industry is also experiencing an upsurge. This is largely due to the penetration of mobile technology. With millions of people depending on mobile phones for their daily transactions, there is a harmony between mobile networks, digital payments, and financial services, all tapping into the new economic opportunities that exist in the region. This is more than just making the citizens comfortable (i.e., making transfers or any transaction from the comfort of their homes); it is about transforming the banking sector and making corporate finance more inclusive and accessible.
Many questions have popped up on how mobile technology is driving fintech growth. People are curious to know the relationship both sectors share. And to be honest, they are all valid questions.
To answer this, it is safe to say one of the most outstanding impacts of mobile technology in fintech is mobile money. M-Pesa in Kenya, MTN MoMo in West Africa, and Opay (Nigeria) have transformed how Africans send, receive and save money. According to GSMA, Africa accounts for 70% of the world’s $1 trillion mobile money value. Africa’s mobile money transactions have grown from 39% to $701.4 billion in 2021, highlighting the growth possibility of mobile banking in the coming years. USSD technology allows the uneducated population with basic mobile phones to perform transactions regardless of location.
How Mobile Penetration is Driving Fintech
Digital technology has provided easier access to financial services because of the advent of mobile technology. What this means is that the fintech industry has grown due to the adoption of various financial platforms across the continent. This shows that fintech is growing fast, and mobile phones are central to this revolution. With smartphones, people can easily send money, pay their bills, invest and even get loans without stepping into a bank.
Just a decade ago, you would need to visit a physical bank to access financial services. Today, mobile banking, like Kuda (Nigeria), lets users open accounts, transfer funds, and track spending from their phones. Gone are the days of waiting in line to make payments. With mobile wallets like Apple Pay, Google Pay, and Paystack, transactions worth millions happen in seconds.
Today, a business owner does not have to travel all the way to the bank to receive customer payment. They can easily make payments with their phones through platforms like Flutter Waves.
Plus, the rise of mobile fintech will not slow down anytime soon. With AI-powered chatbots, biometric security and apps combining multiple services, mobile phones are redefining how people access financial services. In short, mobile phones have made fintech more accessible, faster and inclusive, giving everyone financial power in the palm of their hands.
Furthermore, mobile phones have allowed millions of unbanked individuals to access digital transactions and transform how people interact with money. Now, people without access to traditional banking systems can save, invest, send and receive money effortlessly.
Mobile payments are even more convenient, and people no longer rely on physical cash or physical banking infrastructure to access their money. Businesses now use this trend to foster their organisation’s growth, incorporating mobile payment systems to streamline transactions and ensure smooth customer experiences.
Usually, traditional credit systems exclude individuals with little or no credit history, but mobile phones enable credit models based on individuals’ usage patterns and transaction history. In other words, fintech firms need to leverage this data to offer microloans, salary advances, and buy-now-pay-later options, which provide access to those who need it the most.
Here are some further reasons why the fintech sector keeps growing in Africa.
Smartphone penetration: As mentioned earlier, the widespread use of smartphones has given everyone access to financial technology. This is one key driver to fintech’s growth in Africa. Smartphones have become a necessity. They are cheap and accessible to users, enabling them to access mobile tools of their own volition. And like they say, payments must be made, and bills must be paid.
Global Funding: the fintech sector has enjoyed successful relationships with foreign investors from the US-based VC firms. Also, large firms like Visa and Fidelity have invested heavily in the Fintech industry. This vast funding has been one of the vital reasons for the growth of Fintech in Africa.
Sustainability of the business: Truthfully, Fintech has been impactful because it solves real-life problems. Whether it is payment problems, lending, or remittance, they have greatly relieved the African economy. For instance, Opay is one of the many reliable companies that are helping global businesses make payments easily.
STRATEGIES FOR FINTECH COMPANIES TO LEVERAGE MOBILE PENETRATION
There is a lot more for financial service providers and fintech startups if they can capitalise on Africa’s mobile boom with these strategies.
USSD and phone-friendly solutions: Despite the provision of smartphones, many Africans still use basic phones that cannot accommodate apps. So, fintech companies can offer USSD-based banking, savings and loan services to reach a broader audience.
Partnership with Telecom Companies: Telecommunication companies like MTN, Safaricom and Airtel control the mobile infrastructure. Therefore, fintech institutions can leverage and collaborate with telecom companies for mobile money integration and digital learning.
AI and big data for credit scoring: To create alternative scoring models, Fintechs can analyse how individuals use data, their SMS transactions, and their spending habits. This will enable financial institutions to serve more customers with less human involvement.
Mobile Wallet and App Development: Fintechs should develop apps that allow people to save, invest, and borrow in one app. For instance, Opay in Nigeria evolved from payments to offering loans, ride-hailing and food delivery.
Regulatory Compliance and Security: As mobile fintech grows, regulatory bodies like the Central Bank of Nigeria and Kenya’s CBK need to enforce laws that guide financial companies.
What comes Next?
There are still gaps that need to be filled even though fintech companies are booming.
Some of these challenges are.
- Cross-border payments across Africa are very exhausting.
- It has become a challenge for people to access local stock exchange markets.
- It is difficult to track credit scores, and loans are still difficult to access.
The financial sector could consider incorporating AI and blockchain into its operations. More Africans will adopt cryptocurrencies for cross-border payment and savings. Biometric authentication will improve KYC compliance and security in mobile fintech platforms. They can also integrate financial services tools into mobile apps and e-commerce platforms.
Nevertheless, it is established that Africa’s mobile penetration boom is reshaping fintech by providing new opportunities for fintech startups, banks, and financial service providers. While challenges persist, the world is heading towards a digital-first financial future.
Kelechi Anyikude is a Digital and Growth Marketing Expert who offers technology and digital solutions tailored for businesses and personal brands. He has a passion for technology and innovation.
You can connect with Kelechi about digital and growthmarketing and opportunities in scaling startups on LinkedIn (Kelechi Anyikude)