Africa set for world’s fastest growing fintech region by 2030

By Alexander Chiejina

• Increasing smartphone adoption, expanded network coverage, including rapidly urbanising population fueling fintech growth.

Africa is expected to have the highest growth in the fintech sector globally between now and 2030, a recent analysis by Boston Consulting Group (BCG) and QED Investors has indicated. 

According to the report, Nigeria, South Africa, Kenya, and Egypt (known as the Big Four) are poised to be the primary markets for this expansion in Africa, with the sector expected to grow at a revenue Compound Annual expansion Rate (CAGR) of 32 percent through 2030.

Over 624 fintech companies exist in Africa, and they have raised over $12 billion in total capital. Some of the largest fintech firms on the continent are Flutterwave, Opay, Interswitch, Wave, MFS Africa, Jumo, MNT Halan, Tabby, and Wave Mobile Money. 

The success of fintech businesses is being driven by several trends, such as demographic changes, rising smartphone ownership, falling internet costs, expanding network coverage, as well as a young, fast-growing, and rapidly urbanising population. Fintech is the fastest-growing financial ecosystem in Africa. Finding and removing the points of friction that customers frequently experience with traditional financial institutions (FIs) has been a cornerstone to fintechs’ success along this journey. Numerous fintechs have provided high-quality, customer-focused digital experiences, opened access to underserved and unbanked customer segments, and created more affordable ways of doing business through more effective infrastructure and streamlined procedures.

By 2030, the worldwide fintech market is anticipated to have increased from $245 billion to $1.5 trillion. Currently, the industry accounts for two percent of the $12.5 trillion in worldwide financial services revenue. Nevertheless, it is anticipated to increase by up to seven percent with fintechs predicted to account for about 25 percent of all banking valuations globally by 2030, the report added.

“The payments space will likely continue to be a big focus for investors around the world. Open banking will drive increasingly integrated payments solutions,” Chris Hadorn, global leader, KPMG Payments, KPMG International, stated in the Pulse of Fintech – Payments report.

The analysis predicts that Asia-Pacific (APAC), with a projected CAGR of 27 percent, would surpass the United States of America and take the top spot in the global fintech market by 2030. Similarly, North America will continue to be a crucial fintech market and innovation engine, estimated to grow fourfold to $520 billion in 2030. North America now has the largest financial services business in the world, (a CAGR of 1%), with the US expected to contribute 32% of worldwide fintech revenue growth.

The third-largest financial institution industry in the world, which includes the UK and the EU, is predicted to experience significant expansion through 2030—more than five times over 2021. Like this, it is anticipated that Latin American markets, led by Brazil and Mexico, which have mature fintech ecosystems, will exhibit a revenue CAGR of 29 percent over the same time period.

The COVID-19 pandemic enhanced existing tendencies toward the digitalization of financial services and created a favourable atmosphere for new technology, even though fintechs were previously seen as mostly peripheral to the financial services sector. Fintechs have consequently entered the mainstream in some industries, including payments and transaction banking.

Fintechs have received more than $500 billion in capital during the last ten years. Since 2019, they have gotten almost 20 percent of all venture capital investments made worldwide, which has attracted a lot of money from investors outside the financial services industry, including generalist investors, investors in technology, private investors, and hedge funds. Such funding was occasionally stimulated by a speculative frenzy in sub-segments like cryptocurrency and its supporting technology.

Together, 2021 and 2022 saw more than $50 billion in fundraising for cryptocurrencies, or around 75 percent of total funding for cryptocurrencies up until 2022. With public valuations exceeding $1.3 trillion at its peak in 2021, fintechs made up about nine percent (9%) of all financial services valuations globally, which is a multiple of 20 times annual revenue compared to the historical, pre-2018.