How fintech is driving Africa's digital revolution

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Fintech can help African countries transform their economies. (Alistair Berg, Getty Images)
Fintech can help African countries transform their economies. (Alistair Berg, Getty Images)

The African continent has embraced the mobile fintech revolution. Not only is it home to some 300 million users—the highest number of accounts globally—but more than 500 African companies provide technology-enabled innovation in financial services. In addition, roughly 48% of active global mobile money users live in sub-Saharan Africa.

But more than enabling millions of customers to connect and make digital payments, fintech drives the African digital revolution in surprising ways.

Increasing productivity

Kenya-based Cellulant launched a mobile banking solution in 2007. A year later, they launched the first mobile banking app using US dollars. By 2017, its "digital payments ecosystem" embraced more than 500 mobile projects connecting almost 100 banks across 34 countries on the continent.

The company's Growth Enhancement Scheme (GES) e-wallet has had a massive impact on Nigeria's agricultural sector. It registered more than 14.5 million farmers, enabling them to access digital vouchers on their mobile phones that were then used to purchase seed and fertilisers. The immediate impact was to boost productivity—Cellulant claims on average, farmer income increased by more than 157%.

For small businesses, digital solutions, particularly in the B2B sector, rely on bespoke fixed fee structures that suit individual clients. This makes for better planning (and eliminates the fees and soft costs that come wrapped in the paper model). The benefits from a digital platform—such as billing, payments, automated processing, shortened payment cycles—lower the cost of doing business and speak to the digital economy's fundamentals: agility and efficiency, and eventually, growth.

Driving online commerce and education

The COVID-19 pandemic has thrown a spotlight on the inefficiencies of the global financial system, including paper-bound invoicing and delayed cheque payments, to name a few.  On the upside, this has enabled digital payments to come to the fore.

Naspers owned PayU operates in South Africa and 17 other high-growth markets across the globe. It enables communities that traditionally would not have access to financial services, access to online payments and credit while removing risk from merchants.  In South Africa, PayU Credit partners with some of the country's top credit providers, including Lulalend, which uses "tech and data science to fund SMEs with working capital loans in ways traditional lenders don't".

South Africa's conversion to online payment solutions—primarily due to the pandemic lockdown measures—has been enormous. According to PayU South Africa CEO Karen Nadasen, in 2020, it saw "significant growth in ecommerce, with more and more transactions being completed on mobile devices —up 35% on 2019 levels". Possibly the most exciting growth that mobile payments like PayU offer is the increase in spending on education, as people upskill themselves and prepare to be part of a changing workforce. According to PayU South Africa, there was a 67% year on year increase in spending in 2020—the average transaction was $404, compared to $136 in 2019.

Fostering vibrant entrepreneurial ecosystems

The fintech sector underpins the growth of the vibrant entrepreneurial tech ecosystem and can encourage the adoption of regulatory policies and financing options for economic growth. This, in turn, can further accelerate the shift towards a more robust and digitally-driven economy. By developing and sharing resources, cultivating a favourable regulatory climate for fintech early-stage businesses and providing support to help them scale up, African countries can transform their economies, boost early-stage tech and small businesses and help drive a continental digital revolution.

This post was sponsored and supplied by Naspers.

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