In a report released by Boston Consulting Group (BCG) and QED Investors, Africa has been identified as the frontrunner in the global fintech race, poised to experience unprecedented growth in revenue.
The report reveals that the fintech sector, currently accounting for a mere 2% of global financial services revenue, is projected to soar to an impressive $1.5 trillion annually by 2030. This substantial growth is set to constitute nearly 25% of all banking valuations worldwide.
While the largest market for fintech expansion is expected to be the Asia-Pacific (APAC) region, particularly emerging Asia encompassing China, India, and Southeast Asia, Africa is anticipated to undergo a significant transformation in its financial ecosystem. With 42% of all incremental revenues projected to come from Africa, the continent has the potential to leapfrog its way forward, unencumbered by the constraints of legacy infrastructure.
The report emphasizes that although cash still dominates transactions in Africa, fintech has the power to tackle the issue of financial access given that a considerable portion of the population remains underserved or entirely unbanked. The continent’s youthfulness and rapid growth, characterized by a median age of approximately 19 and a projected population increase of 1.2 billion people by 2050, further compound the need for enhanced financial inclusivity.
“We expect some degree of leapfrogging in technology, particularly when it comes to cashless payments. In Nigeria, for instance, 73% of adults own a smartphone, while credit card ownership stands at a mere 2%,” the report highlights. This indicates that mobile devices will likely be the primary means through which most Africans interact with the financial services sector, presenting vast opportunities for fintech players to excel in payment solutions and lending services.
The growth of the fintech industry in Africa has historically been driven by telecom-fintech players such as M-Pesa, developed by Safaricom, a subsidiary of Vodafone. These players have played a crucial role in fueling the sector’s expansion within the region. Moving forward, these telecom-fintech companies are expected to continue playing a significant role alongside grassroots fintech startups.
The report projects an impressive compound annual growth rate (CAGR) of 32% in fintech revenue until 2030, with key markets identified as South Africa, Nigeria, Egypt, and Kenya. The combination of a thriving fintech landscape and a population that increasingly demands accessible financial services positions Africa at the forefront of the global fintech revolution.