The African Fintech scene - Merging with the global mainstream

The African fintech scene is growing at pace, with radical and innovative offerings that increasingly place the continent in the global mainstream.
Think of Africa. Big isn’t it? Thinking of Africa may bring to mind many stereotypes, depending on your own culture and age. Do you think of terrible conflicts, and the need for charitable intervention? Do you think of vibrant transformation and modernization?
About 16% of the world’s population lives in Africa, occupying 20% of the earth’s land area. That’s more than China, Canada and the USA put together. The African continent comprises 54 countries, with up to 3,000 languages in use. Yes, Africa is big.
Africa is also young, with 60% of the population under 25 years of age. Compare that with the European Union’s youth profile of just 20%. So when considering Africa, put aside the stereotypes, and think of youth driving transformation, enabled by business modernization which is rapidly merging the continent into the global mainstream.

Helping the unwaged and unbanked

Young, increasingly affluent Africans are shaping demand for change in the life of the continent. In the technology and fintech fields this is particularly noticeable, because there were not massive institutions and vested interests to slow down development. Banking is a case in point, where in the past banks were only for the privileged few, and were inherently conservative. Banks did not want to service the requirements of a mass of unwaged people – that was more trouble than it was worth. And yet millions of Africans need banking functions: to receive their wages, send money to friends and family, and pay for services. Without a deeply-entrenched banking system, there have been huge leaps forward in African fintech, which the rest of the world could do well to learn from.

Smartphones – the tool of choice

Parallel to these developments has been the rollout of mobile telephone networks across Africa. In a vast landmass, conventional telephone infrastructure is expensive to install and maintain. In comparison, mobile telephony is easier to deploy, more accessible, and very attractive to users. So attractive, that over 50% of Africans have mobile telephones – equating to roughly double the number of handsets in use by Europeans.
The meeting of these vectors – a youthful and increasingly affluent population, innovations in banking, and reliable and widespread mobile networks – is producing a new wave of social and business change, right across the African continent.
Think of Africa: Big, isn’t it?

‘My phone is my bank’

With a rapidly growing population which increasingly needs financial tech services, the banks have engaged positively with new forms of mobile banking. A good example comes from the Democratic Republic of Congo (DRC), where Rawbank’s Illico Cash offers cardless transfers and withdrawals with the strapline, ‘My phone is my bank.’ Illico is French slang for ‘pronto’, or ‘sharpish’, indicating the instant nature of the service, and the fact that it is targeted on young, streetwise and tech-savvy users. Illico’s send-money-to-anyone feature is the most important, allowing waged people to support family members without bank accounts. Unbanked clients can also open an Illico cash account, so sending and receiving money fulfills an in-demand service across the DRC.
While Illico is an initiative from an established bank, in Kenya the M-Pesa service was launched in 2007 by Vodafone and its partner Safaricom. Pesa is ‘money’ in Swahili, so the name implies Mobile Money for the many millions of people who have limited or no access to banking services. There are currently around 30 million active users of M-Pesa across ten countries, which now include Albania, Romania, and India: the African model of sending and receiving money through a simple smartphone app is spreading.
As with Illico, M-Pesa also enables bill payment, and topping up phone airtime. Many of these services have taken off more quickly in Africa than elsewhere in the world. The inherent conservatism of European banks meant that for a long time there was resistance to doing things differently. It wasn’t until the advent of ‘Challenger Banks’ such as Monzo and N26 that the market started being shaken up. ‘Onboarding’ for example – new customers opening an account – used to be a complex process of visiting a bricks-and-mortar bank and filling in page after page of paperwork, then returning later with masses of paper-based validations. The Challenger Banks made onboarding a simple matter, using the facilities built into the customer’s smartphone – the camera, microphone, and keyboard.
M-Pesa, for example, only requires one visit to an agent - very often a local general store. The customer takes their phone (in which there is a Safaricom/Vodafone sim-card) and some form of approved ID. The user quickly receives a confirmation message and PIN to their phone, after which they input their details: Name, age, address, and preferred language. Within ten minutes they are able to send or receive money, with the agent acting as ‘banker’.Taking a closer look at the M-Pesa screen on the user’s handset, a clear structure and categorisation in the main menu can be seen, with clean visualization and complementary labelling. This is a design which is serious about being user-friendly to the maximum number of people.