Flashy new tech companies and cutting-edge tech get a lot of buzz. But for investors, the real excitement lies in booming tech hubs, areas where new companies are constantly popping up, fueled by money from around the world. These up-and-coming hubs offer a chance for quick profits compared to the crowded tech industries in more advanced markets.
That has been the tale of fintech in Africa over the past few years. Many in the global investment community have looked at the continent as the "future" or "next frontier" of financial technology, with investments flooding into the sector at an unprecedented rate. From 2016 to 2022, funding for African startups grew 18.5x, 45% of which was attributable to fintech per a McKinsey report. And in the eight years to 2023, nearly $4 billion in equity funding was poured into fintech startups while the sector accounted for around half of the total financing raised last year.
The surge in funding is partly behind the boom in Africa's fintech, propelling it to rank as one of the fastest-growing in the world. But the concentration of investor capital on a select few players (in 2023, 75% of all equity funding secured by African fintech startups went to just 10 companies) has inadvertently made the sector a "land of giants" of some sort - a top-heavy ecosystem that may overlook a vast untapped potential.
A handful of well-known names dominate fintech headlines and funding. Companies like Flutterwave , Chipper Cash , MNT Halan , TymeBank , Wave , Jumo , and OPay have become household names, nearly all valued at over $1 billion. While their success is commendable, this concentration of resources raises a crucial question about the broader impact on financial inclusion across the continent. It limits innovation and creates a narrow funnel for financial services distribution, potentially leaving millions underserved.
Despite the growth of fintech, financial exclusion remains a significant challenge in Africa. Sub-Saharan Africa's banked population has jumped from only 23% of the population in 2011 but most Africans still do not have a bank account. Around 360 million adults in the region do not have access to any form of account - roughly 17% of the total global unbanked population, per World Bank estimates. This vast number represents not just a challenge, but an enormous opportunity for a different kind of financial innovation and venture building.
