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Investment
MOBILE FINANCE
Digital platforms cash in on fintech boom A recent report from KPMG suggests that fintech investment in Africa boomed in 2021. But this may only be the start, with a number of drivers likely to encourage even more growth, as Ladi Asuni of KPMG Nigeria explains. Photo: KPMG Nigeria
“F
INTECH INVESTMENT POURS into Africa.” That’s one of the big headlines from a recent report* on the growth of the fintech sector from KPMG Global. In fact, KPMG reports, 2021 was a record year for fintech investment in Africa, and the momentum is only likely to increase. After a brief dip during the Covid-19 pandemic during 2020, the deals came back with foreign investment flooding in. Data shows that there was over US $1.6 billion invested across 153 deals, two times the value of 2020 (US$800 million) and representing a 50% increase in transaction numbers. The key markets remain Nigeria in the West, Kenya in the East, and South Africa in the South. Other countries such as Egypt have also seen some sizeable deals. In Nigeria, the value of deals in the first quarter of 2021 alone outstripped the total for the whole of 2020. As for key drivers, the spread of smartphones is building on the foundations laid by the highly successful M-Pesa service for money transfers that started in Kenya on analogue phones. Key services remain payments and transfers, with foreign remittances (in and out) an important part of this. This is something that the pandemic accelerated after physically taking cash home across borders became difficult. Alongside individuals, small and micro
Ladi Asuni, KPMG: “Fintechs are gaining market share by lowering the barriers to adoption.”
Fintechs are gaining market share by lowering the barriers to adoption, providing better user experiences and leveraging data analytics.
learning techniques, they are able to take on higher-risk lending that traditional banks have largely opted out of. The report also points out that as the market in Africa matures, you can expect to see more development of other areas such as wealthtech (linked to wealth management and investment services) and insurtech (technological innovations that improve the efficiency of the insurance industry). Ladi Asuni, a partner within KPMG Nigeria’s technology advisory practice, discussed some of the report’s findings with us.
businesses are a significant market too — enabling businesses without a card machine to take payments connected to a cell phone. While the focus is on payment services and digital banking, at the same time lending is also a growth area. There is a huge untapped market, after all. In Nigeria, for example, credit penetration stands at only around 3%. With fintechs developing alternative ways for credit scoring through the use of AI and machine
Communications Africa (CAF): Your report says, “2021 was a record year for fintech investment in Africa, and the momentum is only likely to increase”. Why is this? Ladi Asuni (LA), KPMG Nigeria: This is based on the trend of increasing count and total value of investments over the last few years. In some of the markets, like Nigeria, things slowed down during the pandemic in 2020. However, growth in 2021 compensated for this significantly.
16 Communications Africa Issue 2 2022
CAF: How important has Covid been in encouraging people to try out money transfers through their cell phones? LA: The lockdown experienced across most countries helped to drive adoption of digital platforms as one of the main channels available for financial transactions. CAF: Have ease of doing business and the regulatory environment also encouraged this activity? Is this likely to continue? LA: While efforts are being made to enhance the ease of doing business across most African countries, it is difficult to attribute the growth entirely to this as a number of the leading countries are still lagging in their Ease of Doing Business index. CAF: You mention the role of the spread of smartphones across the continent. How important is this to fintechs? Can smartphone costs continue to fall? LA: Adoption of smartphones is growing as manufacturers produce low-end devices www.communicationsafrica.com
