TIT PAYMENTS the frenzy is going global and Africa is catching the virus. So far this year, four of the continent’s FinTech companies have reached or surpassed valuations of $ 1 billion, more than doubling Africa’s “unicorn” population. OPay, a mobile payment company, acquired its horn in August, after raising funds from investors including SoftBank, a Japanese company. Other recent unicorns include Wave, a Senegal-based startup that runs a mobile money network; Chipper Cash, which offers peer-to-peer payments; and Flutterwave, which simplifies payments for businesses. As foreign investments pour in, African FinTech companies are expanding both on the continent and into new services.
Africa is an obvious choice for fintech investors. They bet that young African talent can innovate to get out of the region’s most pressing financial woes faster than traditional businesses. By 2025, the continent will be home to 1.5 billion people, most of whom will have grown up in the internet age. Nigeria, which received nearly two-thirds of African fintech investments this year, has a young and entrepreneurial population. But more than half of Nigerians do not have a bank account. Across the continent, unbanked (and underbanked) people, who have long been largely ignored by conventional lenders, are turning to the upstarts instead. In Côte d’Ivoire, for example, 94% of students’ tuition fees were paid using mobile money in 2014. This makes it fertile ground for companies like Wave, which settled in the country in April. .
One of the reasons why businesses are growing geographically comes from the African Continental Free Trade Area, an agreement that was first concluded in 2018 and has now been ratified by 38 countries. The Pan-African Payment and Settlement System was launched in September as part of the deal, to make the region’s many systems work better together. As a result, investors support companies whose ambitions extend beyond their home country. Flutterwave had reached over 33 African countries by the time of its last funding round this year; Among the attendees was Tiger Global, a New York-based investment firm.
For the biggest African fintechs, simple payments are just an entry point. OPay was founded three years ago and was once a ridesharing app. It now offers interest-free loans that are easier to obtain for informal sector workers than bank loans. The company, now worth around $ 2 billion, is about as valuable as Nigeria’s largest bank. Chipper Cash, who is backed by Jeff Bezos, the founder of Amazon, takes his vision beyond Africa. It allows Nigerians in Britain to send money home instantly and could revolutionize remittances in sub-Saharan Africa, which has some of the highest transfer costs in the world.
Banks may not be the only ones feeling threatened by newcomers. In some cases, telecom providers, which also provide mobile money, are slashing their fees significantly as payment competition intensifies. The battle leaves regulators struggling to control a rapidly changing industry. Wave is crossing the continent at a rapid pace and is now available in four countries.
Despite a record year, Africa’s biggest startups are still relatively young compared to those in the rest of the emerging world. Obtaining correct payments in such a large market could open up a multitude of opportunities. Flutterwave co-founder and investor Iyin Aboyeji says international venture capitalists are realizing that Africa “looks a bit like China in the 1970s. People are hoping to get there early and get good deals.” The emergence of rigorous transcontinental competition this year shows that African fintech is nonetheless maturing, and the world is finally starting to pay attention. ■
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This article appeared in the Finance & economics section of the print edition under the title “Turf wars”