adminAfrican fintech is not disrupting the existing financial service providers. This is because, in many areas of the continent, there is nothing to disrupt. Across most of the continent, there is no formal banking or financial infrastructure in rural areas, due to the high cost of rolling out banking infrastructure.Even those in urban areas are priced out of more developed financial services such as credit and insurance.
African banks have, in a way, admitted their own infrastructure failures by leaving the roll-out of mobile money services mostly to mobile operators. This is in sharp contrast to developed economies, where traditional banks and institutions have a broad presence, and the majority of consumers are able to get loans or purchase insurance. There, fintech is about disrupting these markets to offer better services at lower cost.
Banks have, in a way, admitted their own failure in building sufficient and accessible infrastructure by leaving the roll-out of mobile money services mostly to mobile network operators. These mobile wallets are functioning as bank accounts in most cases. They offer better services at lower cost and this means there is likely to never be a need for most Africans to adopt traditional banking services.
Therein lies the real opportunity for fintech startups in Africa. Rather than disrupting an existing infrastructure as their counterparts in the developed world are, they are in fact building a whole new infrastructure of their own.
One such example of groundbreaking, innovative fintech is MFS Africa, which has connected 80 million mobile wallets in Africa, enabling cross-currency, cross-border, cross-network payments through entirely new infrastructure.
Traditional banks are now reaching out to fintech startups on the continent to connect with young consumers in informal markets. Traditional banks are now reaching out to fintech startups on the continent, with initiatives such as the recent Barclays Africa Accelerator which took place in Cape Town, South Africa. Banks know that they have failed when it comes to reaching lower income consumers in informal markets, and they are therefore turning to more innovative, younger companies to help them connect with these consumers, which in turn gives small companies the chance to scale much faster.
It is this opportunity, and the size of this unclaimed market, that has resulted in such levels of investment in African fintech companies. Investment is flooding into startups providing innovative ways of offering financial services, with companies in the fintech space taking on almost 30 percent of the total funding raised by African tech businesses in 2015.
In order to protect Africa’s unbanked and underbanked from the surge in products that will shortly be at their disposable, there is a need for better regulation of mobile financial services in Africa.
The GSMA Mobile Money Code of Conduct, the SMART Campaign and the UN Principles for Responsible Investment are already providing a useful set of guidelines, but all those involved in fintech in Africa as operators or investors must do more to ensure the end-user of mobile financial services is protected. – Quartz.
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